In China, many real estate projects have stalled. Evergrande, once China’s largest construction company (now number two), has suffered massive losses in the past two years. Despite the sale of several subsidiaries, the real estate group is heavily indebted. Its insolvency would have far-reaching economic consequences.

Evergrande reported a net loss equivalent to 100 billion euros for 2021 and 2022. The company made a long-delayed filing of its balance sheet figures for the past two years on the Hong Kong stock exchange on Monday.

According to Manager Magazin, the company’s debt has risen to 2.44 trillion yuan (about 302 billion euros) by December 2022, after annual net losses of 686 billion yuan in 2021 and 126 billion yuan in 2022. There are “significant uncertainties that may cast significant doubt on the group’s ability to continue as a going concern,” it said.

China’s real estate sector is still in crisis. Large construction companies, especially Evergrande, cannot complete housing projects. This is due to the strict legislation, which has been in place since 2020, regarding debt limits in this sector of activity.

Foreclosure or insolvency?

Trading in Evergrande’s shares on the Hong Kong Stock Exchange has been suspended since March 2022. The same month, the group announced that it would not be able to present its audited annual report for 2021 on time. Evergrande had previously announced that its debt had increased and that there was a risk of default.

The documents filed so far indicate that the group plans to resume trading in the shares. However, the rising debt also suggests that Evergrande is struggling to pay its debts despite the sale of several subsidiaries. The possible insolvency of the construction company will shake the specialized market.

Evergrande Group is the second largest real estate company in China. Develops real estate projects and sells housing mainly to residents of middle and high wealth. The company is located in Shenzhen, but the holding company is registered in the Cayman Islands.

“The post-coronavirus boom in China is over”

Current economic data of the world’s second (largest) economy show regression. China’s economic recovery from the corona crisis lost momentum in the second quarter of 2023 due to many problems: sluggish exports, a troubled housing market, record youth unemployment.

Between April and June, gross domestic product grew just 0.8 percent from the previous quarter, the Beijing Bureau of Statistics said on Monday. This is clearly not equal to the result of the first quarter of 2.2%.

“The data signal that the post-coronavirus boom in China is clearly over. We are seeing a weak recovery,” Commonwealth Bank of Australia economist Carol Kong was quoted as saying by the German economic press.

China, the world’s export leader, is suffering from lower demand overseas as its biggest markets, such as Germany, are in recession. As a result, exports fell more in June than they have since the outbreak of the Covid-19 pandemic more than three years ago.

Another problem is the real estate market, which accounts for about a quarter of the Chinese economy. According to Reuters estimates, real estate investment fell 20.6% in June from the same month last year, after a 21.5% drop in May.

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