2023-09-16 18:41:27
China suspends employees of a company affiliated with Evergrande Real Estate Group
Chinese police arrested a number of employees at a company affiliated with the debt-laden Evergrande Real Estate Development Group, authorities confirmed Saturday.
The police in the southern Chinese city of Shenzhen announced that they had arrested a number of employees of Evergrande Wealth Management, a financial company affiliated with the real estate group, without specifying their number or reasons. The authorities urged citizens to report any cases of corruption they suspect.
Evergrande was considered one of the largest real estate development groups in China, but the huge debts that it is now suffering from have contributed to deepening the crisis facing this sector in the second largest economy in the world, and raised fears of negative repercussions on global markets.
The real estate sector, along with the construction sector, contributes about a quarter of China’s gross domestic product, and they are considered one of the pillars of economic growth in the country, especially in light of the boom it has witnessed over the past decades.
But the enormous debts accumulated by the major groups in the sector, including Evergrande, whose total debt was estimated in late June at about $328 billion, made the Chinese authorities view the sector as an unacceptable source of danger to the country’s financial system and the stability of its economy.
The authorities began to impose gradual restrictions on these groups’ borrowing starting in 2020, causing a series of defaults, most notably Evergrande.
The group announced in late August that it had reduced its losses in the first half of the current year over the course of one year, but its cash liquidity declined in the first six months, which is expected to complicate the repayment of its debts in the coming months.
Another giant real estate group, Country Garden, was able to avoid default in recent months under agreements with creditors, after it suffered record losses and its debts exceeded the threshold of 150 billion dollars.
State-backed Sino-Ocean joined the real estate groups showing signs of faltering, by announcing on Friday the suspension of foreign debt payments.
This week, Moody’s lowered its forecast for the real estate sector in China from “stable” to “negative,” considering that the impact of the support measures taken by the government will be limited to the short term.
(AFP)
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