business

Evergrande founder calls for construction, sales to resume

16 Comments

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I expect Xu to disappear soon, if patterns hold.

2 ( +2 / -0 )

It is only matter of time Evergrande go bankrupt soon or later. China would face same deep depressions Japan experienced after estate bubbles burst up in 1990s.

1 ( +3 / -2 )

correction: ............after real estate bubbles burst up in 1990s.

0 ( +1 / -1 )

Yup, continue operations and work for free because we can't pay you. And while you're working for free, Evergrande's second largest shareholder Chinese Estate Holdings, just sold off all of their $32 million stake in the company and will exit stage left.

4 ( +4 / -0 )

Who are the buyers? Pure speculation that is destined to end badly.

0 ( +0 / -0 )

Pure Ponzi scheme. The company uses money from present sales to complete previous projects. In the end, it is the final "buyers" of nothing who will be left holding the bag. So of course Xu is urging new sales: without them, all collapses.

2 ( +2 / -0 )

In many other countries, huge cartels have been 'too big to fail & fall', but not necessary in China.

Beijing continues to monitor the situation closely to ensure that a fast safety net is appropriately cast..

-3 ( +0 / -3 )

Evergrande is definitely going bankrupt.

This is what happens when Communists control 100% of all companies. Disaster.

Free market all the way.

0 ( +0 / -0 )

Looks like Evergrande will have to handle this themselves without help. It's loans are secured against collaterals though. The real count down is the US debt in October where the debt ceiling will have to be raised and more money will have to be printed. The sky is the limit. Anyone concerned about this addiction?

0 ( +0 / -0 )

Evergrande was nothing but a ponzi scheme from day one. Xu knew it. This was nothing but a money grab and then run!

0 ( +0 / -0 )

China has been famous for over building for decades and creating ghost cities. I suspect that this will not be the only developer to go under. I wonder what will happen to Chinese banking?

0 ( +0 / -0 )

The real count down is the US debt in October where the debt ceiling will have to be raised and more money will have to be printed. The sky is the limit. Anyone concerned about this addiction?

The debts were incurred and the money was appropriated by previous Congresses. Now those debts come due. Are you saying the US Government should not honor the debts incurred by past Congresses? Be clear with your answer please.

0 ( +0 / -0 )

Evergrande was nothing but a ponzi scheme from day one. Xu knew it. This was nothing but a money grab and then run!

In 2009-2010 the CCP was pushing businesses to borrow, build and maintain employment during the Great Recession. China racked up a lot of bad debt during that period and over built not just housing but airports and all kinds of public infrastructure. Banks, often government controlled banks, lending agents, valuation agencies and re-housing agents (real estate agents for those not familiar with the Chinese term) lied on loan documents so buyers could qualify for loans. Banks had lending targets to hit. Banks would often introduce borrowers who didn't qualify for a loan to lending agents who specialized in "repackaging" their loan application, basically fluffing it up with falsified incomes, falsified prices and such, so they could qualify for a loan. A large proportion of these are now "NPL"s, Non-Performing Loans. Banks also repackaged these loans into subprime debt instruments called "WMP"s for Wealth Management Products, the equivalent of those infamous CDOs so they could offload all that bad debt on the unsuspecting as investments. We know how that ended in the US. Lots and lots of blame to go around and with only 1.4 million of the 50 something million empty housing units sitting unsold on the Chinese market Evergrande is just the tip of the iceberg. If the market ever starts to serious doubt the value of those WMPs then the Chinese market will be in for a very hard crash. If property values fall greatly and leave homeowners underwater on their loans the CCP could be shown the door.

0 ( +0 / -0 )

 It's loans are secured against collaterals though. 

A lot of this "collateral" remains unbuilt or incomplete and thus not ready to sell without a lot more work. Many units are pre-sold and the owners are angry that their new homes they pre-paid might not be built.

0 ( +0 / -0 )

> Evergrande is definitely going bankrupt.

This is what happens when Communists control 100% of all companies. Disaster.

Free market all the way.

Umm, companies in free markets go bankrupt as well...and quite regularly.

0 ( +0 / -0 )

Unbelievable how many investors STILL will ignore huge corporate debt when considering foreign investments.

Huge debt is frequently (but not always) a huge red light and whistle over whether a company is properly managed. Or whether they are a trainwreck-in-progress. Any change in interest and lending rates will almost always take what is already a huge uncomfortable debt and turn it into something radioactive. Want to be an offshore investor in something that would reduce even Godzilla to a squishy pile of goo? Especially when it i based in a country - any country - where foreign equity holders have few (if any) legal rights to recovery?

Whenever a company wants to justify huge debt by proudly announcing to you that it has 'significant assets in large land holdings and its property servicing businesses,' stop everything! And if they are trying to hurry you in any way (particularly if they are suggesting some type of a deadline), or telling you that many 'major international asset managers,' are rushing to take advantage of this amazing investment opportunity, so why are hesitating? Well, just run! Don't walk! Run!

End of day, if you want to ignore how a business structures, ignores, juggles, and mishandles their enormous debts, then you will eventually suffer. And have no one but yourself to blame.

0 ( +0 / -0 )

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