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September 28, 2021

Anna Murray 

Global stock markets have been on high alert following the recent failure of China's Evergrande. Evergrande missed payments on wealth products worth 40 billion yuan (US$6.2 billion) on September 23, sparking nationwide protests. It has finally reached an agreement on the interest payment on a domestic bond of US$35.9 million. It does, however, owe US$83.5 million on an offshore bond.

Evergrande Real Estate currently owns over 1,300 projects across China in over 280 cities. Evergrande had done business with the majority of China's 68 trust companies. It is currently having difficulty making debt interest payments. China Evergrande is the world's most indebted real estate developer, owing US$305 billion, according to the data.

Evergrande has until the end of 2021 to fulfill its obligations to wealthy trust purchasers and 70,000 retail investors. As of September 27, its share price on the Hong Kong stock exchange was down 84% in 2021. The cash-strapped company expects to lose US$1.8 billion in the fourth quarter on high-yield products sold through trusts to wealthy clients and institutions.

If Evergrande defaults, many people have paid deposits and could potentially lose that money; construction and design firms and material suppliers are at risk of incurring significant losses, which could force them into bankruptcy; and China's financial system faces a potential impact. As the financial crisis in China Evergrande worsens, the global economy, particularly real estate, will need to be on high alert.