What Is Evergrande Crisis That Is Creating Tensions In World Stock Markets And Infrastructure And Other Sectors


Summary

Stock markets around the world have been put on high alert regarding the Evergrande crisis. In such a situation, it is important to know what is Evergrand Company and what kind of crisis is it facing?

Thousands of people have started demonstrations after the Evergrande company came into trouble. Meanwhile, security personnel have been called to protect the company’s headquarters.
– Photo : Social Media

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There was a huge fall in the stock market in India on Monday. This fall was not limited to Sensex or Nifty only, but from America’s Dow Jones, Wall Street to Japan’s Nikkei closed on the red mark. There is still a risk of falling stock markets going forward. Two main reasons emerged for this. The first and foremost reason was the crisis arising out of Evergrande, China’s largest and most heavily indebted real estate company. This has worried the business environment around the world. The second reason was America’s Finance Minister Janet Yellen’s warning, in which she warned of economic devastation due to the wildly rising debt and appealed to Parliament to impose limits on these loans. Stock markets around the world have been put on high alert regarding the Evergrande crisis. In such a situation it is important to know that what is Evergrand Company? Evergrande is said to have started in 1996 as a company selling bottled water. This company launched tremendous schemes for the middle class as well as foraying into real estate and in so many years became the leader of the real estate market in China.

At present, Evergrande controls two percent of China’s entire real estate business. Evergrande has more than 1,300 projects in 280 cities in China. It also owns the Guangzhou Football Club, a professional football team from China. Evergrande has made a good mark among the middle class in the real estate market. However, during the tremendous growth, the company had a debt of more than $ 300 billion (about Rs 22 lakh crore). In the same year, when China imposed restrictions on sectors such as its digital economy and digital education, fear spread in the real estate sector that China might set a ceiling on it to limit debt. Last year also, the Communist government of China made rules for real estate owners, under which it was decided to control the loans received by them. In the midst of this fear, Evergrande started selling its business. But due to the slowdown in the Chinese property market due to the Corona epidemic, the company had to sell its properties at a big discount. Due to this the company was successful in raising money, but far from paying the debt of Rs 22 lakh crore, the company is also facing difficulty in paying the interest of $ 84 million (about Rs 618 crore) on this debt. The money raised so far has only been used to run the company’s business. Now the biggest concern in front of Evergrand is to pay this interest on the loan. From this week, the company started returning their money to the investors of its wealth management business. But due to lack of funds, he is facing a lot of problems. In such a situation, if Evergrande sinks, then there will be five big problems for the people and companies associated with it…
1. A large number of people started buying properties from the company even before Evergrande’s buildings were built. At present, the work of 800 residential buildings of the company is incomplete. That is, if Evergrande sinks, then the money of thousands of people who invested money in buying the property will also sink.

2. Apart from this, there are many companies in China and around the world that do business with Evergrande. These include firms related to the construction sector and designing, and companies that supply materials. Due to the sinking of Evergrande, there will be a lot of trouble for the companies associated with it. Even some companies will even go bankrupt. 3. The drowning of Evergrand will affect the people working in the company, whose jobs will be lost. This threatens to increase the unemployment crisis in China. Evergrande has not even paid some of its employees due to inability to raise funds. That is, there is a fear of creating ruckus everywhere in China.

4. The biggest impact of the sinking of a big company like Evergrand will be on China’s economic system. Actually, this company has taken loans from 171 domestic banks and 121 financial institutions. If Evergrande is unable to pay the interest, the bank and other lenders will pay less interest to it further. Credit crunch is most likely to happen in this situation. This is a situation where the company can take loans at affordable rates. This will be a bad sign for the world’s second-largest economy, as companies that are hard-pressed have little chance of growing. There is even a point of their closure.
5. Globally, concern is being raised about this because China is the second largest economy in the world. If a company like Evergrande defaults, it will have a big impact on foreign companies associated with it and its loss will be on a global scale. On the other hand, foreign investors can also stop looking towards China to invest money in this concern. Evergrande currently employs 200,000 employees. This company also generates about 38 lakh jobs in China every year. In such a situation, many experts believe that the Chinese government can come forward to save this company. There would be two reasons for this…

  • The sinking of the real estate company will have an impact on the businesses and suppliers associated with it. That is, the entire supply chain itself will be disrupted.
  • The sinking of a company like Evergrande would be a disaster for millions. Not only on the people working here, but also on the people who invest money.

In such a situation, the Chinese government may try to determine that Evergrande should be able to repay its interest and people’s trust in the real estate sector remains, but there is also an argument against it that if the Chinese government is heavy-handed. If a debt-ridden company comes forward to save it, it will be seen as a wrong message for its corporate policy and many more companies in crisis will expect the same. The impact of this crisis on Evergrande was seen on the stock markets on Monday. According to Bloomberg, 500 richest people lost $ 135 billion (about Rs 10 lakh crore) in one day. Tesla owner Elon Musk’s net worth was the highest at $ 7.2 billion (about Rs 53 thousand crore) and Amazon’s Jeff Bezos. There was a loss of $ 5.6 billion (about Rs 41 thousand crore). Apart from this, there has also been a tremendous decline in the wealth of Evergrand founder and chairman Hui Ka Yan and is now from the highest of $ 42 billion (about Rs 3 lakh crore) in 2017. Has remained on the net worth of $ 7.3 billion (about Rs 54 thousand crore).

Expansion

There was a huge fall in the stock market in India on Monday. This fall was not limited to Sensex or Nifty only, but from America’s Dow Jones, Wall Street to Japan’s Nikkei closed on the red mark. There is still a risk of falling stock markets going forward. Two main reasons emerged for this. The first and foremost reason was the crisis arising out of Evergrande, China’s largest and most heavily indebted real estate company. This has worried the business environment around the world. The second reason was America’s Finance Minister Janet Yellen’s warning, in which she warned of economic devastation due to the wildly rising debt and appealed to Parliament to impose limits on these loans.

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