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China's Evergrande Group crisis

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It took two and a half years but Evergrande Group has finally been ordered into liquidation by a Hong Kong court after the company was unable to reach a restructuring deal with creditors.

With US$325 billion in liabilities, this corporate collapse is going to have a huge impact, and other companies could well be following Evergrande into liquidation.

www.bbc.com

Evergrande: Crisis-hit Chinese property giant ordered to liquidate

The Hong Kong order may matter little in the mainland, where most of the property giant's assets are held.
www.bbc.com www.bbc.com
 
The fallout from the oversupply/overpriced realestate sector is going to have some repercussions.
It makes previous slow downs look like mere blips, and shows no sign of stabilising.
Will have repercussions everywhere, particularly in Australia.
How long before
(a), the CCP steps in to do something.
(b) , the price of iron Ore, Coal etc that we export to China starts to fall.
Mick


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mullokintyre said:
The fallout from the oversupply/overpriced realestate sector is going to have some repercussions.
It makes previous slow downs look like mere blips, and shows no sign of stabilising.
Will have repercussions everywhere, particularly in Australia.
How long before
(a), the CCP steps in to do something.
(b) , the price of iron Ore, Coal etc that we export to China starts to fall.
Mick


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They are all Blips in the long run, its not going to change anything, except the nervous nellies will sell out to those will more long term views and the patient folk will get richer 😁.

But, there is a lot more to the global steel demand than Chinese residential real estate, I think if you look back at this round of negative media in the future you will wonder what everyone was worried about.
 
@mullokintyre

For example Green energy projects are pretty big consumers of steel, also China exports a lot of steel to India and they picking up construction at a rapid rate.

 
greggles said:
It took two and a half years but Evergrande Group has finally been ordered into liquidation by a Hong Kong court after the company was unable to reach a restructuring deal with creditors.

With US$325 billion in liabilities, this corporate collapse is going to have a huge impact, and other companies could well be following Evergrande into liquidation.

www.bbc.com

Evergrande: Crisis-hit Chinese property giant ordered to liquidate

The Hong Kong order may matter little in the mainland, where most of the property giant's assets are held.
www.bbc.com www.bbc.com
Click to expand...
Once the world's largest property company by capitalisation.
 
Value Collector said:
@mullokintyre

For example Green energy projects are pretty big consumers of steel, also China exports a lot of steel to India and they picking up construction at a rapid rate.

Click to expand...

They must have picked up exports to India at a phenomenal rate to beat the exports going to countries other than India since this data was published in 2020.
Mick
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mullokintyre said:
They must have picked up exports to India at a phenomenal rate to beat the exports going to countries other than India since this data was published in 2020.
Mick
View attachment 169842
Click to expand...
Yeah, exports to India are growing at a huge rate, but I didn’t say India is their largest market, what I meant was that if China‘s construction slows down, some of that will be offset by growth of exports to India as they are growing and also growth in other areas in china like energy infrastructure, not to mention exports in general are growing to other markets.

But also, your 2019 figures don’t show all the other exports made of steel that are finding their way to India, eg bolts, nails, screws, tools, Air conditioning systems, appliances, earth moving equipment, engines, ships, shipping containers, etc etc. the steel market is complex.

https://www.reuters.com/markets/commodities/indias-april-oct-steel-imports-china-four-year-high-2023-11-29/#:~:text=China was the top exporter,, and pipes, among others.

IMG_0437.jpeg
 
I'm wondering which financial institutions are exposed to Evergrande. Surely there is a risk to bank stability in this situation ?

www.bloomberg.com

Evergrande Liquidation Is a Big Test for International Creditors

China Evergrande Group’s liquidation order by a Hong Kong court cements the downfall of a company that exemplified the country’s real estate boom and bust. For global investors, what happens to the remnants will have implications far beyond one property developer.
www.bloomberg.com www.bloomberg.com
 
basilio said:
I'm wondering which financial institutions are exposed to Evergrande. Surely there is a risk to bank stability in this situation ?

www.bloomberg.com

Evergrande Liquidation Is a Big Test for International Creditors

China Evergrande Group’s liquidation order by a Hong Kong court cements the downfall of a company that exemplified the country’s real estate boom and bust. For global investors, what happens to the remnants will have implications far beyond one property developer.
www.bloomberg.com www.bloomberg.com
Click to expand...
Time will tell if and when the list of creditors pops up.
Of course the banks will always have first cut of the cake courtesy of the mortgages etc.
Mick
 
I suggest that the CCP (aka, the filth) won't let the liquidator get at assets in China and that's most of them. So that should further shrink the pool of idiots of no principle who are willing to risk capital in Xi Jing's workers paradise.
 
While doing a little research on China property, I came across this site
With a few restrictions, it is possible for non China citizens to buy a property in China.
So, can foreigners buy property in China?

The answer is yes, foreigners are allowed to purchase property in China! The essential requirement is that you have studied or worked in China for at least one year on a residence permit. Foreigners are allowed to only own one residential property for dwelling purposes. You may not rent out the property or act as a landlord. Requirements and restrictions may differ in different provinces and cities. For example, Shanghai requires that non-Shanghai hukou families, including foreigners, have to provide proof of income tax or social insuranceto the local government.
Click to expand...

But the really interesting thing I found out was that the CCP owns all the land in China, and you only lease the land on which a building is constructed.
All land in China is owned by the Chinese government, who then lease it out for 70 years at a time. When you buy a home a China, you are only buying the property and not the land the property is built on, meaning if the government decides that they need the land your property is on for any reason, they may evict you. Although this may sound a little severe, it is actually not a big problem. These regulations were first amended in 1988, making the earliest expiration date of leased land somewhere in the late 2050s, which is still a long time away. If it does happen that the government evicts you, you will be compensated.
Click to expand...
So i wonder what will happen when we get to the late 2050's and some of the earliest leases start to run out.
Wonder what the compensation might be?
Mick
 

China slashes mortgage reference rates to revive property market​

Reuters
February 20, 20245:49 PM GMT+11Updated 39 min ago




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[1/2]An aerial view shows unfinished residential buildings of the Gaotie Wellness City complex in Tongchuan, Shaanxi province, China September 12, 2023. REUTERS/Xiaoyu Yin/File photo Purchase Licensing Rights, opens new tab

SHANGHAI/SINGAPORE, Feb 20 (Reuters) - China announced its biggest ever reduction in the benchmark mortgage rate on Tuesday, as authorities sought to prop up the struggling property market and broader economy.
The 25-basis point cut to the five-year loan prime rate (LPR) was the largest since the reference rate was introduced in 2019 and far more than analysts had expected.
"This is the biggest signal. In other words, the largest interest rate cut cycle in history has begun," said Yan Yuejin, analyst at E-House China Research and Development Institution. The cut will directly impact the real estate sector by lowering mortgage costs, he said.

Obviously China is desperate to reinflate that Real Estate Bubble.
Mick
 
but wait, there's more:


Chinese property giants face liquidation threat​

By Glenn Dyer | More Articles by Glenn Dyer

First, it was Evergrande, broke in 2021 and ordered liquidated in early 2024 with well over $US300 billion in debt.

On Wednesday, it was the turn of its big rival, Country Garden, which has been staggering towards Evergrande’s fate for the past year or more — it has around $US190 to $US200 billion in debt.
Both companies are in default on some of their debt — domestically we do not know (and probably never will), but externally, it's smallish compared with total debts in the hundreds of billions.
On Wednesday, a Hong Kong court received a creditor’s petition from a company called Ever Credit to liquidate the Chinese developer, a move that will add pressure on the defaulter to quicken its restructuring efforts.

Western news agencies said Ever Credit is a unit of Kingboard Holdings Ltd., a Hong Kong laminates maker which in October issued a so-called statutory demand to Country Garden for repayment.
But will that happen? The legal action against Evergrande lasted two years with no real action, just lots of vague proposals before its liquidation was ordered last month. The first hearing date is scheduled for May 17 at Hong Kong’s High Court, after Ever Credit Ltd. filed its so-called winding-up petition on Tuesday. It claims Country Garden failed to make payments on a term loan facility of about HK$1.6 billion ($US204 million), plus accrued interest, to the lender, according to an exchange filing.
Just how a laminates maker based in Hong Kong managed to have around $US200 million to lend to Country Garden will be one of life's small mysteries.

Country Garden shares fell 14% on Wednesday in the wake of the news, and its bonds traded around 8 US cents in the dollar — which is default and liquidation territory.
As usual, there’s a lot of confidence around the stricken company — just as there was around Evergrande early on.
In recent months, Country Garden found enough money to repay an 800 million yuan ($US111 million) local bond in full and sold a stake in a mall operator for 3.07 billion yuan with proceeds to be used for offshore debt restructuring.
The company told western media on Wednesday that it has seen a spike in projects approved by local authorities for financing support which western journalists took to mean that the scattered support measures from the central and local governments may be starting to have an impact.

But like all Chinese property companies, it's not the money for the new projects that is the real concern, it is being paid for completed projects with so many buyers still not settling purchases because their buying prices are way above market.

The latest legal action underlines the alacrity Moody’s showed on Friday with its surprise withdrawal of credit ratings for 11 Chinese property and investment firms.
The most unexpected rating removal was for China Great Wall Asset Management, a major state-owned bad-debt manager established in 1999 to handle Agricultural Bank's bad loans. Moody's eliminated its Baa3 score, just shy of junk territory, citing "business reasons" without detailed explanation.
Moody's first removed Great Wall's rating on Friday, later in the day shocking markets by withdrawing ratings for 10 property companies, including Logan Group, Ronshine China, and Zhenro Properties Group.
Western analysts interpret this decision as a sign of looming defaults for property firms. The withdrawal of Great Wall's rating suggests a growing chance of the asset manager handling a new wave of bad debts from the property sector.

This action follows Moody's December decision to downgrade its outlook for Chinese sovereign bonds to negative, which drew criticism from the government.
This action against Country Garden may be dismissed, postponed, or even acted on — but like with Evergrande’s liquidation, it will have the effect of separating the two biggest black holes in Chinese property from the rest of the mess, which may be to the benefit of smaller rivals and the government in Beijing.
 
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