Evergrande Founder Summoned By Chinese Government As Cryptocurrencies Slump
The founder Evergrande, China’s biggest property developer, was summoned by the government after the company issued a statement saying it might not have sufficient funds to meet its financial obligations.
Evergrande is currently in a huge amount of debt worth $300 billion and has been struggling to meet its commitments. The property developer’s financial problems have ignited concerns about the whole property sector, which makes up a substantial part of China’s economy.
Furthermore Bitcoin plunged by 1.68% to $55,456 on Friday, shortly after the Evergrande statement was made.
Evergrande made a statement warning of it’s current liquidity situation on Friday evening during a filing with the Hong Kong stock exchange. The firm said that there is “no guarantee that the group will have sufficient funds to continue to perform its financial obligations.”
Hours later the government issued a follow-up statement saying that it had “immediately summoned (founder) Xu Jianyin and agreed to send a working group to Evergrande Real Estate Group to supervise and promote enterprise risk management.”
The company is one of several real estate firms that have plunged into crisis over the past year after Beijing embarked on a regulatory drive to curb speculation and leverage. This cut off the ability to easily access cash.
Evergrande has so far managed to avoid default but challenges remain.
An Evergrande unit has bond coupons worth $82.5 million in total due Monday, when the grace period ends. This was reported by Bloomberg earlier this week.
Last Friday, Evergrande founder Xu – also known as Hui Ka Yan in Cantonese – sold 1.2 billion Evergrande shares for the equivalent of $344 million, cutting down his stake in the firm from 77% to just 68%.
Beijing regulators have urged the tycoon to use his personal wealth to finance Evergrande’s debt struggles but he seems hesitant to do so.
The property sector, which is a key engine for growth in the country, has cooled in recent months with tight home buying rules and the liquidity crisis affecting some of the country’s largest developers.