Arrested senior executives and millions of empty flats: The world’s largest real estate company is in danger of collapse

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According to the national statistics office, 648 million square meters of living space, or about 65 million apartments, are currently vacant in China. The entire population of Switzerland could be housed here nine times.

This figure symbolizes the massive mismanagement in the Chinese real estate industry.

The largest flagship is China Evergrande. Once the world’s most valuable real estate company, it was already on the verge of bankruptcy in 2021 due to excessive debt and a 98 percent drop in share value, but was supported by the state. Evergrande began restructuring and resumed trading on the stock exchange a month ago.

Evergrande before the final collapse

However, problems continue. According to the South China Morning Post, the meeting planned to be held with creditors this week was canceled at short notice. Evergrande says the restructuring plan needs to be revised.

In addition, new home sales still appear to be weak. The company also postponed a plan to restructure nearly 27 billion francs worth of bond debt to foreign creditors. In a stock exchange announcement on Monday, Evergrande confirmed that its subsidiary Hengda Real Estate will not be able to issue new bonds.

But that’s not all: According to the Caixin business magazine, Chinese authorities arrested Evergraande’s former CEO Xia Haijun and former CFO Pan Darong. The duo resigned from the board last summer after banks seized deposits equivalent to about 1.7 billion francs in subsidiaries. These were loans that subsidiaries took out without being reported on the balance sheet.

There are other investigations regarding the company in China. Last week, employees of the Evergrande Wealth Management subsidiary were arrested in the major city of Shenzhen.

Real estate market remains weak

Evergrande remains silent. The new creditor dates are unknown and the arrest of the former executives has also not been confirmed. Evergrande also did not provide current sales figures.

But recent reports from other indebted companies suggest China’s housing market has been further shaken this quarter. Sales of Country Garden Holdings and Sunac China Holdings, which are also in trouble, continued to decline. And along with them, the creditors have hope that Evergrande can be saved.

Source :Blick