Founder Evergrande, China’s largest real estate developer, was summoned by the government after the company issued a statement saying it may not have sufficient funds to meet its financial obligations.
Evergrande is currently in debt worth $ 300 billion and is struggling to meet its commitments. The financial woes of the property developer have raised concerns about the entire property sector, which constitutes a substantial part of the Chinese economy.
Additionally, Bitcoin plunged 1.68% to $ 55,456 on Friday, shortly after Evergrande’s statement.
Evergrande made a statement warning of its current liquidity situation on Friday night when filing with the Hong Kong Stock Exchange. The company said there was “no guarantee that the group will have sufficient funds to continue to meet its financial obligations.”
Hours later, the government issued a follow-up statement saying that it “immediately summoned (founder) Xu Jianyin and agreed to send a task force to Evergrande Real Estate Group to oversee and promote risk management. ‘business”.
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The company is one of several real estate companies that have plunged into crisis over the past year after Beijing embarked on a regulatory campaign to curb speculation and leverage. This cut off the possibility of easy access to cash.
Evergrande has so far managed to avoid the default, but challenges remain.
One Evergrande unit has bond coupons worth a total of $ 82.5 million due Monday, at the end of the grace period. This was reported by Bloomberg earlier this week.
Last Friday, Evergrande founder Xu – also known as Hui Ka Yan in Cantonese – sold 1.2 billion Evergrande shares for the equivalent of $ 344 million, reducing his stake in the company by 77% to only 68%.
Beijing regulators have urged the mogul to use his personal wealth to fund Evergrande’s debt problems, but he seems reluctant to do so.
The real estate sector, which is a key engine of growth in the country, has cooled in recent months with strict home buying rules and the liquidity crunch affecting some of the country’s biggest developers.