Global financial markets are on the alert as Chinese real estate giant Evergrande faces serious financial problems.
The most indebted real estate company in the world faces a series of deadlines for bond interest payments, totaling tens of millions of dollars.
The company has taken steps in recent weeks to raise money owed to customers, investors and suppliers.
In particular, it has set up a risk management committee to carry out restructuring, hoping to avoid bankruptcy.
However, according to rating agencies such as S&P, bankruptcy is inevitable, which will have a significant impact on the global economy.
The real estate giant, which owes more than $ 300 billion and is facing the biggest bankruptcy in China, said on Monday that the commission included government officials and would play a key role in “limiting and eliminating future risks”.
On Friday, Evergrande said it would seek to restructure its debt after acknowledging that it may no longer be able to meet its financial obligations, urging the government of its southern Guangdong province to intervene to help manage it. fall.
“Evergrande is trying to sell assets to pay off the debt, but Friday’s statement essentially indicates that it is going to ‘deliver’ and needs help,” said Conita Hung, director of investment strategy at Tiger Faith Asset Management. “This sends a very bad signal,” he said.
What will be the consequences of a possible Evergrande bankruptcy?
There are several reasons why Evergrande’s problems are serious.
First, many people bought real estate from the Evergrande even before construction began. They have already made deposits and could possibly lose that money if it collapses.
There are also companies that deal with Evergrande. Companies, including construction companies, design companies and suppliers of materials, are at risk of major losses, which could lead to bankruptcy.
The third reason is the potential impact on China’s financial system.
“The financial implications will be far-reaching. “Evergrande reportedly owes money to about 171 domestic banks and 121 other financial companies,” Mattie Bekink of the Economist Intelligence Unit (EIU) told the BBC.
If Evergrande defaults, banks and other lenders may be forced to lend less. This could lead to what is known as a credit crunch when companies are struggling to borrow money at affordable prices.
A credit crunch would be very bad news for the second largest economy in the world, because companies that can not borrow are difficult to grow and in some cases can not continue to operate.
This may also bother foreign investors, who could see China as a less attractive place to invest their money.
Sources: Reuters, BBC
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