1, Evergrande's crisis was initiated by the Chinese govt. In August 2020, the Chinese govt required the asset liability ratio of real estate companies to be less than 70%. This led Evergrande to sell assets urgently and reduce the asset liability ratio.
2, The Chinese govt banned Evergrande from listing and raised funds through the stock A market to reduce the debt ratio. This has exacerbated Evergrande's crisis.
3. The Chinese govt is cracking down on pseudo technology companies such as the real estate industry and DiDi, and guiding capital into the manufacturing industry. Moreover, the Chinese govt suppressed Chinese house prices by means of purchase restrictions and so on. This made Evergrande's asset sale not smooth.
4, By August 2021, Evergrande has 1.95 trillion CNY of debt, but they have 2.3 trillion CNY of assets. If they can sell 320 billion CNY of assets at the normal price, they can tide over the crisis.
Do you know why the Chinese govt refused to save Evergrande, even prevented Evergrande from listing and lending? And why western media keep sending articles ask China to save Evergrande?
According to Chinese law, the order in which the bankrupt company pays off its debts is as follows:
1st. Employees' wages.
2nd. Taxes,
3rd. Bank loans,
4th. Customer rights and interests.
5th. Debts of domestic enterprises.
6th. Debts of foreign enterprises.
7th. Shareholders' equity.
With regard to Evergrande's corporate debt, the top eight are Wall Street companies, including the US Department of defense pension fund and the federal pension fund. No. 9 is the Japanese Pension Fund.
Now it is not the Chinese who are most afraid of Evergrande's bankruptcy.
View attachment 792193
Now there is indeed a card house to fall. Let's see which card house it is.
Inflation, goods shortage, now is the financial storm. Guess which country it is?