You are here: Home » International » News » Companies
Business Standard

China's top property giant Evergrande under 'tremendous pressure'

China's top developer firm Evergrande is under immense pressure as anxious investors recently protested at its demanded repayment of loans and financial products, a media report said.

China | property | Investors


Photo: Bloomberg
Photo: Bloomberg

China's top developer firm Evergrande is under immense pressure as anxious recently protested at its Shenzhen headquarters and demanded repayment of loans and financial products, a media report said.

The Hong Kong-listed developer is sinking under a mountain of liabilities totalling more than USD 300 billion after years of borrowing to fund rapid growth, Channel News Asia reported on Tuesday.

Last week, Evergrande was downgraded by two credit rating agencies. Its shares have also tumbled their 2009 listing price. The development came recently as news reports speculated Evergrande's imminent collapse.

Anxious on Monday protested at the Shenzhen headquarters of cash-strapped developer Evergrande Group. The crowded its lobby to demand repayment of loans and financial products.

Evergrande has said that it's facing "unprecedented difficulties" but denied rumours that it is about to go under. Evergrande on Tuesday conceded that it is under "tremendous pressure".

On Tuesday, the company's shares fell nearly 9 per cent and are down almost 80 per cent since the start of the year.

An estimate by Capital Economics said that that Evergrande has about 1.4 million properties that it has committed to complete - about 1.3 trillion yuan (US$200 billion) in pre-sale liabilities, as of the end of June, according to Channel News Asia.

Beijing's crackdown on overextended developers has led to a surge in loan losses. And it has also raised fears of contagion across the nation's $50 trillion financial sector. In the first half of the year, the developers gained good returns compared to pre-pandemic profit levels. However, now the tougher rules including curbs on borrowing leverages and land purchasing have drawn the system to a liquidity crisis and missed debt payments. In the first six months of the year, the real estate sector's nonperforming loans (NPL) jumped to 30 per cent across the five largest banks to 97 billion yuan ($15 billion), according to Nikkei Asia.

Last year, the communist regime's introduced a "three red line" policy that hit the developers badly. As the policy assesses developers' financial soundness and assigns a colour -- green, orange, yellow or red -- based on how many of the "lines" they cross. Through this, regulators would evaluate three ratios -- liabilities to assets, net debt to equity, and cash to short-term debt -- before deciding whether a developer can borrow further or not, Nikkei Asia reported.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, September 14 2021. 16:52 IST