BEIJING: As Chinese real estate behemoth Evergrande reportedly prepares for a government-backed mega-restructure, here is an explainer on what Beijing's bid to limit a contagion could mean for the wider economy:The Chinese government sparked a crisis in the property industry when it launched a drive last year to curb excessive debt among real estate firms as well as rampant consumer speculation.
But according to Bloomberg it has now missed a 30-day grace period on overdue coupon payments worth US$82.5 million, while agency S&P Global Ratings has said a default now"looks inevitable".After Evergrande warned last week it may not be able to meet its financial obligations, the local government in Guangdong - where the firm is headquartered - summoned billionaire chairman Hui Ka Yan, and said they will send a"working group" to the company.
Hong Kong-listed Sunshine 100 defaulted after missing a deadline to make US$179 million in payments this week, and Kaisa failed in a debt swap to buy crucial time for raising cash. With the local government sending a working group to the firm, the Evergrande crisis has drawn parallels with government intervention in other indebted companies, notably aviation conglomerate HNA Group.
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