China's Evergrande set to collapse as deadlines loom, fears of US-style GFC

Asia's Tech News Daily

China's Evergrande set to collapse as deadlines loom, fears of US-style GFC

It has been teetering on the brink of collapse for weeks but China Evergrande, the country’s second biggest property developer, could be facing up to doomsday as it admitted it may not be able to meet its financial obligations.

With more than A$400 billion ($418b) in debts, the property developer is dealing with several looming deadlines to pay up, as attempts to save it fall through.

An offshore bond payment that China Evergrande initially missed on September 23, but got a 30-day grace period on, is set to expire on Saturday with $110 million owing.

There’s another $60m interest payment too, which wasn’t paid when due on September 29, and the grace period is also set to run out.

Discussions for a A$7b deal for Hong Kong-listed Chinese developer Hopson to take a majority stake has also fallen through.

Credit rating service Moody’s has basically given the property developer a junk rating, warning that there are “weak recovery prospects for Evergrande’s creditors if there is a default”.

Experts believe that China Evergrande’s collapse is all but inevitable.

The Chinese government has been reluctant to bail out the ailing property developer and the People’s Bank of China governor Yi Gang has claimed the risk to the economy could be contained.

Yet there are 70,000 investors in Evergrande, which has also paused construction on homes for more than 1 million home buyers.

Alarming drop in house prices

Clifford Bennett, chief economist at ACY Securities, warned that China has moved further along the US style global financial crisis (GFC) pathway.

China uses the property market to prop up the economy with nearly a third of gross domestic product coming from the industry. Recently, two other Chinese developers, Sinic and Fantasia, have also defaulted on payments.

In further bad news, home prices in China dropped in September for the first time in six years, while real estate investment has also tanked for the first time since last year.

Evergrande said real estate sales plunged about 97 per cent during peak home-buying season, with the developer selling just US$571m ($791m) since September, a tiny fraction of the US$22b it recorded in the same period last year, reported Bloomberg.

If Evergrande’s properties flood the market, due to its collapse, it would further drive prices down across the market causing more problems.

China's Evergrande set to collapse as deadlines loom, fears of US-style GFC

Workers install a traffic surveillance camera near the Evergrande Yujing Bay residential complex in Beijing. Photo / AP

While the Evergrande situation was already a crisis, Bennett predicted things would get much worse if property prices were to experience even greater drops.

“There are the very first signs of that actually happening with prices in the 70 largest cities just reported to have fallen 0.8 per cent. Not a big deal, except they used to rise steadily and impressively. Something is happening that is more profound than a short term situation of one or two large developers being in trouble,” he explained.

“They are the canary in the mine. They are faltering because the easy win path of the incredible China boom of past decades, is beginning to settle back into a more typical pattern of a mature capitalist economy.”

Situation continues to unravel

Bennett added that China, the world’s second largest economy, could well be having a US-style property speculation bubble burst experience.

“In the original GFC, high lending to all kinds of construction and property investment (in the US) led to a global financial crisis. China was actually the backstay then to the global economy,” he noted.

He added that China’s continued strong growth during the GFC and the impact that had on all of Asia and Australia, certainly supported the region during the severe US and European downturn.

So China’s potential downturn could spell bad news for Australia considering it makes billions from the relationship, despite the trade relationships being frosty at times.

China's Evergrande set to collapse as deadlines loom, fears of US-style GFC

A map outlines Evergrande housing development projects in Beijing. Photo / AP

To add to that the US economy is in the grip of a serious slow down with US mortgage applications suffering another severe contraction, he added.

“We should pay attention to any further decline in Chinese property prices, and be particularly concerned should the boom in US prices begin at any stage to slow or reverse,” he said. “Mortgage applications are, as I have said for some time, a major warning sign.”

Internet Explorer Channel Network
Asia's Tech News Daily
News Related


Uncertainties remain but defence contractor Babcock says it's time to go for gold

Babcock's boss is targeting cost savings as he aims to turn around its fortunes but admits the wider macroeconomic environment remains "a bit difficult". Read more »

The latest sign of President Biden's inflation politics problem comes from Main Street

U.S. President Joe Biden speaks as he holds a meeting with CEOs of companies in a variety of sectors to discuss the holiday shopping season, at the White House in ... Read more »

NVM is also feeling the pressure and is taking a new step towards bidding log

Real estate association NVM wants to make bids on houses fairer with a new online platform for bidding by registration. The real estate association tries in this way to meet ... Read more »

Pātea Warriors to lace up boots and play in premier competition next year

The Pātea Warriors are getting ready to lace up their boots and take to the field in Taranaki’s CMK premier club rugby competition. The Pātea Warriors are re-entering the competition ... Read more »

British watchdog opposes Suez takeover by Veolia

Photo: ANP The British market watchdog CMA does not yet agree with the acquisition of waste processor and water company Suez by industry peer Veolia. The two French companies have ... Read more »

Taxpayers could face higher bills after £11bn waste management merger, watchdog warns

The UK regulator has the power to order the sale or divestment of part or the whole of a business if it ultimately concludes that there are competition concerns outstanding. Read more »

Te Korowai o Ngāruahine Trust wins Environmental Award for removing weir

An initiative that opened up the Kaūpokonui Stream has earned an environmental award. Te Korowai o Ngāruahine Trust was one of the 16 recipients of this year’s Taranaki Regional Council ... Read more »

Jet founder Marc Lore plots U.S. expansion of food delivery biz: A 'one-stop shop' for cooked meals

A Wonder van parked outside of a customer's home. Each Wonder vehicle is staffed with one chef who preps the meals before bringing them to the front door.Source: Wonder Whether ... Read more »

COVID-hit small businesses worried about impact of possible third wave

File Photo. Image: AFP Just when micro, small and medium enterprises (MSMEs) were gearing up to recover from two consecutive waves of COVID-19 infections, a new variant of the coronavirus ... Read more »

Stellantis wants to outfit cars with AI to drive up revenue

The Associated PressFILE – The Stellantis sign outside is shown on Jan. 19, 2021 at the Chrysler Technology Center in Auburn Hills, Mich. Carmaker Stellantis announced a strategy Tuesday to ... Read more »

Brussels wants more information about Nuance purchase by Microsoft

Photo: ANP The competition authority of the European Union wants more information about the acquisition of Nuance Communications by Microsoft. Brussels has asked customers and competitors of the two companies ... Read more »

House prices rising at fastest pace in 15 years on quarterly basis, says Halifax

The three month-on-three month increase of 3.4% is the strongest seen since 2006, the lender said, but it does not expect growth to continue at the same level into the new year. Read more »

Katrina Kaif and Vicky Kaushal may move into a rented beachfront property in Mumbai after wedding

Bollywood actors Katrina Kaif and Vicky Kaushal. (Image credit: AFP) Bollywood actors Katrina Kaif and Vicky Kaushal, who are in Jaipur for their wedding to be solemnized at a hotel ... Read more »

Lord of the tree rings: Log splitter to help Taranaki farmers

Backyard tinker Joe Goodin has turned a former fertiliser truck into a massive mobile log splitter to help Taranaki farmers turn felled trees into winter fuel in record time. Local ... Read more »

No sun, no stars for six months. How to work and live in the North

The chain of meteorology stations stretches to Chukotka - and at every station people are waiting for the supplies Read more »

Reliance, Abu Dhabi-based TA'ZIZ form joint venture for $2 billion chemical projects in Ruwais

The signing of the agreement was overseen by RIL Chairman and MD Mukesh Ambani and UAE Industry Minister Dr Sultan Ahmed Al Jaber. Oil-to-telecom conglomerate Reliance Industries Ltd (RIL) on ... Read more »

Stocks making the biggest moves premarket: American Airlines, AutoZone, GlaxoSmithKline and others

Check out the companies making headlines before the bell: American Airlines (AAL) – Chief Executive Officer Doug Parker announced he would step down from that job on March 31 and ... Read more »

DNB sees risks from corona, interest, inflation and technology

Photo: ANP Supervisor De Nederlandsche Bank (DNB) will pay a lot of attention next year to the risks that financial institutions ran due to the corona crisis. The persistently low ... Read more »

Instagram launches tool urging teens to take a break

The Associated PressFILE – This Friday, Aug. 23, 2019 photo shows the Instagram app icon on the screen of a mobile device in New York. Instagram on Tuesday Dec. 7, ... Read more »

Stratford High School donates cans to Stratford Foodbank

Stratford High School is helping Stratford Foodbank keep its shelves stocked. The school donated boxes filled with cans and other food items to the foodbank. The donations were collected as ... Read more »

Ngee Ann Kongsi's $2.94m donation to IPS will help fund interest-free loan project in Yishun

SINGAPORE – Low-income families who need some cash to pay the rent, medical bills or school fees can steer clear of illegal moneylenders and borrow from a community lending pilot ... Read more »

Rs 2,000 notes now 1.75% of total banknotes in circulation; down from 3.27% in Mar 2018            

Representative image The number of Rs 2,000 currency notes in circulation has decreased to 223.3 crore pieces or 1.75 percent of total notes in circulation (NIC) in November this year, ... Read more »

American Airlines CEO Parker to step down next March

The Associated PressAn American Airlines flight arrives at Miami International Airport, Monday, Nov. 8, 2021, in Miami. The U.S. says that as of Monday, with bans on travelers from 33 ... Read more »

DNB warns financial sector: do not wait any longer to consider climate risks

It is almost becoming a regular tune from De Nederlandsche Bank: the warning to the financial sector about the impact of climate change. It is really a risk for the ... Read more »

Astranis signs deal to bring satellite internet to 3 million people in Peru by 2023

A visualization shows an Astranis satellite over Peru in orbit.Astranis Astranis, a San Francisco-based company with an alternative approach to providing internet access from satellites, on Wednesday announced a deal ... Read more »

EU ministers clear the way for abolishing VAT on solar panels

Photo: ANP VAT levies on certain goods and services, including solar panels, water, passenger transport and live streaming of sports matches or shows, can be reduced in the EU to ... Read more »

EU agreement: The Netherlands may abolish VAT on solar panels and water

The Netherlands has argued in the past for the use of a zero rate, but this was only possible in specific cases, such as the supply and supply of ships ... Read more »

American Airlines CEO Doug Parker to retire, after 20 years at helm

Parker is the longest-serving chief executive of a major U.S. airline. Read more »

'Wind direction' partly to blame after thousands cut off by storm, energy boss tells MPs

Paul McGimpsey of the Energy Networks Association faced questions at a select committee over storm Arwen, which has left thousands of homes cut off. Read more »

Moscow court fines Google over $188,000 in four cases of unlawful content

As of now, Google has been fined a total of 58 mln rubles ($778,890) for the same offense Read more »

Large profit margins on cheap self tests but the market may be volatile: FD

A coronavirus nasal testing kit. Photo: Now that self testing is being encouraged, including for people with mild symptoms, the trade in tests is booming but purchase prices appear ... Read more »

SaaS startup MoEngage raises $30 million led by Steadview Capital

Customer analytics startup MoEngage on December 7 said that it has raised $30 million led by Steadview Capital, doubling its valuation to about $500 million in six months. While MoEngage ... Read more »

American Airlines CEO Doug Parker to retire, president Robert Isom to take reins March 31

An American Airlines plane lands at Ronald Reagan Washington National Airport November 23, 2021 in Arlington, Virginia.Drew Angerer | Getty Images American Airlines CEO Doug Parker, the longest-serving chief executive of a ... Read more »

Half of office occupiers with presence in tier-II cities using flex spaces: JLL- Awfis Survey

Almost half of the office occupiers who already have a presence in tier-II cities are using flexible spaces due to the availability of shorter leases and a cautious approach by ... Read more »

Chip companies lead in sharply higher AEX

The stock exchange in Amsterdam traded sharply higher on Tuesday, partly due to the gains made by shares in the chip sector. Investors were less concerned about the economic impact ... Read more »

Gainers & Losers: 10 stocks that moved the most on December 7

India’s benchmark indices ended higher on December 7 led by gains in auto, metal, realty and financial names. At close, the Sensex was up 886.51 points, or 1.56%, at 57,633.65, ... Read more »

CDL, Palo IT bag top prizes in Sustainable Business Awards for their green initiatives

SINGAPORE – Doing well by doing good – that is the philosophy of the companies that bagged awards for being sustainable at a ceremony on Tuesday (Dec 7). The desire ... Read more »

Small businesses welcome plans for UPI-like digital platform for MSME lending

Representative Image (Source: ShutterStock) A digital platform to provide quick and easy credit to the micro, small and medium enterprises sector can reduce paperwork and ease the flow of small-ticket ... Read more »

German investor confidence down due to Omikron variant

Photo: ANP German investor confidence has fallen due to the rise of the Omikron variant of the coronavirus. According to figures from the German research institute ZEW, investors are mainly ... Read more »

United Arab Emirates to move to Western-style Monday to Friday working week

UAE's government says the change will make it "the first nation in the world to introduce a national working week shorter than the global five-day week". Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic