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The surprise payment paid off the interest on an ‘offshore’ bond that was due to pay on September 23 and that gives the Chinese real estate giant a break to raise cash and pay off the next installments of its millionaire debt.
China Evergrande Group made a credit payment to its debt amounting to more than 300,000 million dollars before the date. The balance of $ 83.5 million will be received by bondholders before Saturday, October 23, according to sources close to the transaction.
The local media ‘Securities Times’ assured that the real estate company paid the interest through Citibank bank and the news caused the shares of China Evergrande Group to grow more than 5% this Friday on the Hong Kong Stock Exchange.
“We’ve seen it before: a bond redemption does not solve the problem for the company and it does not change the fact that it is the walking dead,” Justin Tang, head of research at United First Partners, told ‘Bloomberg’.
Several Beijing officials this week promised investors that the crisis will not spiral out of control and that the interests of creditors will be protected, although the true impact on China’s economy is still uncertain.
In China, of all economic sectors, real estate is the one that contributes the most to the Gross Domestic Product, as well as the creation of jobs and the generation of cash for local governments.
The sale of land in the Asian giant represents a third of its income, which stood at 27.3 trillion yuan, about 4.3 trillion dollars in 2020, according to the Japanese bank Nomura.
Real estate accounts for 40% of Chinese household assets there, according to Macquarie, so if the housing bubble explodes, it could cause consumer fear and affect other economic sectors.
Already sales of land plunged 17.5% in August compared to the previous year, according to Reuters calculations.
The real estate phenomenon has grown so much that there are currently more than 65 million vacant homes, which is equivalent to the total number of households in France and the United Kingdom combined.
Of the 1.4 billion Chinese, about 70% have money invested in residential properties. According to the Chinese central bank, 93.6% of urban households were homeowners; one of the highest rates in the world.
At the end of June this year, loans to households in domestic and foreign currency, most of which were mortgages, amounted to 67.8 trillion yuan, about 10.6 trillion dollars, according to data from the People’s Bank of China.
With Reuters
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