Friday, 9 June 2023

China’s Evergrande used retail financial investments to plug funding gaps

5 min read

According to company executives, property developer Evergrande used billions of dollars raised from selling wealth management products to retail investors to plug funding gaps and even to pay back other wealth management investors. Evergrande financial advisers marketed the products widely, including to homeowners in its apartment blocks, while its managers persuaded subordinates to invest. 

Company executives said 80,000 investors own RMB 40 billion ($6.2 billion) in outstanding Evergrande wealth management products. Analysts also revealed that Evergrande maximised its loan allowances from banks (even acquiring a small bank for that purpose), used presales as a de facto financing channel, and increased dependence on short-term commercial bills to nearly 30% of its RMB 2 trillion ($305 billion) liabilities. Recently, financial regulators in Beijing issued a broad set of instructions to Evergrande to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds.

News source: Financial Times and South China Morning Post

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