Chinese property giant Evergrande's shares plummeted on Monday after the company announced that it would be unable to carry out a restructuring plan intended to guarantee its survival.
The news, which came as a major blow to investors, underscored the severity of the crisis facing China's property sector. Evergrande, the world's most indebted developer, has been struggling to repay its massive debts, which exceed $300 billion.
In a statement released on Sunday evening, Evergrande said that it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, "is being investigated." The company did not provide any further details about the investigation.
The news came two days after Evergrande said that meetings on the restructuring scheduled for Monday and Tuesday would not take place, saying it was "necessary to reassess the terms" of the plan in order to suit the "objective situation and the demand of the creditors."
Evergrande's failure to carry out its restructuring plan has raised fresh concerns about the future of the company and the wider Chinese property sector. The sector has been in a downturn for over a year now, with sales and prices falling sharply. The crisis has been exacerbated by the government's crackdown on excessive debt and speculation in the sector.
The property sector is a key pillar of the Chinese economy, accounting for around a quarter of GDP. A sharp downturn in the sector could have a significant impact on the overall economy.
Analysts have warned that Evergrande's default could trigger a wave of defaults by other developers, which could lead to a financial crisis. The government has so far been able to contain the fallout from Evergrande's problems, but it remains to be seen whether it will be able to do so in the long term.
Impact on the global economy
Evergrande's debt crisis is also having a knock-on effect on the global economy. The company has suppliers and creditors all over the world, and its default could lead to losses for many businesses.
The crisis has also raised concerns about the stability of the Chinese financial system. China's banks are heavily exposed to the property sector, and a sharp downturn in the sector could damage their balance sheets.
What's Next for Evergrande?
It is unclear what the future holds for Evergrande. The company is still negotiating with its creditors, and it is possible that it will be able to reach a restructuring agreement. However, there is also a risk that the company could go bankrupt.
If Evergrande does go bankrupt, it would be one of the largest corporate bankruptcies in history. The bankruptcy would have a significant impact on the Chinese economy and could also have a knock-on effect on the global economy.
The government is likely to do everything it can to prevent Evergrande from going bankrupt. However, if the company is unable to reach a restructuring agreement with its creditors, it is possible that the government will have to step in and bail it out.
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Evergrande's debt crisis is a major challenge for the Chinese economy and the global financial system. The company's failure to carry out its restructuring plan has raised fresh concerns about the future of the company and the wider Chinese property sector.
It is unclear what the future holds for Evergrande, but the company's bankruptcy would have a significant impact on the Chinese economy and could also have a knock-on effect on the global economy.
