New Delhi: China’s real estate giant Evergrande debt crisis has sent shockwaves as global investors are awaiting to gauge the impact on the financial system of the world’s second largest economy. Chinese authorities are yet to release detailed statement on the issue. Evergrande is reportedly facing at least USD 83.5 million in interest payments due on Thursday, with a 30-day grace period.Also Read - China's Inhalable Covid-19 Vaccine Likely to Boost Antibodies
The debt crisis has been raising concerns about a liquidity crisis among all Chinese and Hong Kong property companies, as markets quickly turn off access to dollar funding. Also Read - Apple Removes Quran App in China After Request From Officials
China Evergrande Debt, Default Crisis Explained
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- Ashmore Group PLC and HSBC Holdings PLC, both of London; BlackRock Inc. based in New York; and UBS Group AG of Zurich are some of the firms with significant holdings of Evergrande bonds.
- Evergrande Group was founded in 1996. It builds skyscrapers, office towers, apartments, shopping malls and other things. The company has also ventured into drinking mineral water, health clinics, theme park construction and electric vehicles, as per AP report.
- Evergrande’s founder Xu Jiayin borrowed money to build the empire. Recently, Evergrande disclosed that it had USD 310 billion outstanding debts. The amount was borrowed from banks, creditors, bondholders, the AP report says.
- While the Evergrande’s debt issue is not a recent one but it came to fore after China’s wide-scale regulatory crackdown across most of its businesses. Beijing crackdown began with technology giant Alibaba Group Holding Ltd, as per IANS report.
- China’s crackdown on property developers, without a known endgame, is what’s sapping liquidity from thinly traded securities like Evergrande bonds, which are held in passive emerging-market-index exchange-traded funds and separately managed accounts at U.S., European and Asian money-management firms, as per IANS report.
- Markets are now watching for whether the People’s Bank of China, will inject liquidity “tactically” Wednesday night, Emons says. The timing of all this comes as some investors are also bracing for a potentially hawkish outlook from the Federal Reserve on Wednesday, and many have been waiting for a significant pullback in the S&P 500 during the month of September, the IANS report says.