China’s central government has refused to bail out Evergrande, as the company tries to complete pre-sold, unfinished projects. That strategy, though, may be backfiring. Beijing will find it trickier to look the other way, writes ywchen1:
Register now for FREE unlimited access to Reuters.comSo far, the central government has refused to bail out Evergrande, opting to stay largely on the sidelines as the company tries to complete pre-sold, unfinished projects. That strategy, though, may be backfiring as the national real estate market goes into a tailspin. Property sales by value are down 29% in the first six months of the year and new construction starts are down 34%.
Evergrande’s $300 billion of liabilities implies it will require a much more substantial lifeline. Beijing will find it trickier to look the other way.China Evergrande said on July 22 that its chief executive officer and finance head have resigned after a preliminary probe found their involvement in diverting loans secured by its Hong Kong-listed unit, Evergrande Property Services, to the group.
Evergrande had been investigating since March how deposits worth 13.4 billion yuan belonging to the property services unit were seized by banks. Separately, China is planning to set up a real estate fund worth up to 300 billion yuan to support more than a dozen property developers including Evergrande, financial information provider REDD reported on July 25, citing sources.Editing by Robyn Mak and Thomas Shum
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