How the mighty have fallen: The rise and fall of Evergrande

Real estate developer Evergrande is struggling to soothe angry homebuyers and investors knocking on its doors for cash that was taken as deposits for ongoing projects or unbuilt homes and the promised yields.

Below we have a brief timeline of Evergrande’s rise as one of China’s biggest developers and it’s shift into one of China’s most infamous debtors.

The beginning of Xu’s Evergrande: 1996

Targeting millions of middle-class Chinese climbing onto the property ladder across the quickly urbanizing country, steel-factory worker Xu Jiayin founded Evergrande

2009/10: A promising start

After going public in 2009, Evergrande took control of Guangzhou Evergrande and spent billions of dollars on foreign players, helping it win a succession of titles. The company also moved into the dairy, grain and oil businesses and tried its hand at building an electric car which sadly kicked off a debt-fueled spending spree.

2017: Richest man

With a net worth of $43 billion, Xu became the richest person in Asia

2018: Central bank raises red flag

In November, the first signs turbulence became apparent when China’s Central Bank added Evergrande to their list of highly indebted conglomerates that would potentially collapse, causing systemic risks.

August 2020: Three Red Lines

In a scheme dubbed “three red lines” that tightens lending to the real estate sector, regulators announce caps for three different debt ratios.

Evergrande traded 28% of its property management unit for $3 billion, starting a trend of offloading properties at increasingly steep discounts.

June 2021: Scrutiny about home deposits

As part of a crackdown on the property sector, regulators fasten scrutiny on the controversial process of taking deposits from homeowners before a house is obtained. It is a major source of funding for developers.

Under the new rules, local governments had to set a maximum cap on deposits, hold deposits and release funds to developers in batches post inspection.

Research firm Capital Economics estimates that Evergrande had 1.3 trillion yuan (which is more than $207 billion) in pre-sale penalties at the end of June, amounting to approximately 1.4 million homes it had committed to building.

August 2021: Court combats

Work at several construction sites grinded to a halt after an advertiser sued the company for unpaid dues, the first in a string of cases filed by scared subcontractors.

Global ratings companies like Fitch, Moody’s, and S&P downgraded Evergrande’s outlook to unfavorable, giving rise to concerns about the troubled firm. They did so in order to borrow money leading to fears of a possible bankruptcy that many fear could reverberate through the world’s number-two economy.

The company said in a stock market filing that its total liabilities have swelled to 1.97 trillion yuan ($305 billion) and that it is facing the “risks of defaults on borrowings”.

September 2021: Public challenges

As fears mount about its future, Evergrande says it is under “tremendous pressure and may not be able to meet its liabilities. It warns that negative media coverage and rumours had led to waning confidence and falling property sales during a normally buoyant September selling period.”

Public protests erupted outside the company’s headquarters in Shenzhen and other locations across the country, with angry investors and home homebuyer’s repayments.

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