Evergrande isn’t Lehman but could still cause a credit crunch in China

Evergrande isn’t Lehman but could still cause a credit crunch in China
The enormous scale of Shenzhen-based Evergrande, which was founded in 1996, has led to the wall of debt it faces. (Shutterstock)
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Updated 28 September 2021

Evergrande isn’t Lehman but could still cause a credit crunch in China

Evergrande isn’t Lehman but could still cause a credit crunch in China
  • A major default would send shockwaves through the Chinese economy and may cause foreign investors to pull cash out of China and other emerging markets

MOSCOW/CAIRO: Evergrande Group is a massive Chinese property developer with debts of $300 billion it is struggling to pay.

A major default by the Fortune Global 500 firm would send shockwaves through the Chinese economy and may cause foreign investors to pull cash out of China and other emerging markets.

This raises fears of a credit crunch that led to the 2008 financial crisis, although fall-out from the company’s woes has so far been concentrated in the property sector.

The shares and bonds of another Chinese property developer, Sunac China Holdings Ltd have fallen sharply this week, as investors fear the company could run into similar troubles as Evergrande.

The enormous scale of Shenzhen-based Evergrande, which was founded in 1996, has led to the wall of debt it faces.

It builds around 600,000 homes a year, but also owns theme parks, builds electric cars and even owns the Guangzhou football team.  The firm has 750 projects in 233 cities across China and employs over 160,000 staff. 

However, the company has been caught up in Chinese President Xi Jinping’s crackdown on firms, particularly in the property and the tech sector, to curb growth based on excessive borrowing. Last year the government placed restrictions on the amount property firms could borrow.

Following a slowdown in building work caused by the pandemic, the firm faced $83.5 million interest payment on dollar-denominated bonds on 23 September, which passed without investors receiving their money, according to the WSJ. Although the firm has a month’s grace before it is recorded as a default. 

The focus now turns to whether a coupon payment of $47.5 million due on Wednesday is made.

About $2.8 billion worth of bonds will mature by the first quarter in 2022, followed by $3.2 billion in the second quarter, according to a note by BofA Global Research issued 9 September. 

Following months of falling sales, the firm has around 1.5 million unfinished apartments that it needs to deliver to investors. It has such huge cash flow problems that it is paying suppliers with partly finished apartments rather than money.

It also owes cash to 171 domestic banks and 121 other financial firms, according to the Economist Intelligence Unit.

However, several local Chinese councils have set up special custodian accounts for Evergrande property projects to protect funds earmarked for housing projects from being diverted, reported Chinese media outlet Caixin over the weekend.

Beijing appears to be moving to prevent a total collapse of a firm that has so many links into the wider Chinese economy.

But such aid tests China’s crackdown policy, which is meant to prevent firms that are too big to fail writing cheques they cannot cash.

China's central bank this week vowed to protect consumers exposed to the housing market and injected more cash into the banking system.

In a statement on Monday the People’s Bank of China said it would “safeguard the legitimate rights of housing consumers"

Most China watchers expect the government’s containment efforts to be focused on prioritizing small investors ahead of foreign holders of Evergrande debts.


Egyptian football club plans $8.6m IPO

Egyptian football club plans $8.6m IPO
Updated 17 sec ago

Egyptian football club plans $8.6m IPO

Egyptian football club plans $8.6m IPO

JEDDAH: Egypt’s Ghazl El Mahalla Sporting Club intends to sell EGP135 million ($8.6 million) shares through an initial public offering, said minister of public business sector.

The sale of the stocks under the IPO will be held within two weeks, Hesham Taqfiq told CNBC Arabia.

Al Ahly Sporting, Egypt's most popular football  club, also announced last month its plan for a potential IPO with 49 percent of the company’s shares.


UK designs hydrogen powered jet concept with zero emissions

UK designs hydrogen powered jet concept with zero emissions
Image: Shutterstock
Updated 47 sec ago

UK designs hydrogen powered jet concept with zero emissions

UK designs hydrogen powered jet concept with zero emissions

RIYADH: A design of a liquid hydrogen-powered airliner theoretically capable of matching the performance of current midsize aircraft with zero emissions was unveiled by a UK research group.

The FlyZero concept envisions a commercial plane carrying 279 passengers non-stop from London to San Francisco matching today's comfort and speed, Bloomberg reported citing a statement by the Aerospace Technology Institute.

The group is a partnership between the UK government and industry. 

Hydrogen fuel technology is seen as a viable option away from fossil fuel commercial flights, however it is a challenge for storing on aircraft and the infrastructure for its widespread rollout remains in its infancy. 


ATI said it expects hydrogen aircraft to operate in 2030 and would publish further details on such aircraft, technology roadmaps, economic reports and sustainability assessments by early next year, according to Bloomberg.

The UK, which hosted the COP26 climate summit last month, is funding new technologies to help create aerospace jobs while meeting its climate targets.


Central Bank of Egypt to issue T-bills tender worth $1bn

 Central Bank of Egypt to issue T-bills tender worth $1bn
Image: Shutterstock
Updated 9 min 17 sec ago

Central Bank of Egypt to issue T-bills tender worth $1bn

 Central Bank of Egypt to issue T-bills tender worth $1bn

RIYADH: The Central Bank of Egypt will on Monday Dec. 6 issue a tender for one-year US dollar-denominated Treasury bills worth $1 billion.

The proceeds of this tender will be used to pay the value of a previous bid, which the CBE offered on Dec. 8, 2020, through which $1 billion was withdrawn, Daily News Egypt reported.

The CBE said that it had received 33 offers from local and international investors worth $1.8 billion to cover a similar bid that the bank put forward on Nov. 15, 2021, worth $1.6 billion.

The Central Bank accepted 28 of those offers, worth $1.6 billion.


Singapore suspends crypto exchange Bitget

Singapore suspends crypto exchange Bitget
Updated 15 min 50 sec ago

Singapore suspends crypto exchange Bitget

Singapore suspends crypto exchange Bitget

RIYADH: The regulator in Singapore has suspended Bitget, a crypto exchange that got into a fray after promoting the digital currency Army Coin, which is named after the followers of South Korean boy band BTS, Bloomberg reported.

Bitget, the sponsor of Italian soccer team Juventus, describes the army coin as a way to provide lifelong financial support to BTS members, but BTS’ agency Hybe said the coin has nothing to do with BTS and threatened legal action.
Bitget has removed the Singapore Monetary Authority logo from its website and blocked Singapore users from accessing the app and website, according to Bloomberg.
It also said on its website that it was established in 2018 in Singapore and has more than 1.5 million users worldwide.


Saudi Arabia, Oman to sign 13 trade and investment agreements

Saudi Arabia, Oman to sign 13 trade and investment agreements
Updated 27 min 4 sec ago

Saudi Arabia, Oman to sign 13 trade and investment agreements

Saudi Arabia, Oman to sign 13 trade and investment agreements

RIYADH: Saudi Arabia and Oman plan to sign thirteen trade and investment agreements, Oman’s minister of commerce, industry and investment promotion said to Asharq. 

The announcement came during the Saudi’s Crown Prince Mohammad bin Salman visit to the Sultanate. 

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