The case

​On 27 August 2023 the Chinese real estate company Evergrande announced that it had lost CHF 4.2 bn from January to June. In the same period of the previous year the loss had amounted to CHF 8.4 bn.

Real estate company Evergrande is the company the most deeply in the red in the world, with debts amounting to CH 300 bn. Because of this, Evergrande had to file for creditor protection in the United States mid-August. The southern Chinese real estate company had already found itself in a precarious situation two years ago.

The case is representative of several real estate companies in China that used to build flats in a time of an unprecedented building boom for which there was no demand whatsoever.

Evergrande Group is the second largest real estate company in China and would mainly build housing for people with middle and higher incomes. The company’s headquarters are located in Shenzhen, though the holding company is registered on the Cayman Islands to facilitate financing.

It is the international financiers that are now left out in the cold as the company’s share nosedived by 95 % in 2021. After trade had been suspended for almost 18 months, trading was resumed on 28 August 2023. The minus at the opening of trading was 87 %. The stock market value of the real estate company fell to only CHF 342 m, compared to almost CHF 50 bn in 2017.

 

Source: ​Konrad Adenauer Foundation & Anton Ladner

The commentary

Rising debts have caused the value of the Yuan to drop against foreign currencies. In addition to intervening in the foreign exchange markets, China’s government has been trying to reduce the outflow of the Yuan to foreign countries, and they not only keeping an eye on the exchange rate. Experts believe that China will cut off profit transfers from foreign companies in order to boost domestic economy and protect China’s currency. In short, it could become more difficult to take profits achieved in China out of the country in the future.

​

This publication has been prepared solely for information purposes and is does not constitute a recommendation, a solicitation, or an offer. The information on which this publication is based has been obtained from sources that we believe to be reliable and in good faith, but we have not independently verified such information and no representation or warranty, express or implied, is made as to its accuracy. All expressions of opinion are made as of the date of publication and may be subject to change without notice. k-flash and all related affiliates accepts no liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this publication or any part of its contents. The use of this publication should not be regarded as a substitute for the exercise by the recipient of his or her own judgment. This publication is not directed to any person in any jurisdictions that prohibit such publication.