The Rise and Fall of China's Evergrande Group

čas přidán 19. 09. 2021
You might have heard something about Evergrande Group (恒大集團) recently. This is a sprawling company with billions of dollars in debt, a little bit of a cash crunch, and is looking for a way out.

Who knows what is going to happen. Everything is all up in the air and we are hearing new things each day. But the whole saga has gotten me interested in how a real estate company has managed to grow so far, and so fast. That is what we will talk about today.

In this video, we look at the rise and fall of what had once been China's biggest real estate conglomerate. A company now with $300 billion in liabilities.

Errata:
26:20 - 22% discount, not 78% discount. Google Translate error.

Links:
- The Asianometry Newsletter: asianometry.substack.com
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- The Podcast: anchor.fm/asianometry

Komentáře

  • As with everything related to China topics, please be civil in the comments. Check out other videos on China's economy with the playlist: cs-tv.org/plid-PLKtxx9TnH76T_4R7Lxs8QoDr64zlvt8SS

    • *As with everything related to ANY topic

    • Evergaand ki gaand ghus gayi

    • Great content as always. Looking forward to the next video. I personally think that the CCP would soften the blow by using state owned banks. So hopefully the situation doesn't pan into a full blown out crisis.

    • What's gonna happen to Hengchi now?

    • Will you do a video on the curse of Jackie Chan. Those PRC companies he endorses all end up in dire financial straits?

  • Fundamentally, no one is living in Evergrand's millions of apartment units, aka Ghost Towns; so, there is no real demand for these apartments other than speculation. Until these apartments become occupied by owners or renters Evergrand has no viable business model to go forward.

  • Charity with other people money !

  • Evergrande spring failed because they invited Jackie Chan to branding the product.

  • liabilities are hard dollars, assets like land are hard to value and are easily carried at inflated prices on financial statements. Evergrande is toast. Its over, the only real question is who is assigned the losses and how much.

  • BS Evergrande was into shipping container business before real estate. Get your fact right Evergrande was trafficking human.

  • Chinese building code is non-existant. In other words - crap and falling apart.

  • I burst out laughing when you mentioned his first project - Jinbi Gardens - built on an old pesticide plant, in the middle of an industrial area. What could possibly go wrong?

  • What is broken in China is the same thing that was broken on Wall Street in 2008 .... Corrupt accounting. In 2008 Warren Buffet’s Moodys was paid to rate liar loan toxic debt as AAA. This caused risk uncertainty in which froze lending. Nobody knew who was insolvent because the books were unreliable. Effectively, Warren Buffet had been paid by con artists to package their worthless paper into counterfeit AAA assets. The same has happened in China real estate, but this time Price Waterhouse Cooper was paid $40 million for external audit of Evergrande’s books and found nothing wrong. PWC got the accounting job because Evergrande knew they were willing to sucker punch all who trusted their reputation. PWC is responsible for $20 billion of Evergrande debt held by foreigners. In the coming months western financial markets will discover a pattern of malfeasance AGAIN. This is because instead of rotting in prison, Warren Buffet proved you can get away with it.

    • The difference between Lehman mortgage meltdown and Evergrande is ... Evergrande finances were built on shadow banking with non existent real estate not yet built, US mortgages were built on liar loans wrapped up into consolidated debt obligations which Moodys rated AAA investment grade for a fee. The 2 problems are 1... how to manage the financial impact when a drop in real estate prices will force more liquidations that drop prices even deeper. How to catch a falling knife that picks up speed but must be lowered. In the US, they just handed over the houses to big hedge funds at fire sale prices. 2... how to manage the economic impact of reduced shadow banking. In the US, the government loaned money to the insolvent banks at near zero% interest then borrowed the money back from the banks at a higher interest rate. The banks then foreclosed on homeowners because their mortgage payments were not reduced nor postponed.

  • CCP, quickly ask your uncle Joe to mint you several gazillion dollar coins and pay your debt. Scribble out an IOU on a cocktail napkin. You’re golden.

  • Great coverage of the story.

  • Its so nice to hear and see an impartial voice that covers the facts and doesnt foam at the mouth when it comes to China existing

  • Just how is all this consistent with Marxist-Leninist thought? Mao is spinning in his grave in a dance with Marx, Lenin, Stalin and Trotsky.

  • The inevitable outcome of socialism communism whatever you want to call it eventually it runs out of other people's money and then everything goes to hell in a handbag. You see history really does repeat itself you're seeing it now every communist country that's ever been has fallen apart economically socially and in every way

  • It's hard to understand how it all went so wrong. Who knew that plowing all your profits into leverage to acquire more debt could backfire?

  • "A little bit of a cash crunch" ROFL, a humongous CASH CRASH.

  • Very good analysis. Thanks.

  • Rumors of China demise is greatly exaggerated. The troubles of Evergrande was planned by the Chinese authorities. Always believe the opposite of what the mainstream news media is telling you.

  • Is amazing to hear this whole video in English, sorry Australian producers I know they do their best

  • excellent

  • Probably a lot of corruption

  • Everything sounded good up until Cheng Yu Tung and hand gestures…….I assure you. Cheng Yu Tung understands more than half of conversational mandarin. Translators are in abundance haha. It’s now a prerequisite in most HK firms to be fluent in mandarin.

  • In China, it's People First is NOT socialism for Wall Street: "Remember the Crash of 2008, when the U.S. housing bubble popped? How Bush, then Obama, bailed out the speculators, while 7+ million families lost their homes? And how trillions of dollars of bailouts went to the speculators, driving inflation and increasing unsustainable debt, while credit to productive industry was choked off, to the present day??? Now, check out what China is doing in the Evergrande case -- forcing speculators to take a giant haircut, a "pre-emptive bubble popping", while protecting the homeowners, and continuing to direct money to physical production. cs-tv.org/tv/video-UodMHGRqn_Y.html China is putting people first, while the Federal Reserve is engaged in "socialism" for bankers and speculative swindlers, under the theme of protecting those "Too Big to Fail"!"

  • Just listen to Winston (SerpentZA) on this.

  • When a xompany like a real estate and developer start buying or diversifying into business not related to the main one, that is a Red Flag. Buying a soccer l team, building a School solely for soccer if I am not mistaken and building a stadium for soccer. It seems investors miss these Red Flags in their greed even foreigners. They do not have the acumen is the right word or vision what is happening with their loan which I might say is a no no for Warren Buffett. Probably took their investment out at once or stipulate that their loans are solely for this purpose. Probably they knew that employees of said company are buying company wealth. Guess it is all visible in the newspaper and did not recognize for some reason.

  • Meaning the inventory picked up over this last year will not be back on the market anytime soon, so no worries about there being too much inventory out there or people under cutting one another to sell a home . GGWP

  • JP Morgan has 1.47 trillion assets 700 billion in debt. U said they had 50 billion not true per yahoo finance

  • You are know nothing white guy

  • Love this!

  • China's 300 billion dollars time Bomb.

  • 31:34 Oh hi there chicago.. or rather chicagos.. whats the plural of chicago?

  • 16:23 yeah that state seal is notoriously controversial. Massachusetts and connecticut are both named after local native american tribes, so having a native american on the seal isnt necessarily a problem... the problem is why he was put on there in the first place, which is a long story

  • Govt supported this and govt should bail it out.every floor is a city

  • 2:22 "I have no people. I have gifted gifted people I am special special people I refined." Say again? Is this Google translate, or is this actually what it says on that steel company's webpage?

  • Do not spoil the image of own country, China when dealing business outside through corrupt means as well as money laundering outside China. If that is the case your looking for trouble. Also no demand of bribery for or by any foreign country politicians and leaders, or your project will collapse.

  • This is the very company that the Chinese descendants in my country used to justif their argument for political reasons. In the end everywhere is the same. Lol

  • It is a goodwill China doing this before it’s too late to become like US. A country with the greedy piece of shit government sucking and screwing everyone in the world while calling themselves free market, at the same time creating policy like decouple the gold standard and printing so much money at will to feed the greedies, fund the stock market while still calling themselves the democratic hero everyone must follow.

  • Well researched & interesting topic. Many houses and apartments globally are over-leveraged (meaning too expensive). The value of property against (average) wage earning capacity is now over 2.5 times more than my parents had in the 1960s and 1970s. Meaning that overall (average, not high end) property prices is now over 2.5 times more expensive than its repayment capacity, than it was 40 years ago. We call this "progress". Yes, for the banks and real-estate agents until the property bubble bursts.

  • I love the way that the phrase, "people's democratic republic", belongs to dictatorships across the globe. Like Voltaire said of the Holy Roman Empire (that it was not holy, nor Roman, nor an empire), a similar vein can be made of "people's democratic republic"; that's it's not a democracy nor for the people (but a clique of powerful ideologically driven un-elected individuals, which treat the property of the state as their private estate). As for a republic (a Western idea); it's half right. The Politburo in Beijing is indeed a senate of sorts, but the officials arrive there through Byzantine-like back room deals, reeking of cronyism, and it's a rubber-stamp body for the dictator.

  • Wow! cs-tv.org/tv/video-MaXPed0ZfRU.html , cs-tv.org/tv/video-hBkMe4TdHDQ.html

  • I have an economic channel here in Slovakia and now I am preparing video about this topic and I found your video. Really great work. You have my sub :)

  • good work

  • One can´t build on speculation in that scale you must sell the apartments on contract before the construction begins like we do in the west and I guess everywhere but in China?

  • One can´t build on speculation in that scale you must sell the apartments on contract before the construction begins like we do in the west and I guess everywhere but in China?

    • I'm in the west and there's no such requirement here, and I believe there is no such requirement in the US, as far as I know...

  • If everyone in China give USD 300 to evergrande ..the company will recover

  • Evergrande look like a ponzi

  • Great video! The “three highs one low” actually refers to high leverage, high gross margins and high turnover, low prices

  • The troll was a little too quick off the blocks here. If GS hasn’t come to a conclusion, how did the troll get there so fast? Answer: CCP filled the propaganda pipe to its outlets in July. Sort of funny really. They honestly don’t know how hard it is to sort stuff like this out. Nope. Not for them. Just read the script.

  • Love the little quips and jokes throughout the video.

  • Gmg ❤️❤️ where are you from?

  • excellent presentation... thank you for your high quality informative work...

  • It seems like a house of cards from the very beginning.

  • Tesla also did the bump of small profits just to show they can do it, then returned to plowing every dollar they could find into growth. And after said growth they achieved sustained profits. Operating on limitless credit is very dangerous. I hope these rules about the red lines prevent any more events like this one. They should have been there from the beginning.

  • LOL on the prompt reference …..

  • Excellent reporting and researched to let the world know what’s happening in China in the absence of an honest to goodness reporting from the CPP.

  • Real state again…. How The brightest and smartest fail time and time again? Cause they are not… they just happen to grow , nobody even know how

  • Man good principles are necessary for successs. If he becomes blinded by greed and lust (money and women's beauty) he will surely fall and lose all his prosperity and honor.

  • F.... the chairman. Burning people's money.

  • China should be in debt and should suffer because of their corona gift to the world

  • It's like a Ponzi scheme, but with apartments to show for it....

  • China's time is over. The CCP turn China back in a North Korea 2.0

  • How could they make a loss selling bottled water? It's one of the most profitable things to do.

  • I thought evergreen would cause a massive disruption on world economy.. but hey another company with ever on its name would be a real deal

  • Hello your review is very helpful and detailed. Thank you. Please can you find out something about the regenerativenery industry's like JinkoSolar and Xinjiang Goldwind windparks in relation with ironore steel. Thank you so much.

  • China never counted their numbers! That was the big fault. They hammered the world with the usual fact that they were bigger than india but one child orders have worked well to 700 mill!

  • Awesome video, clear, interesting and informative. Thank you!

  • This insane, mind crushing night mare now hammer all chinese people in all provinces! Empty cities everywhere! Now the families are afraid to get one child! The houses will become ruins!

  • I’ve been looking for this video. Great info

  • You had me rolling when you said; just a few billion in debt 🤣🤣🤣🤣🤣

  • EverG had been having liquidity issues since a decade ago. The covid knocked them off cold . The government will NOT save the shareholders, bond holders and suppliers. They need a haircut.

  • Chinese companies cannot and will not be trusted by any civilised country.

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  • Donkey capitalism

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • Yes! People: "Evergrande has problems, but Evergrande is not going to start a financial crisis." China to Evergrande: "Don't default." Meanwhile Evergrande: Defaults.

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • 25:49 Evergrande wasn’t just touching the red lines. It took them to prom and got them pregnant in the back seat of a Volkswagen Beetle LOL

  • Sweet video loved the way you presented it with the pictures and presentation .

  • This is some great reporting. Western MSM haven't been so good on this story.

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • I must say. Bitcoin’s price action has been fluctuating throughout the past few days and weeks, with bulls and bears both reaching a clear impasse, the aggregated cryptocurrency market has been following in Btcoin’s lead and is struggling to garner any decisive momentum.

    • @Aron pls can you help me with their contact am i think i can buy coin now

    • As a beginner who don't understand how Bitcoin trade really works and you really want to make profit from it. I will advise you to first start working with a professional broker like fbb traders

    • gmail

    • @Ward Gray Is that their gmail

    • USING THE EMAIL AND WITH THEIR NAME THAT ALL

  • I will shed no tears if the the communist China economy collapses. The CCP is getting what it deserves for unleashing covid on the whole which killed millions with severe damage to the world economy.

  • China's Enron

  • $300 Billion... I watched your TSMC videos and the $20 Billion price tag for a cutting edge fab sounded insane but this...Jesus.

  • China is on the path to fall the us dollar the dollar dead

  • Guess what Evergrande still alive. The liabilities are off set by property and you are making a misleading video

  • Hi John, isn't Tesla doing something similar as 12:55? Of course Tesla is far more cautious, but still.

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • Man, you are a research guru ! Thanks for this

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • Thank you for this video. I am not disputing the highly precarious situation Evergrande Group is in but you seem to be misinterpreting what current liabilities are and misreading JP Morgan's balance sheet around 10:00. Current (short-term) liabilities of a company is whatever it is likely to pay back within one year or less. The $45 billion your are quoting for JP Morgan as current liabilities is its short-term borrowings, not its current liabilities. Unlike US industrials, US banks do not breakdown their liabilities as current and non-current, i.e. those payable in one year or less and more, respectively. However, it is not difficult to figure out that current liabilities of JP Morgan is much higher than its short-term borrowings because about $1.8 trillion of $1.9 trillion money deposited to it as of the end of its fiscal 2020 is either non-interest bearing, demand or savings deposits as disclosed in the notes to its consolidated financials. Only $112b of deposits in JP Morgan are time deposits and even some of this is most probably short-term in addition to some of the rest of its liabilities of $1.2 trillion. These imply of $3.1 trillion JP Morgan has in liabilities, at least $2.0 trillion is in the form of current liabilities. In addition, current liability ratios of 40% to 60% are pretty common in industrial companies. For example, 41% of Apple’s total liabilities of $259 billion as of end of its fiscal 2020 was current liabilities whereas 55% fo Amazon’s total liabilities of $228 billion was also current.

  • How, instead of a being a model Socialist state, China is rather a worse version of Capitalism and the USA. Or may be not, let's see.

  • Man, you are the most dangerous CS-tvr ever. A man who delves into this much detail is a dangerous man in any measure.

  • This is definitely a real life episode of "Billions TV show"

  • A fantastic watch👍

  • This is just one of the examples of when a so called "communist gov" interferes with private business. The CCP tells a lie to the citizens that they can use capitalistic practices to make money but then with the day to day whim of complacency, changes the rules making it hard for a company to conduct business. Why would the CCP cut their own income from "taxes" they charge these companies? THEY, the CCP mob have no idea what they are doing or how to even run a gov. And this will be their undoing. Soon the revolution will come.

  • Great in depth reporting of the history of this company, that I've seen no one else has been able to shed light on!!

  • Not so ‘grande’ anymore....

  • Man this video is so underrated. I think I've watched/listened to this video at least 10 times now.

    • Thanks for the comment. DM if you need help maximizing your trading or investment returns😊

  • This look like realy big problem and it's.. but this is can be soft with nicely then.. of cause not good for evergrand but the invesment of the buyer will be return..

  • 30:42 Unwritten but spoken agreement.

  • Very detailed informative piece.

  • cs-tv.org/tv/video-rbffXfJ5CSY.html

  • The three auto headquarters in Tianjin, Shanghai, and Guangzhou are to represent the economic centres in Northern, Central, and Southern China respectively (top 2 cities in each). It's the 3rd largest country in the world with an area larger than the EU so having distribution spread out is quite normal for manufacturing companies.

  • Pronounced as 'She', not 'shoe'.

  • The most pressing issue on China today is obvious. China must come clean on COVID 19. International law states clearly, "A country must sound the alarm within 24 hours whan a virus is found". Overwhelming evidence proves China suppressed and coverd up the facts by there own Doctors and Scientists for months. * This was intentional * Only when the whistle blowers got on the web and the news got out did China say, "We may have a problem". Millions have died and its not over. I would be interested to hear what Asinometry has to say on this?