Huai'an, Jiangsu, Evergrande Mingdu Community, a subsidiary of Evergrande Group.
Photo by Zhao Qirui issued by China News Service
When will Evergrande experience a substantial debt crisis?
This is a problem that has been hovering in the market for a long time in the past.
Previously, Evergrande paid overdue interest many times before the expiration of the grace period, and awkwardly pulled the companies on the default line back. In the face of huge liquidity problems, such emergency hedging can only "save it for a while."
According to the Evergrande announcement on the evening of December 3, given the current liquidity situation, the Group is uncertain whether it has sufficient funds to continue to perform its financial responsibilities.
The company received a notice requesting the company to perform a guarantee obligation in the amount of 260 million U.S. dollars.
In the event that the Group fails to perform guarantees or other financial responsibilities, it may cause creditors to demand accelerated debt maturity.
Now, Evergrande’s risk boots have landed, but this is not a bad thing.
Dispel uncertainty and get on the right track
The financial market is a confidence market, and the ability to adjust and stabilize expectations can better respond to risk crises.
Speculations and rumors about the Evergrande issue spread to the market. This uncertainty can easily cause panic. Once a consistent behavior of "self-actualization" is formed, it may even cause a viable company to die because of the collapse of outside confidence.
Blind diversified expansion and poor management are the main causes of Evergrande’s debt problems, but it must also be noted that the financial debt of Evergrande Group accounts for about one-third of all debts, the structure is relatively scattered, and the amount of financial investment is small. .
After Evergrande’s announcement that it could not perform its guarantee responsibilities, Guangdong Province dispatched a working group to Evergrande as soon as possible to supervise and promote enterprise risk management, to effectively strengthen internal control management, and maintain normal operations.
Judging from the overnight response of the financial management department, the problem of Evergrande Group is an individual case, and the risk of its spillover to the financial industry is controllable.
These actions have sent two key signals to the market. One is the official action to bring Evergrande’s crisis management to the right track for a proper resolution. The other is to eliminate uncertainty, help stabilize market confidence and expectations, and promote the stability of the capital market. And the normal operation of financial markets.
It should also be noted that the current trend of China’s macroeconomic stability and improvement has not changed. This has laid the foundation for the overall healthy development of the real estate industry and the credit foundation for overseas financing of Chinese-funded enterprises. The normal financing function of the long-term market will not be affected. The impact of the Evergrande incident.
The rights and interests of all parties are expected to be protected
It is undeniable that the real estate industry is of great significance in providing employment, driving upstream and downstream industries, and guaranteeing the housing needs of the people. When handling Evergrande debt issues, creditor rights and various stakeholder groups must also be taken into consideration.
Regarding creditors, Evergrande announced that the Group will consider its overall financial situation as a whole, respect all stakeholders, uphold the principles of fairness and legalization, and will actively communicate with overseas creditors to formulate feasible overseas restructuring plans for all stakeholders .
For home buyers, the government is urging Evergrande to speed up the restoration of project construction, avoid "unfinished buildings" and safeguard the legitimate rights and interests of housing consumers.
In this process, the financial department will also cooperate with the housing and urban-rural construction department and local governments to provide financial support for the resumption of the project.
The settlement of the debt problem is expected to take care of the upstream and downstream enterprises cooperating with Evergrande and the employees who contribute to the Evergrande project. One of the most important points is the group of migrant workers who must ensure that their wages are paid in place to protect them. The legitimate rights and interests of the People’s Republic of China to maintain social stability.
The government has repeatedly emphasized that it is necessary to adhere to the principles of marketization and rule of law to deal with risks.
As the Governor of the People's Bank of China Yi Gang said, the principle for responding to the Evergrande incident is to strictly follow the order of compensation prescribed by the law, and fully respect and protect the legal rights and interests of creditors and property owners.
In this process, it is especially necessary to protect the legitimate rights and interests of consumers who have purchased houses.
"We will adhere to the principle of rule of law to ensure that the legitimate rights and interests of all creditors and stakeholders are treated fairly." Yi Gang said.
Multi-party joint force to swing a "combination boxing"
When preventing and dissolving risks, China upholds the overall thinking and bottom-line thinking, and must not allow the spread of individual company risks to evolve into a systemic crisis.
When the "invisible hand" of the market cannot completely solve the problem, the "visible hand" of the government needs to make decisions and deployments at critical moments, which will also verify the strong leadership of the central government from the side.
Evergrande, who wants to return to a healthy body, must dare to overcome the "throttle period" in the disposal process, and such a breakthrough requires a series of "combined punches" from the government.
The dispatch of a working group by Guangdong Province is a powerful measure to resolve the crisis, and the joint cooperation of multiple departments has given a set of three-dimensional plans to "break the situation" in an all-round way.
Judging from the trends disclosed by the financial management department, it will continue to maintain communication with the relevant regulatory authorities in the overseas market, urging overseas bond-issuing companies and their shareholders to strictly abide by market discipline and rules, and properly handle themselves in accordance with the principles of marketization and rule of law. Actively fulfill the statutory debt repayment obligations.
The relevant departments will provide support and facilitation under the current policy framework for the repayment of funds remitted by enterprises and the repurchase of overseas bonds.
Continue to support real estate companies to issue bonds in a reasonable way for financing, maintain smooth bond financing channels for real estate companies, and pay particular attention to guaranteeing the rolling renewal of bonds issued by real estate companies that operate normally.
At this stage, it is necessary to focus on satisfying the mortgage needs for first homes and improved housing, reasonably issue real estate development loans and M&A loans, increase support for guaranteed rental housing, and promote the steady and healthy development of the real estate industry and the market.
Shabin