Concerns that the real estate company might go bankrupt worried the financial markets last year.
(Photo: Reuters)
The shares of Chinese real estate developer Evergrande and two of its subsidiaries were suspended from trading in Hong Kong on Monday morning at the company’s request. In a mandatory notification from the group, it announced insider information.
The halt to trading came shortly before an offshore bond worth more than $2 billion matured on Wednesday. In January, the highly indebted group announced restructuring. The company has accumulated more than $300 billion in debt.
There is also speculation about further off-balance sheet debt. Evergrande missed several regular interest rate dates in 2021. At the beginning of December, an Evergrande subsidiary owed interest even after a 30-day grace period had expired.
The rating agencies Fitch and S&P rated this as a partial default. The group’s payment difficulties had worsened since the Chinese government took measures last year to curb speculation in the real estate market.
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Concerns that the heavily indebted conglomerate would go bankrupt worried the financial markets last year. However, the greatest risk associated with the Evergrande crisis is that China’s private households will lose their belief in real estate as a value-preserving asset class.
According to estimates, around three quarters of the assets of private households are invested in real estate. Their investments are the basis for the construction boom of the past two decades and an important driver of economic growth. The Chinese real estate market accounts for around a third of China’s economic output.
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