The Chinese real estate company Evergrande, feared because of its risk to the global economy, has come one step closer to bankruptcy.

On Monday, the company's shares on the Hong Kong Stock Exchange lost a fifth of their already sharply declined value after the company announced on Friday that it may no longer be able to service its debt.

Hendrik Ankenbrand

Business correspondent for China based in Shanghai.

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At the close of trading on Monday, the price of the stock was 1.81 Hong Kong dollars, 87 percent below the value at the beginning of the year. Evergrande is the second largest real estate company in China based on its apartment sales. The company achieved its fabulous rise by taking on ever greater debt, which now amounts to more than $ 300 billion. Since the Chinese government set new upper limits for the debt of real estate companies last year, the banks have turned the tap on Evergrande, as a result of which the group's liquidity has become tight and it has had great difficulty paying interest payments on the bonds it has issued in recent months could.

On Friday, Evergrande worried its overseas bond holders when it announced it was planning to restructure its foreign debt.

Observers expect that in the event of insolvency, foreign investors would be served in the last place or not at all, in an orderly or disorderly manner.

On Monday, Evergrande announced that officials from various state regulatory agencies are moving into a new "risk management committee" at the company.

The committee will play an important role in "defusing and eliminating future risks" for the group.

Further real estate developers in the wake

In addition, another Chinese real estate developer has admitted problems servicing a large loan. In a statement addressed to the Hong Kong Stock Exchange, the company Sunshine 100 China Holdings announced on Monday that it had had to allow a repayment period of around 170 million dollars (around 150 million euros) plus interest the previous day to elapse. The background is "liquidity problems" due to "unfavorable effects of several factors, including the macroeconomic environment and the real estate market," said Sunshine 100 China Holdings. Talks with creditors about debt rescheduling or other solutions are ongoing, the company added. 

Sunshine 100 has already had problems servicing its loans on time in the past. According to a calculation by financial news agency Bloomberg, the company is now in arrears with $ 385 million. Sunshine 100 is not one of the major corporations in China. However, the company's problems are an expression of the crisis in the Chinese real estate industry, at the center of which is Evergrande.

China's central bank claimed weeks ago that the risk that Evergrande poses to China's economy, and thus the rest of the world, is under control. On Monday, the central bank announced that it would reduce the minimum reserve that banks must hold by 0.5 percentage points with effect from December 15. This flushes 1.2 trillion yuan (167 billion euros) into the economic cycle and is intended to stimulate the economy. The crisis on the real estate market, which has long since gripped other large corporations beyond Evergrande, is currently putting pressure on growth.

China's Vice Prime Minister Liu He, who has been entrusted with the management of the economy by President Xi Jinping, announced last week that the growth target of at least 6 percent would be exceeded this year.

However, since the benchmark is the extremely weak pandemic year 2020, most observers had expected growth of at least 8 percent before the start of the real estate crisis.

Above all from the small and medium-sized enterprises, which are to benefit from the now released loans, one can hear of a bad order situation.