Understanding the China Property Developer Crisis

By Brian Wang

China’s second largest property developer, Evergrande, is in big trouble and that caused global stocks and crypto to crash today.

Here is a video by Asianometry which goes over how Evergrande grew quickly from 1996 to 2021.

They used a lot of debt and leverage. They have US$300 billion in debt.

They have development projects in over 170 cities in China. Evergrande Group owns 45.8 million square meters of development land and real estate projects in 22 cities.

Chinese regulators created Three redlines at the start of 2021 which required less debt for real estate.

* The policies forced deleveraging to improve financial health for the real estate sector; * The government is moving to address debt build-up in the sector and we have high confidence in the scope of these policies;

* Future access to financing will be predicated on developers’ adherence to strict criteria including liability to asset ratio (excluding advance receipts) of less than 70%, net gearing ratio of less than 100%, and cash to short-term debt ratios of more than 1x.

The Chinese government forced Evergrande and other property developers to get less debt but Evergrande was too indebted and could not adjust.

Asianometry believes that Evergrande will be broken up but the Chinese government will protect the banks holding the debt.

SOURCES -Wikipedia, Asianometry, UBS
Written by Brian Wang, Nextbigfuture.com

Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.

Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.

A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts.  He is open to public speaking and advising engagements.