Shares in embattled Chinese property developer Evergrande plummeted Monday, following the announcement that it would be unable to carry out a restructuring plan intended to guarantee its survival.
The company collapsed more than 25 percent by the break, underscoring market concerns as China’s property sector faces an unprecedented crisis.
On Sunday evening, Evergrande announced that it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, “is being investigated.”
That came two days after the company said meetings on the restructuring scheduled for Monday and Tuesday would not take place, saying it was “necessary to reassess the terms” of the plan in order to suit the “objective situation and the demand of the creditors.”
Evergrande’s enormous debt has contributed to the country’s deepening property market crisis, raising fears of a global spillover.
The property sector, which along with construction accounts for about a quarter of China’s gross domestic product, is a key pillar of the country’s growth and has experienced a dazzling boom in recent decades.
But the massive debt accrued by the industry’s biggest players — Evergrande had estimated debt of $328 billion at the end of June — has been seen by Beijing in recent years as an unacceptable risk for China’s financial system and overall economic health.
Authorities have gradually tightened developers’ access to credit since 2020, and a wave of defaults has followed — notably that of Evergrande.
Earlier this month, authorities in the southern city of Shenzhen said they had arrested several Evergrande employees, also calling on the public to report any cases of suspected fraud.
Another Chinese property giant, Country Garden, has narrowly avoided default in recent months, after reporting a record loss and debts of more than $150 billion.