Beijing: China Evergrande Group, the world's most heavily indebted property developer, has suffered substantial losses, recording a combined deficit of $81 billion over the past two years. The long-delayed earnings report, released on Monday, revealed that the company lost 476 billion yuan ($66.36 billion) in 2021 and 105.9 billion yuan ($14.76 billion) in 2022.
These significant losses were primarily caused by various factors, including a slowdown in the Chinese property market, increasing costs, and asset write-downs. Furthermore, Evergrande's liabilities continued to soar in 2022, reaching $335 billion, while its assets only amounted to $251 billion.
The company's financial troubles have had severe repercussions on the broader Chinese economy. Recent reports have highlighted unpaid wages for construction workers, incomplete projects, and furious homeowners unable to occupy their new properties.
Also Read: The 'cost' of Ukraine's counteroffensive is discussed by a top US general
To prevent a more extensive financial crisis, the Chinese government has been working to stabilize the real estate market and has extended some financial support to Evergrande. In March, the company announced an offshore debt restructuring program to address its debt issues.
Also Read: Washington says it can't provide Ukraine with enough F-16s, but vows to continue supporting country
However, the future for Evergrande remains uncertain, and the possibility of a complete default cannot be ruled out. The company's restructuring plan is still in its early stages, and the level of support it will receive from its creditors is unclear.
The news of Evergrande's $81 billion losses underscores the deep-rooted problems in China's real estate sector, which has been a vital driver of economic growth. Yet, the sector now faces several challenges, including an economic slowdown, rising costs, and stricter regulations.
Government efforts to stabilize the market have been somewhat successful in averting a full-blown crisis so far. Nevertheless, the issues in the real estate sector are likely to continue exerting pressure on the Chinese economy in the months and years ahead.
According to Charles Macgregor, the head of Asia at Lucror Analytics, Evergrande's losses are a significant blow to the Chinese economy, as the company plays a crucial role in the real estate sector. The resulting impact is likely to spread throughout the economy, despite the government's attempts to stabilize the market. The situation remains uncertain, and the effects of Evergrande's financial woes are expected to persist in the foreseeable future.