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Evergrande complex in Hong Kong: The real estate group is in deep trouble
Photo: Isaac Lawrence / AFP
In the wake of the real estate crisis in China, trading in shares of the highly indebted Evergrande Group on the Hong Kong Stock Exchange has been stopped. In addition to the securities of the Evergrande Group, no shares of the Evergrande Property Services Group and the Evergrande Group for electric vehicles could be traded, according to three announcements from the Hong Kong stock exchange on Thursday. No reason was given in it.
Evergrande's shares had only resumed trading at the end of August after a 17-month suspension.
Most recently, there had been reports of investigations against employees of the company. For example, the Bloomberg news agency reported that CEO Hui Ka Yan had been placed under police control. China Evergrande did not respond to a request for comment.
The police headquarters of Guangdong province, where the real estate company is based, or the Ministry of Security could not be reached for comment. However, two insiders told Reuters news agency that Hui had stopped communicating with workers a few days ago and could not be reached. Previously, several managers of Evergrande's subsidiary Hengda had been arrested.
China's real estate industry is currently experiencing a severe crisis. Evergrande is a giant in the sector, but with the equivalent of an estimated 311 billion euros in liabilities, it is the most indebted company.
About two years ago, concerns about the company's bankruptcy brought back memories of the global financial crisis of 2008, which was heralded by the insolvency of the US investment bank Lehman Brothers.
Last year, Evergrande Group shares were suspended from trading for months. When this was resumed at the end of August, the paper fell by 80 percent.
Debt restructuring is in jeopardy
The group is to restructure its debt according to Chinese requirements. But new bad news keeps coming: On Monday, the Shenzhen-based group announced that it had missed the payment of a bond plus interest of the equivalent of around 529 million euros. Previously, the company had already postponed meetings with creditors. On Sunday, the group announced to the Hong Kong Stock Exchange that an investigation was underway against its subsidiary Hengda Real Estate Group.
The investigations against Hengda jeopardize the planned debt restructuring. One of the cornerstones is the exchange of old debts for new bonds. Evergrande is not allowed to issue any new debt securities for the time being because of Hengda.
If the debt restructuring fails, this could drive the group into insolvency. Industry insiders warn that a complete collapse could endanger social peace because many of the group's condominiums have already been sold but not yet completed. In the U.S., the real estate company has already filed for creditor protection.
In addition to Evergrande, the real estate developer Country Garden, which operated thousands of construction projects in China, recently hit the headlines as another giant in the market due to problems. A crisis in the sector is a danger for China. The real estate industry is an important driver of the People's Republic's gross domestic product. So far, the sector has contributed more than a quarter annually to economic growth.
The crisis of real estate companies is therefore a problem for the economy in China. The possible consequence is that if China is doing badly economically, this could have an impact on the global economy, and thus also on Germany. Many German companies manufacture in China. The country, which has a population of around 1.4 billion, is also an important market, for example for the automotive industry.
State leadership introduced "red lines"
One reason why real estate groups are currently struggling and highly indebted is demand. Since the construction boom in the noughties after the turn of the millennium, real estate companies have always gone steeply uphill. People invested in real estate that, unlike the stock market, promised stability.
According to experts, the real estate corporations immediately built new buildings and bought land with the proceeds. However, because the demand for housing fell and prices fell, construction companies were no longer able to complete their projects and also no longer service their creditors.
In the meantime, videos circulated on the Internet of angry apartment buyers who suddenly learned that their apartment, which had already been paid for, could no longer be completed.
Since 2020, it has also been more difficult for highly indebted companies to obtain financing. At that time, the communist government under state and party leader Xi Jinping introduced the policy of the "three red lines". The home was to be used again as a dwelling and not for speculation.
mmq/Reuters/dpa-AFX