Beijing (AFP)

Concern is mounting in China around the future of the behemoth Evergrande, the flagship of real estate whose abysmal debt now raises fears of bankruptcy bringing social and economic instability for the country.

Summoned in August by Beijing to "actively" resolve its debt problems, he said "to do everything possible" to keep its activities afloat.

But some creditors are now calling for "immediate" repayments, Bloomberg reported on Friday.

Real estate heavyweight

Evergrande is one of the largest Chinese private groups.

It employs 200,000 people and its activity generates 3.8 million jobs in the country, according to the company.

It is one of China's leading real estate developers, with a claimed presence in more than 280 cities.

Its president, Xu Jiayin, is the fifth fortune in the country, according to the specialist firm Hurun.

Besides real estate, Evergrande is also known in China for its football club: Guangzhou FC (ex-Guangzhou Evergrande), coached by Italian world champion Fabio Cannavaro.

Guangzhou FC football team during a competition, November 28, 2020 in Qatar KARIM JAAFAR AFP / Archives

And in recent years it has embarked on an all-out diversification.

It is present in the flourishing food and mineral water market, with its Evergrande Spring brand.

He also created amusement parks for children, which he wanted "bigger" than his rival Disney.

The Chinese giant has also invested in tourism, internet, digital, insurance, health ... but also the electric car.

Founded in 2019, Evergrande Auto's objective was to relaunch the group, revolutionize the sector and compete with the American manufacturer Tesla.

But two years later, the company not only does not sell any vehicles.

But, valued for a time at 120 billion dollars, it is only worth ... 60 billion, after having lost in a few weeks half of its value.

Multiplication of acquisitions

Evergrande has increased acquisitions in recent years and is now heavily in debt: it estimates its liabilities at 1.97 billion billion yuan (257.3 billion euros).

The group is described by Beijing as "gray rhino", a term designating a large company with alarming debt and which presents a systemic financial risk.

Besides Evergrande, the authorities are particularly concerned about the scale of the loans taken out by the country's large private conglomerates and their labyrinth of tangled subsidiaries.

The China Evergrande center in Hong Kong, August 6, 2021 ISAAC LAWRENCE AFP / Archives

In recent years, power has pushed them to slimming down, like Wanda (real estate, cinema, amusement parks), Fosun (tourism, entertainment) or even HNA (tourism, aviation).

During August, Beijing had publicly urged Evergrande to "actively" resolve its debt problems.

An unusual approach commensurate with the concern that the group's financial health arouses.

The group's action has unscrewed in recent months on the Hong Kong Stock Exchange: in one year, it has lost more than 70% of its value.

Recently, contractors and suppliers have complained that they are not getting paid.

Worried about the medium-term repayment capacities, the rating agency Moody's lowered the group's solidity rating in early August to "Caa1", one of the worst that can be attributed.

Fitch and Standard and Poor's (S&P) had done the same.

Under pressure

Real estate has traditionally been one of the engines of the Chinese economy.

And the sector, which attracted more than a quarter of investment last year, has played a key role in the post-pandemic recovery.

On a construction site in Beijing, August 21, 2021 Noel Celis AFP / Archives

But Beijing, which fears overheating, has tightened in recent months the conditions of access to credit for real estate developers.

Under the new rules, Evergrande can no longer sell any property until it has formally finished building it.

In the past, however, the group had largely taken advantage of this model to finance itself and keep its activities afloat.

Despite the pressure, Beijing "will not let Evergrande go bankrupt," say analysts at US-based SinoInsider.

"It would have a huge impact on the regime" and its stability, they note in a note.

© 2021 AFP