Just the interest owed by China’s property giant Evergrande is bigger than Punjab

Sep 21, 2021

By: BI India Bureau

China’s property developer becomes biggest debt-laden

Evergrande is China’s second largest property developer that owes over $300 billion to the country’s banks.

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Just a little over half of $300 billion, 54 percent, is secured i.e. the banks have assets as collateral against the amount.

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Real estate developer may default

Evergrande is expected to default on interest payment and that itself is about $83.5 billion, that’s bigger than Punjab’s economy worth nearly $75 billion.

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It owes money to about 250 financial institutions

Evergrande owes money to 128 banks and 121 non-banking institutions, according to Reuters.

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Reports say its debt is around 6.5 percent of total China’s property market liability

Evergrande’s liabilities are around 6.5 percent of the total Chinese property market’s liabilities, according to Invesco, a US-based asset management firm.

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Report findings

Invesco also says Evergrande’s debt is roughly 2-3 percent of Chinese bank’s core tier-1 capital as of the end of June 2021.

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Top 4 banks lend between $2 and $5.5 out of every $100 of lending

The top four banks in China, all state-owned, have given anywhere between $2 and $5.5 out of every $100 of lending to Evergrande.

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Property space contributes a quarter to China’s GDP

The property sector makes for a quarter of China’s gross domestic product (GDP) and Evergrande is the second largest player in it.

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Evergrande may disrupt the country’s finances

Such a large default by Evergrande may leave a hole in the country’s finances, which is among the top consumers of commodities in the world.

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Burnt and bruised banks may get wary of lending further, particularly, to the property sector.

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The subsequent spillover may hurt China’s economic growth and hurt global demand for commodities like steel, metals and chemicals.

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