China Evergrande’s Ghost Cities

China Evergrande’s Ghost Cities The stock market sells off today as the potential for another Lehman Brothers moment enters the forefront of everyone’s minds.

China Evergrade has over $300 Billion in total loans and liabilities and has two signifigant interest payments coming up this week. Will China Evergrade make good on their debt? The total interest owed over the next 2 weeks is over $120 million.

Will China Evergrande find the money?

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The PRC has made it clear that all of China Evergrande’s debt must be rolled over by the Chinese banks sitting on the bad paper. But, the public debt is another story. They must come up with some cold hard cash. Likely more Chinese banks stepping in with liquidity facilites so that the PRC can save face. The PRC has said they will not “bail them out”, but letting them fail is another story.

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Social unrest is a major worry for Xi and probably the catalyst for his recent comments about “Common Prosperity” which is perceived by the Chinese people as celebrating Communism and Mao.

Furthermore, Beijing is also trying to reign in the property bubble.

Which comes at a terrible time for China Evergrade. As it needs its legitimate real estate investments to pay for its fraudulent ones.

And there are really very few megadevelopers that embody the Chinese property bubble the way China Evergrade does.

Ghost Cities In Pictures

Picture
Evergrande Splendor Kunming, 2016.
Evergrande Splendor Kunming

China Evergrade’s Splendor Kunming mega project encompasses more than 16,000 units. Moreover, total population capacity of 60,000 residents. A small city. Moreover, Roanoke Virginia only has 97,000 residents. To give you perspective.

Firstly, Splendor Kunming has all of the entities that a small city would have from schools to a hospital. However, according to locals all of this closed down in 2016.

But China Evergrande was reporting over 30,000 inhabitants of Splendor Kunming. And they were seeking debt on their mini city. So lenders had to be persuaded.

Picture
Splendor Kunming’s hotel today.

China Evergrande’s Ghost Cities