Struggling Chinese developer said to demolish resort | Latest News Headlines

Struggling Chinese developer said to demolish resort

| Local News | Fox News

A struggling Chinese real estate developer, saddled with $ 310 billion in debt, has suffered another blow after being ordered to demolish a 39-building complex.

BEIJING – A struggling Chinese real estate developer struggling with $ 310 billion in debt announced on Tuesday that he was ordered to demolish a 39-building complex in yet another blow to his finances.

Evergrande Group gave no explanation, but reports indicated that the government in Danzhou, a city in the southern island province of Hainan, discovered that it was poorly built and violated the town planning law.

Evergrande’s struggle to comply with more stringent official restrictions on the use of borrowed money by the Chinese real estate industry has raised fears of a possible default and a financial crisis. Chinese regulators have tried to reassure investors that any potential impact on financial markets can be contained.

Economists say Beijing can keep China’s credit markets functioning normally if Evergrande defaults, which increasingly looks likely. However, they say Chinese leaders want to avoid sending the wrong signal by mounting a bailout at a time when they are trying to force companies to reduce their debt.

Evergrande on Monday asked to suspend trading of its shares in Hong Kong. Trading resumed after Tuesday’s announcement, gaining 7.6%.

The company gave no indication of the possible loss from the demolition of buildings on Ocean Flower Island. He said the other buildings on the island were unaffected by the order.

Evergrande, the most indebted developer in the global real estate industry, warned last month that it could run out of cash to meet debt payments and other obligations.

The company claims to have 2.3 trillion yuan ($ 350 billion) in assets and 2,000 billion yuan ($ 310 billion in debt), but it has struggled to sell assets fast enough to keep payments to companies. bond holders. Construction on some projects has been temporarily suspended after contractors complained about not being paid.

Tuesday’s announcement indicated that buyers in 20210 signed real estate purchase contracts worth a total of 442 billion yuan ($ 70 billion).

Beijing tightened restrictions on developers last year as part of a campaign to curb rising corporate debt, seen as a threat to economic stability. The ruling Communist Party has made reducing financial risks a priority since 2018.

The Danzhou government ordinance said the Evergrande project violated a national planning law. He said the government would organize the demolition if the company did not act.

The Hainan government last year ordered an investigation into Ocean Flower Island, a hotel complex, amusement park and other facilities, according to news reports. They said some building permits had been revoked and fines of 215 million yuan ($ 34 million) had been imposed for planning and construction violations.

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