Evergrande started out in 1996, selling bottled water. The company rose to fame when it ventured into the real estate business. It quickly became the poster boy of Chinese real estate industry. Once China’s most prolific property developer, Evergrande now has become he country’s most indebted firm. It owes around $300 billion to just lenders. Suppliers and foreign investors also account for a major portion of the company’s liabilities.
What went wrong?
Evergrande borrowed $300 billion from lenders to expand while the company was at the top of its game. This move later turned out to be disastrous for the company as the Chinese government introduced new rules and ordinances to control the amount owed by real-estate giants like Evergrande.
The company then resorted to selling off its properties at major discounts to stay liquidated. As a result of this, Evergrande failed to earn enough profits to meet its interest payment obligations.
How this crisis has hit Japan:
The Japanese toilet makers Toto have also been adversely hit by the Evergrande crisis as China accounted for 30% of the company’s profits last year. Out of which Evergrande must have a large share since it used to be a big name in Chinese real-estate industry.
Other potential suppliers to Chinese house builders and constructors were also affected by this crisis. Daikin, Japanese air condition makers lost approximately 4.7% of its profit shares.
Image Credits: Wikiedia Commons
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