In order to solve the problem of payment for Evergrande's wealth investment products, Evergrande announced a ****three kinds of payment programs for investors to choose from, namely, cash installment payment, payment for physical assets and payment for the balance of the purchase. Evergrande (formerly known as Evergrande Financial Services) wealth also surged by 40 billion yuan, which seems to be a huge number, but is only a small part of the current liabilities of Evergrande Group. According to public data, at the end of 2020, Evergrande's total assets were 2.3 trillion yuan and its total liabilities were 1.95 trillion yuan, about 85 percent of its total assets. Its current liabilities are 1.5 trillion yuan, or 1.5 trillion yuan to be repaid within a year.
Faced with 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 the greatest strength to realize a big drop in debt through high growth in sales and strict control of the scale of land reserve. As of the end of June this year, Evergrande's interest-bearing liabilities have been reduced to about 570 billion yuan, compared with last year's peak of more than 870 billion yuan, a significant drop of nearly 300 billion. However, this debt scale still ranks among the top of the industry.
Why is Evergrande suddenly facing an existential crisis?
Evergrande's problem boils down to one, the decision-makers of the real estate industry development trend of a major miscalculation.
The past 20 years of real estate soaring is the product of the times, is a by-product of China's massive leap forward in urbanization, when China's urbanization slowed down significantly, belonging to the golden age of real estate has actually come to an end. Especially from 2016 onwards, the high level flag clearly put forward "housing without speculation", this is also the end of the real estate era of a more obvious signal.
Evergrande is still crazy after 2018 to take land, and even leverage (debt) to take land - this is a very speculative decision-making, in the view of Evergrande decision-makers (in fact, the real estate industry head of the enterprise *** knowledge), China's real estate, although the golden age is over, theoretically, there should also be a silver age. In the view of Evergrande's decision makers (in fact, it is the head enterprise of real estate industry), although the golden age of Chinese real estate is over, theoretically there should be a silver age. In the silver age of intensified competition, it should follow the law that the strong is always strong and the weak is always weak. Evergrande desperately take land to do large-scale, is not precisely to let themselves become the "strong constant strength" of the strong? However, no one expected, from the end of 2020, the state's heavy-handed suppression of real estate came so fierce.