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| Evergrande: Why should I care if China property giant collapses? | Evergrande: Why should I care if China property giant collapses? |
| (about 1 hour later) | |
| Before its debt crisis, Evergrande was building a new stadium for its football team, Guangzhou FC | Before its debt crisis, Evergrande was building a new stadium for its football team, Guangzhou FC |
| A crisis at the world's most indebted company has worsened after its chairman was placed under police surveillance. | A crisis at the world's most indebted company has worsened after its chairman was placed under police surveillance. |
| It follows earlier reports that other current and former executives at Chinese property giant Evergrande had also been detained. | It follows earlier reports that other current and former executives at Chinese property giant Evergrande had also been detained. |
| Evergrande suspended the trading of its shares in Hong Kong on Thursday until further notice. | Evergrande suspended the trading of its shares in Hong Kong on Thursday until further notice. |
| It marks another low for the firm which was declared to be in default in 2021 after missing a crucial repayment deadline, triggering China's current real estate market crisis. | It marks another low for the firm which was declared to be in default in 2021 after missing a crucial repayment deadline, triggering China's current real estate market crisis. |
| What does Evergrande do? | What does Evergrande do? |
| Businessman Hui Ka Yan founded Evergrande, formerly known as the Hengda Group, in 1996 in Guangzhou, southern China. | Businessman Hui Ka Yan founded Evergrande, formerly known as the Hengda Group, in 1996 in Guangzhou, southern China. |
| According to the company's website, Evergrande Real Estate currently owns more than 1,300 projects in more than 280 cities across China. | According to the company's website, Evergrande Real Estate currently owns more than 1,300 projects in more than 280 cities across China. |
| The broader Evergrande Group encompasses far more than just real estate development. | The broader Evergrande Group encompasses far more than just real estate development. |
| Its businesses range from wealth management to making electric cars and food and drink manufacturing. It even owns a controlling stake in what was one of the country's biggest football teams, Guangzhou FC. | Its businesses range from wealth management to making electric cars and food and drink manufacturing. It even owns a controlling stake in what was one of the country's biggest football teams, Guangzhou FC. |
| Mr Hui was once China's richest person with his fortune estimated at $42.5bn (£34.8bn) by Forbes, but his wealth has plummeted since then, largely as Evergrande's problems have grown. | Mr Hui was once China's richest person with his fortune estimated at $42.5bn (£34.8bn) by Forbes, but his wealth has plummeted since then, largely as Evergrande's problems have grown. |
| Why is Evergrande in trouble? | Why is Evergrande in trouble? |
| Evergrande expanded aggressively to become one of China's biggest companies by borrowing more than $300bn. | Evergrande expanded aggressively to become one of China's biggest companies by borrowing more than $300bn. |
| In 2020, Beijing brought in new rules to control the amount owed by big real estate developers. | In 2020, Beijing brought in new rules to control the amount owed by big real estate developers. |
| The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat. | The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat. |
| Now it is struggling to meet the interest payments on its debts. | Now it is struggling to meet the interest payments on its debts. |
| This uncertainty has seen Evergrande's shares lose 99% of their value in the past three years. | |
| In August, the firm filed for bankruptcy in New York, in a bid to protect its US assets as it worked on a multi-billion dollar deal with creditors. | In August, the firm filed for bankruptcy in New York, in a bid to protect its US assets as it worked on a multi-billion dollar deal with creditors. |
| Why would it matter if Evergrande collapses? | Why would it matter if Evergrande collapses? |
| There are several reasons why Evergrande's problems are serious. | There are several reasons why Evergrande's problems are serious. |
| Firstly, many people bought property from Evergrande even before building work began. They have paid deposits and could potentially lose that money if it goes bust. | Firstly, many people bought property from Evergrande even before building work began. They have paid deposits and could potentially lose that money if it goes bust. |
| There are also the companies that do business with Evergrande. Firms including construction and design firms and materials suppliers are at risk of incurring major losses, which could force them into bankruptcy. | There are also the companies that do business with Evergrande. Firms including construction and design firms and materials suppliers are at risk of incurring major losses, which could force them into bankruptcy. |
| The third is the potential impact on China's financial system: If Evergrande collapses, banks and other lenders may be forced to lend less. | The third is the potential impact on China's financial system: If Evergrande collapses, banks and other lenders may be forced to lend less. |
| This could lead to what is known as a credit crunch, when companies struggle to borrow money at affordable rates. | This could lead to what is known as a credit crunch, when companies struggle to borrow money at affordable rates. |
| A credit crunch would be very bad news for the world's second largest economy, because companies that can't borrow find it difficult to grow, and in some cases are unable to continue operating. | A credit crunch would be very bad news for the world's second largest economy, because companies that can't borrow find it difficult to grow, and in some cases are unable to continue operating. |
| This may also unnerve foreign investors, who could see China as a less attractive place to put their money. | This may also unnerve foreign investors, who could see China as a less attractive place to put their money. |
| Is Evergrande 'too big to fail'? | Is Evergrande 'too big to fail'? |
| The very serious potential fallout of such a heavily indebted company collapsing has led some analysts to suggest that Beijing may step in to rescue the company. | |
| However, Jackson Chan from financial markets research platform Bondsupermart does not think that will now happen. | |
| "To be honest, Evergrande has already collapsed," says Mr Chan, adding that he believes "it is on the brink of a forced liquidation". | |
| This could have a major effect on China's economy as the property sector contributes roughly a quarter of its growth. | |
| Mr Chan also suggests that the country could be following a similar path to Japan in the 1980s, when it slipped into decades of economic stagnation. | |
| Reporting by Peter Hoskins and Mariko Oi | |