Chinese Giant’s Financial Woes Have Experts Worried

Chinese Giant's Financial Woes Have Experts Worried

(AbsoluteNews.com) – One of the largest real estate developers in China is in hot water. The company, Evergrande, is deeply in debt. It’s warning that it could default on its debts if its situation doesn’t change.

In 2020, Evergrande tried to cut its debts as the Chinese government introduced caps. According to reports, those debts now total $305 billion. If the company doesn’t find a way to sell off some of its assets, it isn’t going to be able to pay suppliers, raise income, pay its loans or finish projects. In addition to the real estate giant’s bonds due in 2022, the interest on its current loans and late payments to suppliers are cause for concern.

Evergrande has already stopped work on some of its projects as it tries to save money. On September 14, the company disclosed it has not made any “material progress” in its hunt to find investors. The issues surrounding the debt and lack of liquidity could “lead to cross-default.”

Experts worry that if the company has to restructure, it could lead to an economic crisis in China akin to the 2008 US collapse of Lehman Brothers. That’s often seen as the event that caused the country to fall into the Great Recession. Michel Lowy, of the banking and management firm SC Lowy, told Reuters the fallout from Evergrande’s collapse would be hard to contain.

It’s unclear how big an impact the real estate giant’s collapse would have on the US. However, with America’s economy still recovering from COVID-19, it’s definitely a concern.

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