China’s biggest real estate developer Evergrande is in crisis and is looking at a default. How big are they? How big of a problem is this? How will this affect the United States, global economies, and how bad is it? In this video, we’ll look at Evergrande, contrast and compare it to some other metrics and really put things in perspective.
Evergrande is China’s biggest real estate developer and at this time they hold over $300 billion dollars of debt and liabilities, making it the biggest debt load of any company in the world today. Ultimately, if they default on their debt obligations and fold, the collapse could send shockwaves through the Chinese economy and the global economies at large.
Currently they’re set to formally enter default on October 23rd, unless China bails them out which would cause a whole different set of problems altogether. Many out there are calling this China’s “Lehman Brothers Moment” because it’s so similar to what the United States real estate markets saw back in 2008.
To put things in perspective, let’s explore how big Evergrande really is.
They manage more than 1,300 real estate projects in China. The $300 billion dollar debt is bigger than the debts of Peru, the Philippines, Iceland, Bulgaria, and Panama put together. They have projects in over 280 Chinese cities and over 12 million homeowners rely on the company to provide a roof over their heads. In fact more people live in Evergrande properties than the total populations of countries like Greece, Portugal, Cuba, or Sweden.
Looking at it another way, we can say that they manage more land than all of Manhattan since they manage 7.3 billion square feet of land versus Manhattan being a total of 6.4 billion square feet of land. Evergrande is so big that they could literally employ all of Los Angeles considering they provide 3.8 million jobs in China alone.
Their $300 billion dollar debt load is bigger than the GDP of countries like Finland, New Zealand, Qatar, or Hungary. If they fall, everything one will feel the shockwaves because 30% of China’s GDP is at risk of crashing. Many experts are saying that a potential Evergrand default could be worse than the U.S. or Japanese real estate bubbles.
Ultimately the results would not be pretty. Prices on goods would likely skyrocket as China would try to recoup the losses by raising costs on Chinese exports and increasing already inflated costs of shipping containers and sea freight. Inflation in America could increase substantially, making everyday consumer purchases unaffordable.
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