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A Chinese property company reveals billions of failure in its payments report

July 20, 2023: On Monday, Evergrande Group in China published a nearly $81 billion mixed flop in its long overdue payments report.

The most indebted property developer decreased into default in 2021 and announced an offshore debt restructuring program in March, having struggled to finish projects and repay suppliers and lenders.

Evergrande’s net failures for 2021 and 2022 were 476 billion yuan and 105.9 billion yuan, respectively, as a result of writedowns of properties, return of lands, losses on financial assets and financing costs, the company said.

In its previous intermediate year of operation, 2020, Evergrande posted a net profit of 8.1 billion yuan.

Evergrande’s colossal deficit pile in recent years has become the source of serious concern about China’s property sector, a bedrock of the Chinese economy, with ruins and abandoned property projects across the country. The company’s proposed restructuring will be heard at the High Court on July 24.

JPMorgan estimates that around 50 property developers have defaulted on $100 billion of offshore bonds over the last two years, while dozens have been suspended from Hong Kong stock exchange exchanges.

On Tuesday, the co-head of Asia-Pacific research at CreditSights, said there will be consolidation in China’s property market, which is evolving an “increasingly bifurcated sector.”

CreditSights tracks the monthly contracted sales figures of more than 30 developers, and Sandra Chow expressed only eight had said increases in their sales numbers.

“Unsurprisingly, all of those are the state-linked or the stronger developers, so we’re catching this increasing bifurcation where the strong developers are the state-linked, the large players, and the smaller ones are kind of left to languish, and it will be an increasingly consolidated sector,” Chow explained.

“Understandably, if you’re a homebuyer, you’re not going to buy a house from a weak player as well because there’s that risk that the developer will not be able to complete your house on time, and then you’re going to be left with that penalty, so it’s quite hard to see how the smaller developers will regain homebuyer trust and then get the cash in to turn around their companies.”

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