SHENZEN, China— Dozens of anxious investors protested
outside the headquarters of troubled Chinese property giant Evergrande Tuesday,
after the debt-laden firm conceded it was under "tremendous pressure"
and may not be able to meet its repayments.
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Evergrande's plight has raised fears of a contagion across
the debt-mired Chinese property sector — which accounts for more than a quarter
of the world's second-largest economy — with a knock-on for banks and
investors.
The Hong Kong-listed developer is sinking under a mountain of
liabilities totaling more than $300 billion after years of borrowing to fund
rapid growth.
An estimated 60 to 70 people gathered outside
Evergrande's
headquarters in the southern city of Shenzhen, demanding answers from the
company.
The anxious investors crowded in front of the building's
entrance as police with riot shields were deployed to maintain order, according
to AFP reporters at the scene.
"Our boss is owed over 20 million yuan ($3.1 million),
and many people here are owed even more," one man who gave his surname as
Cheng told AFP.
"We are definitely very anxious. There's no clear
explanation right now. ... They should have paid the money when it was
due."
Another man outside the headquarters said his firm was a
supplier to Evergrande, and is
owed more than 30 million yuan ($4.6 million).
He said he had previously been offered repayment in the form
of property by the group, but they failed to reach agreement on this offer.
"My family has also been threatened. ... Evergrande
employees in my hometown warned my mother to tell me to stop causing trouble
and come home," he said.
'All feasible solutions'
Evergrande was downgraded by two credit rating agencies last
week while its shares tumbled below their 2009 listing price, with a barrage of
bad headlines and speculation of its imminent collapse on Chinese social media.
On Monday, the company insisted it will avoid bankruptcy.
But on Tuesday, it issued another statement to the Hong Kong
stock exchange, saying it had hired financial advisers to explore "all
feasible solutions" to ease its cash crunch.
The statement warned that there was no guarantee Evergrande
would meet its financial obligations.
The firm blamed "ongoing negative media reports"
for damaging sales in the pivotal September period, "resulting in the
continuous deterioration of cash collection by the Group which would in turn
place tremendous pressure on ... cashflow and liquidity".
Shares in the firm fell more than 11 percent Tuesday, and
are down almost 80 percent since the start of the year.
The firm has some 1.4 million properties that it has
committed to complete — around 1.3 trillion yuan ($200 billion) in pre-sale
liabilities, as of the end of June, according to an estimate by Capital
Economics.
Evergrande did not respond to a request from AFP for
comment.
'Biggest test'
"Evergrande's collapse would be the biggest test that
China's financial system has faced in years," said Mark Williams, chief
Asia economist at Capital Economics.
Yet "markets don't seem concerned about the potential
for financial contagion at the moment," he said, adding "that would
change in the event of large-scale default", which would likely prod the
central bank to step in and buttress the teetering developer.
"The most likely endgame is now a managed restructuring
in which other developers take over Evergrande's uncompleted projects in
exchange for a share of its land bank."
The pictures of angry investors outside the firm's
headquarters could also cause alarm in Beijing, where leaders are keen to keep
a lid on any form of social unrest.
Evergrande has already sold stakes in some of its
wide-ranging assets and offered steep discounts to offload apartments, but
still reported a 29 percent slide in profit for the first half of the year.
The developer was founded in 1996 by Xu Jiayin, who went on
to become China's richest man during the country's property boom of the 1990s.
He poured money into mass developments in new cities,
raising $9 billion in Evergrande's 2009 IPO in Hong Kong.
A year later, Xu bought a struggling football team and
renamed it Guangzhou Evergrande, lavishing millions of dollars on salaries for
its stars.
Evergrande started to falter under the new "three red
lines" imposed on developers in a state crackdown in August 2020 — forcing
the group to offload properties at increasingly steep discounts.
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