Evergrande Falls On Hong Kong Stock Exchange: -25.45%
China has so many empty houses that 1.4 billion people wouldn't be enough to fill them.
Evergrande, the sick person of the Chinese construction industry, continues to worry after the company’s shares fell on the Hong Kong Stock Exchange (-25.45% at HK$0.41) on September 25.
Thus, major concerns have returned about the sustainability of China’s real estate sector, which in the past contributed about a third of Beijing’s GDP, and the possible impact this may have on international markets. The poor result was prompted by a statement that Evergrande was unable to issue new bonds following an investigation into its subsidiary Hengda Real Estate Group.
The strong decline in quotations affects not only the group’s parent company, but also its subsidiaries – Evergrande Nev (-20%) and Evergrande Serces (-11%), as well as other real estate securities, including Country Garden (-5%), which is just one step from default.
The construction giant has been navigating dangerous waters for some time. It was investigated by China’s securities regulator for alleged disclosure violations. At the end of July, it was revealed that Hengda Real Estate’s unpaid debts had reached approximately 277.5 billion yuan ($38 billion), and the number of pending claims was 1,931.
Real estate, which has been one of the pillars of the Chinese economy, has collapsed in 2021. That is when China Evergrande Group defaulted. Furthermore, another major company, Country Garden, warned that it would be considering “various debt management measures.” This message was interpreted by many analysts as evidence of a possible collapse.
The realities of China’s real estate crisis were explained by He Keng, 81, former deputy director of the National Statistics Office. In his opinion, “1.4 billion people, which is the entire population of the country, would not be enough to fill all the empty houses.”
The former government official believes the country has an incredible surplus of residential buildings destined to sit empty. According to calculations by the Reuters news agency, at the end of August the total area of unsold housing was 648 million square meters, which is equal to 7.2 million dwellings with a floor area of 90 square meters.
