The hour X is approaching, the white knights are leaving. Evergrande, the Chinese real estate giant saddled with 260 billion euros in debt ($305 billion) announced the failure of the negotiations for the sale of a subsidiary which would have made it possible to meet the most urgent deadlines. The news, after two weeks of suspension of the stock from the listing, rained down on the Hong Kong Stock Exchange with the violence of a new typhoon: the company, which also owns the Chinese champion team, coached by Fabio Cannavaro, lost its 12,5% while the would-be buyer, Hopson real estate, celebrated the narrow escape with a jump of 5%.
He is alone the last stage of a landslide which has seen shares in the group's three publicly traded companies plummet 80 percent over the year, for a loss approaching $60 billion. These numbers indicate that very few believe that the colossus, which has 800 large construction sites in dozens of cities, is able to honor the first installments of debts that have fallen due to international creditors even if so far, unlike other distressed real estate, paid the yield of yuan bonds.
Saturday morning grace period expires of 30 days granted to defaulting debtors. It is unlikely that the patron Xu Jiayin, until a few months ago considered the richest man in China, will be able or willing to meet the debts due in September (113 million dollars), which in the meantime rose to 270 in October. Unless the authorities, so far absent except for some vague reassurances about the "however manageable" situation, intervene in extremis to prevent a default that threatens to have major consequences on the credibility of Chinese finance. In the crosshairs of international operators, who are already sharpening their weapons in view of the negotiations with the mega debtor, the Hong Kong financial center itself, already a showcase of the reliability of the Chinese system, has ended up. The Financial Times has already noted that the securities suspended from the listing now represent a value of over 62 billion dollars, which ended up in a sort of icebox to the detriment of Western investment funds as well
To get a dimension of the problem it is enough to say that Evergrande is the tip of the iceberg of a debt exposure of 5 trillion dollars, as much as it weighs on Chinese real estate, a sector that represents 29 percent of GDP, or 41 percent of credits in the banking system, as well as about 78 percent of wealth of Chinese families. And you can already see the systemic effects of this corporate crisis. For the first time the average price of houses, calculated on 70 cities of the immense country, recorded a drop caused by the distrust of buyers both in real estate developers, not just Evergrande, who are struggling to meet their commitments.
The embarrassment of the authorities is evidenced by the silence of the official media, which so far have devoted little space to the crisis and the first protests by customers and employees (obliged to pay part of their pay into savings funds managed by the company) but the discomfort is well present on social media. Even in China, the house represents an almost obligatory stop for families, especially before marriage. And Xi JingPing is aware of the importance of the match which falls among other things in the middle of campaign on “social cohesion”, that is, the squeeze on the rich and the excesses of the digital economy. Yet so far he hasn't moved, at least officially, to find a solution to the liquidity problems of a giant that owns dozens of investments, from tourism to electric cars, unsellable in a time of crisis.
Meanwhile, ironically, Jack Ma, the founder and largest shareholder of Alibaba, is sailing on his yacht in the Balearics after months of probation for daring to criticize the regime's banks.
