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Evergrande, the massive Shenzhen based Chinese property developer, has been facing a massive debt crisis.
The company, which is the second largest real estate developer in China, has built up 300 billion US dollars in debt. This debt is as massive as GDPs of countries such as Ireland, Hong Kong, Portugal, and Denmark.
Creditors, which are the people or institutions that loan money to others, are now refusing to accept Evergrande bonds and demand that Evergrande repay the 300 billion that they owe.
If Evergrande decides to default, which when they are unable to make timely payments, misses payments, or flat out stops making payments on their debt, then they could declare bankruptcy.
If Evergrande does crumble under the debt, it would mean the largest real estate liquidation ever. A collapse on this scale would also likely cause other Chinese real estate developers, banks, and mortgage companies to also collapse.
Also, there is a chance that the Chinese government steps in to bail out Evergrande, however, the Chinese government has announced that this crisis is Evergrande’s alone to deal with, however, seeing the implications that an Evergrande collapse could cause, there is a chance the Chinese government does step in to prevent a collapse.
If Evergrande does collapse, the shockwaves caused by such a massive collapse would be felt in markets across the world.
The CEO of Evergrande has fallen under criticism after reportedly giving himself an 8 billion dollar raise while asking employees to donate money to pay off the company’s debt.
When a freshman who asked to remain anonymous was asked about this situation, they said, “I don’t think this is anything to worry about unless your parent’s work for or with Evergrande.”
When senior Borui C. was asked about this situation he said, “This probably won’t affect most people directly, and I think the potential fallout is exaggerated.”
Evergrande Collapse, Should you be Worried?
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