Beijing is trying to adjust slow motion collapse for the Evergrande

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The pretense that China’s wealthiest Xu Jiayin continues to manage events at the China Evergrande Group is a majority of the seats on the new risk management committee set up by national representatives with heavy debt developers. It ended this week because it occupied.

In a statement released Monday night after Evergrande shares fell to record lows in Hong Kong trading, Hui said the new committee would not report to the board. ..

Hui is nominally the chairman of a seven-seat committee, but four slots are held by representatives of state-owned enterprises managed by either the central or local governments of southern Guangdong. Evergrande is headquartered in Shenzhen, a high-tech manufacturing and service center adjacent to Hong Kong.

Mr. Liu Shihiro, a senior executive of Guangdong Holdings, a conglomerate managed by the Guangdong Provincial Government, has been appointed as co-chair of the committee. According to two people involved in the Evergrande restructuring, Shenzhen officials were engrossed in similar issues, and the Guangdong provincial government took responsibility for the Evergrande. Baonen, Local real estate and financial services group.

The Chinese government has dominated other large debt companies through similar mechanisms. In particular, it is a conglomerate of aviation, logistics and tourism based in southern Hainan and has been effectively taken over by local authorities. Early last year..

But nothing is as big as Evergrande, which has total debt of over $ 300 billion or is interconnected with the Chinese economy. Debt relief while minimizing collateral damage to the rest of the real estate sector will be a daunting task.

“The working group will take over Evergrande, find third parties, especially state-owned developers, and take over the development projects,” said Chen Long of Beijing-based consultancy Plenum. “Then, Evergrande was completed. Former shareholders, including Xu Jiayin, will be wiped out.

“This is how Beijing has managed companies with high debt over the last three to four years,” Chen added. “The number of times they were able to save Evergrande was many times. They were still able to save the Evergrande today, but no one has the political motive to do so.”

The HNA was one of four “gray rhinos”. This represents a highly leveraged group that authorities believe poses a unique risk to the country’s fiscal stability, introduced by the Chinese government in 2017 after regulators became concerned about its size. The term used for. Purchase overseas.. Both HNA and Anbang Insurance, another rhino, were subject to government-controlled restructuring and were so long and opaque that they eventually disappeared from view without causing market panic.

A statement from Evergrande on Monday night suggested that state representatives of the new risk management committee would oversee a similar process. “”[Evergrande] We believe that the experience of the members of the committee and the resources they have available will help the group overcome the challenges they are currently facing, “says the developers.

Neither HNA nor Anbang have received as much attention or played a central role in the Chinese economy as Evergrande. It is the world’s second-largest economy and the second-largest developer in terms of sales, with the real estate sector estimated to account for about one-third of total economic output.

It describes the cautious choreography surrounding the end of Evergrande’s slow motion over the past week.

After the market closed on Friday, Evergrande revealed that it would struggle to repay its previously undisclosed $ 260 million warranty obligation. Such guarantees are just one of the channels where the collapse of the group could send a shock wave to the Chinese economy. Evergrande said in its August interim annual report that it issued a total guarantee of RMB 557 billion ($ 87.4 billion) on behalf of real estate buyers and business partners.

China’s central bank, securities regulators and banking regulators all issued a statement on Friday, arguing that developer distress was due to mismanagement and that the crisis would not destabilize the financial system. On Monday night, the Chinese Communist Party’s Politburo said it would take steps to “boost public housing and support the housing market.”

This helped to ease the nerves of the market, even if Evergrande’s bondholders said they hadn’t received a total of $ 82.5 million in delinquent repayments.

Total debt was $ 343 million. This is the same amount that Hui raised by selling 9% of Evergrande’s stake at the end of last month. However, neither he nor Evergrande has stated whether the proceeds will be paid to international bondholders or domestic creditors. Extensive protest..

Eswar Prasad, a Chinese financial expert at Cornell University, said the statement by Politburo and the central bank’s simultaneous measures to increase liquidity in the banking sector “supported growth but could promote a financial revival. “Without a significant expansion of the bank,” he said. Market imbalance. “

“The message from the Politburo is important and shows that the government may loosen policies in the real estate sector,” added Zhiwei Zhang, chief economist at Pinpoint Asset Management. But even so, it’s probably too late to prevent Evergrande from sinking under the weight of its debt.

Additional report by Xinning Liu in Beijing

Beijing is trying to adjust slow motion collapse for the Evergrande

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The post Beijing is trying to adjust slow motion collapse for the Evergrande appeared first on Eminetra.

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