Evergrande can’t pay its debts. China is scrambling to contain the fallout
Beijing is intervening to prevent a disorderly collapse of Evergrande after it has defaulted on its debt. The collapse of the real estate group could wreak havoc on the world’s second biggest economy. The property developer has entered “restricted default” after the company was unable to pay off interest that was due a month ago – the grace period ended on Monday. The company has more than $300 billion total liabilities and its inability to pay the interest revived concerns about the future of the company.
Evergrande has 200,000 employees, made more than $110 billion in sales last year and owns more than 1,300 developments in over 280 cities in China. Real estate and related industries account for approximately 30% of GDP in China and analysts are concerned about a collapse triggering wider issues in the property market and overall economy.The local government in Guangdong province sent officials into the firm to oversee risk management and maintain normal operations. The central bank of China said it would put $188 billion into the economy to counter the slump of the real estate market. Evergrande announced it would be creating a risk management committee with government representatives to avoid future risks.