What’s next for Evergrande: Bailout, breakup or default?
Investors may have to wait a while longer to find out whether Evergrande will default on its enormous debts — it now has a grace period of up to 30 days on the first bond payment. A second payment of $47.5 million on another bond is due next week. Evergrande’s stock plunged nearly 12% Friday in Hong Kong, reversing a recovery it staged the previous day on news that the company would pay interest on another bond issued in yuan to mainland Chinese investors. So far this year, the shares have plunged 80%.Filling the vacuum of information is mounting speculation that the Chinese government will have to Demand for housing is easing for a number of reasons. The number of marriages has plunged 40% since 2013, reducing the demand from newlywed couples. And urban population growth has slowed.It means “developers will be competing over a shrinking pie,” Evans-Pritchard said.”The environment for developers will get a lot more challenging. Evergrande’s collapse marks the end of the beginning of the squeeze facing China’s property sector rather than the beginning of the end,” he added. Taking control of Evergrande would also fit a recent pattern of greater intervention in the Chinese economy. Beijing has been cracking down on private enterprise, from tech companies to private tuition and even social media influencers, while trying to cool the overheated real estate sector.Pang from ING believes the government’s crackdown on property and other industries could harm the economy. “Recent government policies do not aim to squeeze companies into debt troubles. But I agree that there are too many policies coming out in a short period of time. Policy risks are rising and could hurt employees, and therefore consumption,” she said.— CNN’s Beijing bureau contributed to this report.
