BEIJING -

On September 21, tens of thousands of Chinese employees - in the evergrande real estate group - received a letter from the group's chairman, Xu Jian, expressing his conviction that the company "will emerge from the most difficult circumstances as soon as possible, It will speed up the full resumption of work and production to achieve the goal of ensuring construction.”

Xu Jian's message comes at a time when expectations are rising about the bankruptcy of Evergrande, which is the second largest real estate developer in China, after the group announced its inability to pay the payments owed on it, due to its lack of liquidity.

Data issued by the real estate group indicate that the number of employees directly in Evergrande has reached about 200 thousand people, while it is considered one of the largest companies in the world in terms of revenues, so how did you cross the path towards bankruptcy?

How did the fall of Evergrande begin?

In November 2017, Chinese President Xi Jinping said - during the 19th National Congress - that "housing is for living, not for speculation," as this sentence opened a hot front for real estate companies.

Since 2019, Chinese authorities have imposed a raft of regulations aimed at curbing the industry's excessive debt and staving off a housing bubble, which has hampered these companies' access to financing.

According to the 2020 financial statements of Evergrande, the group borrowed about 716.5 billion yuan (about 110.7 billion dollars), with 335.5 billion yuan due within one year, which represents 46.8 percent, and this resulted in the real estate group's commitment to repay 502.1 billion yuan from 2021 to 2022, of which 48 billion yuan is in interest.

Although Evergrande owns 778 projects with a total value of over 456.8 billion yuan and 28.31 million square meters of land;

However, it failed to provide sufficient liquidity to be able to commit to paying the amounts due from it.

According to the 2020 financial statements of Evergrande, the group borrowed about 716.5 billion yuan (about 110.7 billion dollars) (French)

What will happen if Evergrande declares bankruptcy?

Market experts believe that the Evergrande issue will not cause the next financial crisis, but it may cause more volatility in many global economies if the slowing Chinese economy is affected even more.

Experts hope that the Chinese government will move to control the problem before it causes damage to the banking system.

Investors worry that the Chinese government could allow the company to go bankrupt, harming the interests of shareholders and local bondholders.

Market experts believe that resorting to debt restructuring will prioritize retail investors for wealth management products in order to achieve social stability, while foreign investors - who own papers issued by overseas Evergrande entities - will find it difficult to obtain funds, because they have "less bargaining power compared to other lenders closer to assets".

Investors are concerned that the Chinese government may allow the company to go bankrupt, harming the interests of shareholders (Reuters)

Will the Chinese government intervene?

Experts believe that the statements of a number of government officials reflect that Beijing is closely monitoring the crisis, while trying to show calm.

Without naming Evergrande directly, Fu Lin Jui, a spokesman for the Chinese National Bureau of Statistics, said in early September that the Chinese real estate market has remained stable this year, but the impact of recent events "on the development of the entire industry" should be noted.

According to Mark Williams, chief Asian economist at Capital Economics, the Chinese authorities will eventually intervene to ensure that the broader financial system does not fall into crisis, explaining that policy makers will allow real estate developers to bear the severe pain, but will intervene to ensure the health of the banking system.

The Chinese government may intervene through the acquisition of Evergrande by state-owned companies, project management and debt restructuring, without losing sight of societal reactions.

Can bankruptcy be avoided?

Evergrande has made a name for itself in residential real estate, as it boasts of having “executed more than 1,300 projects in nearly 280 Chinese cities”, but her interests extend far beyond that.

Outside of housing, the group has invested in electric cars, sports and amusement parks.

It even has a business of food and beverage, groceries, dairy and other goods across China.

In 2010, the company bought a soccer team known as the "Gwangju Evergrande", which has since built what is believed to be the world's largest soccer school, at a cost of $185 million.

He is currently working on the construction of the largest football stadium in the world, at a cost of 1.7 billion dollars, to eventually be able to accommodate 100,000 spectators.

With the debts of the real estate group ballooning, “selling the assets” is certainly one of the inevitable options to get out of trouble.

But Evergrande's current assets are mainly concentrated in homes and land reserves, and the liquidity of these two assets is relatively weak in nature.

If the real estate market is calm, you will not be able to sell it even if it is cheap.

Observers consider the collapse of the Evergrande to mean "the end of the history of the king of real estate" (French)

How do the Chinese watch the developments of events?

Over the years, many middle-class people have snapped up Evergrande homes in high-rise buildings as investments in the country.

But the real estate developer's commitment to silence about the fate of the payments due on him and the extent of his ability to pay or not;

Hasten the impatience of small investors who swept into the company's headquarters last week in the southern city of Shenzhen.

The case interacts frantically through Chinese social media, between an observer of its course and another awaiting the fate of his investment and a number of people wishing for its downfall.

They consider that the collapse of the Evergrande means "the end of the history of the king of real estate", and that after Evergrande people will not have to "buy a pile of concrete for six handbags full of money".