In order to solve the payment problem of Evergrande's wealth investment products, Evergrande announced three payment schemes for investors to choose from, namely, cash installment payment, physical assets payment and house purchase balance payment. The wealth of Evergrande (formerly known as Evergrande Financial Services) has also surged by 40 billion, which seems to be a huge number, but it is only a small part of the current liabilities of Evergrande Group. According to public data, by the end of 2020, Evergrande had total assets of 2.3 trillion yuan and total liabilities of 1.95 trillion yuan, accounting for about 85% of its total assets. Its current liabilities are10.5 trillion yuan, that is,10.5 trillion yuan will be repaid within one year.
Facing the debt problem, in March last year, Evergrande began to implement the development strategy of "high growth, scale control and debt reduction", saying that it would use the greatest determination and strength to achieve large debt reduction through high sales growth and strict control of land reserve scale. By the end of June this year, Evergrande's interest-bearing liabilities had dropped to about 570 billion yuan, a sharp drop of nearly 300 billion yuan from the peak of more than 870 billion yuan last year. However, this debt scale is still in the forefront of the industry.
Why did Evergrande suddenly face a crisis of survival?
In the final analysis, Evergrande's problem is a major misjudgment of the development trend of the real estate industry by decision makers.
The rapid development of real estate in the past 20 years is a product of the times and a by-product of the large-scale leap forward of urbanization in China. When the urbanization process in China slowed down obviously, the golden age of real estate was actually over. Especially since 20 16, after the senior management clearly stated that "the house is not speculation", this is also a clear signal that the real estate era is over.
After 20 18, Evergrande is still frantically taking land, even taking land with leverage (debt)-this is a highly speculative decision. According to the decision-makers of Evergrande (in fact, it is also the head enterprise of the real estate industry), although the golden age of China real estate has ended, there should still be a silver age in theory. In the silver age when the competition is intensifying, we should follow the law that the strong will remain strong and the weak will remain weak. Isn't Evergrande's large-scale land acquisition just to make itself strong? But no one expected that from the end of 2020, the state will crack down on real estate so hard.