The rising demand for China’s more affordable housing outside the Chinese capital is placing more pressure on larger government-owned developers.
Evergrande Group, listed on the Shenzhen Stock Exchange, had a market capitalisation of 1.6 trillion yuan (€215bn) in 2017. A member of China’s top-tier A-share market, the company raised over 800bn yuan last May by selling shares on Hong Kong’s H-share market. After the secondary offering, Evergrande had more than 100 billion yuan in cash in its balance sheet, although its historical loan book grew to more than 180 billion yuan during the same period. It has accrued operating losses for eight straight years.
Evergrande has been at the centre of a string of scandals and bad publicity. A year ago, the company issued a statement that its chairman, Wu Xiaohui, had violated trade secrets, and said it was evaluating a criminal investigation.
It also appointed a non-executive chairman in response to media criticism that its main board was stacked with unqualified and incompetent directors. As interest in the stock reached a peak during the listing process, Wu was charged with corruption and banned from leaving China for five years.
Meanwhile, Evergrande is ramping up its spending in Hong Kong, especially in the mainland region of Guangdong. (Beijing is where the company’s office is based.)