Exit Evergrande in China’s never-ending crisis
Boom-and-bust era is highlighted by the crazy case of the bankrupt Chinese property company
It was the ultimate symbol of China’s property boom-and-bust era. A real estate juggernaut that seemed to live up to its name, Evergrande.
When it was listed in Hong Kong in 2009, there was an investor frenzy.
On Monday, only the lingering fallout remained as the bankrupt company, built on US$300 billion of debt, was delisted from the Hang Seng Index.
The property bubble it helped create had long since burst, but the shockwaves continue to shake the world’s second-largest economy.
“Evergrande is one of the landmark examples of the collapse of China’s real estate sector. It marks the end of the golden age,” Gary Ng, a senior economist at the French investment bank Natixis, said, as reported by the Reuters news agency.
The greatest property bubble in history destroyed $18 trillion of wealth.
ICIS
Broken bricks:
- The company once had a market value of more than $51 billion.
- Now, it is worth just $282 million, with debts totaling around $300 billion.
Delve deeper: The fall of Evergrande sparked a massive shock, leaving homeowners poorer after the 2020 crash. Up to 70% of their wealth is tied up in bricks and mortar.
Between the lines: “The greatest property bubble in history has already destroyed $18 trillion of household wealth,” research firm ICIS, part of the LexisNexis group, revealed in a study released earlier this year.
Big picture: Ballooning public debt walks hand in hand with this rapid decline in household wealth. Deflation is widespread, while consumer spending remains stagnant.
Bottom line: As real estate prices drop, households see the value of their property decline, making them reluctant to splash out on big-ticket items.
China factor comment: Greed and debt have made companies like Evergrande a byword for the big blowout. The gloomy picture is unlikely to change in the foreseeable future.