From Boom To Bust: A Closer Look At The Downfall Of A Chinese Success Story

It wasn’t that long ago that China Evergrande was seen as a shining symbol of that nation’s robust economy and an example of how glimmers of capitalism existed within the communist system.

But as COVID-19 began to redefine life across China and around the world, this once-revered real estate behemoth became one of the most notable pandemic-era failures.

A recent timeline

Evergrande spent decades developing some of the most ambitious and expensive construction projects in China’s history. Its success served as an analogue to China’s broader pursuit of global superpower status.

But by late 2021, the writing was on the wall. It was at this point that the company’s debt had grown to a point that Evergrande had no choice but to default.

That move sparked a prolonged court battle regarding how the company’s many creditors would be able to claim at least a portion of their losses.

This week, a judge ordered the company to use its liquidated assets to pay down debt to the tune of tens of billions of dollars. Of course, even that is just a portion of the more than $300 billion in unpaid bills Evergrande had on the books at the time of its initial default.

A lesson learned

Evergrande’s spectacular downfall helped bring about a much larger housing market crash across China and took a direct toll on other smaller property developers.

In addition to the uncertainty that ordinary Chinese citizens are experiencing within a precarious economic situation, countless unpaid creditors, investors, workers, and banks have no real expectation that their losses will ever be fully recouped.

Even as Evergrande pursues a long-shot bid to restructure and take on new projects, the rampant pursuit of growth that led to its previous status is unlikely to resurface … and that’s probably a good thing.

Chris Agee December 4th, 2023

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