Chinese Real Estate Debts Trash Stock Exchanges and Shock the World Economy

Dívidas na Imobiliária Chinesa fazem cair bolsas de valores e estremecem a economia mundial

Evergrande Real Estate, a Chinese real estate company responsible for more than 1,300 projects in 280 cities, is facing a financial crisis that threatens to bring down the international investment market. The fear of that happening led to stock markets around the world crashing this Monday, and left the price of iron below $100 in more than a year.

Hong Kong's stock market took a 3.3% tumble this Monday, with Evergrande shares traded on the local market down more than 10%. Some Asian bourses did not open due to holidays.

In Europe the bearish scenario was seen in the stock exchanges of London (-0.86%), Frankfurt (-2.31%), Paris (-1.74%), Milan (-2.57%), Madrid (-1.20%) and Lisbon (-1.62%).

Expectations of slowing growth in China and particularly in the Chinese real estate sector knocked down iron ore futures prices. The main input for steelmaking closed down 8.8% at the port of Qingdao in China, quoted at $92.98 per ton.

Expectations of slowing growth in China and particularly in the Chinese real estate sector have knocked down iron ore futures prices

On Monday, the company began repaying investors in its property wealth management business as it struggled to cope with its liabilities.

The world's most indebted real estate agent is expected to pay interest of $84 million on its bonds by Thursday. "[Evergrande Real Estate's] debt, between bonuses and loans, totals $87 billion, [but] some interest payments will not be made this week. Its total liabilities were $304 billion as of June 30," according to a report by MCM Consultants quoted by the BBC.

Also according to MCM Consultants, investors fear that this crisis of the group will negatively affect its suppliers, customers and financial creditors, and on the other hand, it seems the Chinese government will intervene in the company to "recover its financial health and prevent a contraction of the economy."

Evergrande Real Estate is part of the Evergrande Group, an economic group with assets estimated at $360 billion, with annual sales of $108 billion. The conglomerate is also active in the automotive, technology, and healthcare sectors, among others.

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