Evergrande liquidated, beginning the collapse of China's economy


- The real estate sector contributes more than 30 percent to China's GDP. As the real estate sector collapses, the GDP will fall and unemployment will increase, thus the Chinese economy will be dealt a fatal blow. The sinking of Evergrande is the first in Pashera as China's second largest real estate company, Country Garden, is also on the verge of sinking. Another big blow to China will be that foreign investors will start running away from China as foreign investors have lost confidence in China's real sector.

The Hong Kong court ordered the liquidation of the debt-ridden Chinese real estate company Evergrande, causing an uproar around the world. China's real estate sector has been reeling for the past four years. Not only Evergrande, but all the top companies including Country Garden, Kaisa Group, Fantasia Holding, Suner, Scenic Holdings, Modern Land have come under fire. The goods are not sold so these large companies are left with no cash. Because of that, tomorrow if not today, these other companies will also be locked up and liquidated. Since Evergrande has started and other companies are also going to take their turn, it seems that the death knell of China's real estate sector has sounded.

Economic analysts are seeing the collapse of Evergrande as the beginning of the collapse not only of China's real estate sector but also of the Chinese economy as the real estate sector contributes more than 30 percent to China's GDP. As the real estate sector collapses, the GDP will fall and unemployment will increase, thus the Chinese economy will be dealt a fatal blow. The sinking of Evergrande is the first in Pashera as China's second largest real estate company, Country Garden, is also on the verge of sinking.

Country Garden has a debt of 192 billion dollars (about 16 lakh crore rupees). The company has more than 3100 projects all over China, but there is no cash to complete these projects, so the country garden is also about to sink.

In this way, one after another companies will sink, the Chinese economy will suffer such a death blow that the burden cannot be reduced and it will collapse. Currently, China's GDP is around 19 trillion dollars, it will decrease to less than 15 trillion dollars in a decade.

Another big blow to China after Evergrand liquidation is that foreign investors will start fleeing from China as foreign investors have lost confidence in China's real sector. Whether the Hong Kong court order will be enforced in mainland China is disputed, but it doesn't matter much. Evergrande's reputation has been tarnished by the Hong Kong court order, its shackles have been unleashed, so China is bound to suffer a blow.

Evergrand was considered the largest real estate company not only in China but also in the world, so foreign investors invested heavily in Evergrand. Evergrande issued bonds in US dollars. The company was considered strong, so the big banks of the world, including USB, bought bonds worth millions of dollars.

The company used the money to construct the flats, but the expected goods were not sold, so the matured bonds could not be paid. In November 2021, for the first time, it was admitted that the company could not pay the US dollar bond.

After that, the company tried to raise cash but failed to match. The company also made a restructuring plan to pay off the debt, but to no avail and the debt increased to 340 billion dollars (about Rs. 29 lakh crore). The company could not even pay the maturing bonds after that.

Naturally, its impact will be widespread. The whole world came to know that the oil is going to go out to get back the investment made in a big company like Evergrande, so there is no question of new investment coming in, but the old investment will also start withdrawing.

As the company goes into liquidation, now the court will undertake the process of paying the creditors by selling the company's assets, but these goods are not going to be sold overnight, so it is not certain when the foreign investors will get the money.

The first payment will be made to the small people from the proceeds from the sale of the company's assets. There are millions of ordinary people in China who have paid a lot of money to Evergrande but the company has not given them flats. Court appointed liquidator Alvarez & Marsal Asia will first give them the money or give them the flat. After that the Chinese companies will be paid and the foreign companies will be paid last, so the foreign companies will not have to enter the name of their investment. Which foreign investor would be willing to invest in a Chinese company after knowing that the investment made in China will have to be lost?

Evergrand liquidation is seen by real estate experts as a big opportunity for India. The rich countries of the world have plenty of money but no market, so they invest in countries including China. India can be its best alternative now due to China sinking but India does not have a massive organized real estate market like China so India cannot attract these foreign investors.

The real estate sector in India has a size of about 500 billion dollars, while in China, Evergrande and Country Garden have assets of more than 500 billion dollars.

Chinese companies could raise crores from the market by issuing dollar bonds, whereas India does not have such booming companies in the real estate sector.

According to real estate experts, India can take advantage of this situation by diverting foreign investment to the infrastructure sector. Infrastructure development in India is in the hands of the government. The government itself can attract foreign investors by issuing dollar bonds or awarding large contracts to Indian companies. China's loss may prove to be India's gain.

China's two-decade real estate boom has finally burst

With Evergrande liquidating, China's real estate boom that began in 2000 has begun to burst. Since 2000, China has started to urbanize rapidly after foreign companies started coming to China. Due to this, land prices in China tripled in ten years.

The Chinese government allowed large factories near middle-class cities along the river and brought people from rural areas to settle in these cities. The boom in China's real estate sector began as skyscrapers were allowed to be built to accommodate this population. Forty-forty-story buildings with small matchbox-like flats were erected, each tower housing thousands of people. China has urbanized to the extent that 66 percent of the total population of China lives in about 40 cities. The real estate companies felt that people will move to the cities, so they bought land randomly and built constructions. China has fallen out with countries including the US, production has fallen, factories have closed and there has been a recession.

India successfully weathered the 2018 IL&FS crisis

When the Infrastructure and Financial Services (IL&FS) crisis hit in India in 2018, the real estate sector faced a major threat. Even the real estate sector of India seemed to collapse but the real estate sector of India proved to be strong. The central government took immediate steps to mitigate the effects of the IL&FS crisis. In 2016, the Real Estate (Regulation and Development) Act or RERA was enacted. By strengthening it too, the future threat was averted so the crisis was averted. Foreign investment in Indian real estate is negligible so it has no impact on foreign investment.

It also had no impact on the Indian economy. This is because the real estate sector contributes only 7.3 percent to India's GDP. Even when India's real estate sector grows to 5.8 trillion in 2047, its contribution to the GDP will be 15.5 percent, so the possibility of a big blow to the Indian economy due to the real estate sector is unlikely.

Comments

Post a Comment

Popular posts from this blog

A sign of the second revolution in China after Mao's revolution

Image
- Inhumane atrocities on the people caused outrage as the communist leader himself lived in Ayyashi. - In almost all the big cities of China, people are holding violent protests and gradually these protests are turning into demands for democracy instead of lockdown protests. Political analysts believe that the cause of this protest may be the lockdown imposed due to Corona, but the real reason is the growing dissatisfaction and outrage against the communist regime of China. Due to the increasing cases of Corona in China, there has been a flare-up after the Chinese government imposed a zero covid policy. Under the zero covid policy, lockdown has been imposed in areas where corona cases are high. In big cities in China, people are not allowed to go out and are being forced to stay indoors. On November 25, due to the lockdown, a fire broke out in an apartment in Xinjiang, even though people were not allowed to go out in the name of lockdown, 10 people perished. Due to this incident, pe
Read more

Talk of Delhi: Reconciliation with Gehlot, Pilot supporters confused

Image
New Delhi: A meeting called by Congress president Mallikarjun Kharge to end the fight between Ashok Gehlot and Sachin Pilot in Rajasthan has left Pilot's supporters confused. After Ashok Gehlot and Sachin Pilot spoke to Rahul Gandhi for four hours at Mallikarjun Kharge's bungalow, it was announced that the two leaders would contest the next assembly elections together, but there was no crackdown on Pilot's demands. Pilot Vasundhara Raje sought to dissolve the Rajasthan Public Service Commission investigating government corruption and set up a high-level committee to restructure and compensate the unemployed affected by the paper leak. If these three demands are not met, they have warned of fierce agitation. The Gehlot government has not accepted any of the three demands, leaving PILOT supporters confused. Congress sources say that there is still a phase of dialogue between the two and this issue will be resolved. K.C. Venugopal has confirmed this. Cracks in Congress over
Read more

China's Insidious Privacy

Image
As many important countries as there are in the world, they are ruled by almost one-man show politicians. The kind of team leadership that was traditionally used to manage and manage huge countries now appears to be dying out. Due to this, the burden of taking all decisions is placed on a single person. Hence, the possibility of making hasty or wrong decisions increases. This is the situation of the leaders of all important countries including India, Russia, China, America. China has its own top leadership of the People's Party, but its role is very limited. India has a two-tier cabinet. Besides, Rashtrapati Bhavan and Supreme Court are also ready for error correction and guidance. That readiness is sometimes expressed in the form of reprimand. However, the role of the President and the court in the practical management of the entire nation and in the formulation of policies is limited. In China, Xi Jinping enjoys absolute power. There is a Politburo and a Senate to stop them. Ch
Read more

Adhir's allegation, Mamata's daily expenses of 3 lakhs

Image
New Delhi: Trinamool Congress and Congress, the two allies of the anti-BJP Front India, have come face to face again after Congress leader Adhir Ranjan Chaudhary made allegations against Mamata Banerjee. Chaudhary has alleged that Mamata Banerjee used to spend Rs 3 lakh per day in the hotel where she was staying abroad. Even after siphoning off so many rupees from the government's coffers, not a single rupee of foreign investment has come to Bengal from Mamata's foreign travel. Mamata's family members and others went abroad on the pretext of bringing foreign investment to the state and came back having fun without doing anything. Mamata went on a 12-day trip to Spain and Dubai to bring foreign investment to Bengal. The Trinamool Congress termed Chaudhary's words ridiculous and said that facilities including foreign academies will be opened soon in Bengal. That time Chaudhary's lies will be exposed. A special meeting of Shah-Nadda to convince Vasundhara In Rajas
Read more

A minor was killed in public in Delhi, people watched the spectacle

Image
- For the so-called civil society, this is like drowning with water in the lid - When Sahil stopped the witness in public and stabbed him in the stomach, there were many people around. Most of the people watching the spectacle saw Sahil stabbing the witness. In the CCTV footage, it is seen that some people pass by on the public road and turn back to see Sahil's murderous game but do not try to stop him. Seeing that Sahil was alone and there were at least twenty-twenty five people outside, if an attempt had been made to stop him, the witness could have been saved, but except for one or two people, no one tried to stop Sahil or save the witness, nor did they inform the police. The murder of Shraddha Volkar by her live-in partner Aftab Amin Poonawala, which happened exactly one year ago in Delhi, created a stir. After killing Shraddha, Aftab was caught cutting her body into pieces, keeping it in a freezer and disposing of it slowly. While the details of the Shraddha murder case ha
Read more

Uproar in UP politics due to attack on Chandrasekhar Ravan

Image
There is talk on social media that Chandrasekhar Azad himself staged the attack in an attempt to gain political advantage. - Chandrasekhar Azad Ravan is one of the most interesting characters in UP politics. Chandrasekhar is only 36 years old but has made more enemies than anyone else in UP politics. Ravana is very unpopular with the upper castes especially the Thakurs and Kshatriyas because Azad speaks harshly against the upper castes. Chandrasekhar has been speaking in the same aggressive tone against those who have been playing vote bank politics in the name of Dalits for years. Leaders who have been running their shop in the name of Dalit vote bank in UP for years feel threatened by Chandrasekhar and dislike him. Chandrasekhar is also considered by many as a pawn of BJP and Yogi Adityanath. The attack on Chandrashekhar Azad Ravan, known as the chief of Bhim Army and an extremely aggressive youth Dalit leader, in Saharanpur, Uttar Pradesh, has created an atmosphere of tension and
Read more

Tribal bus services: Even the tribals do not like private bus service very much

Image
JS of Gujarat State Transport Corporation. T. Bus services run across the state. Its foremost is economics, which is rarely seen by the government itself or the public. The main for-profit services of this corporation are in tribal areas. Route Chikkar makes a profit as every route that runs in remote inland tribal areas carries every Chikkar passenger. Other than that thousands of routes suffer losses. In other words, it is the tribals who give food and water to the corporation and the rupee from the hard work of the tribals comes into the possession of the corporation only by becoming a ticket fare, from which the staff of the corporation is paid. The other side of this coin is that the worst i.e. third class services of the corporation are given to the tribal areas. Third class means third class in each stage. The people of the so-called elite society are not equally familiar with the tribal area. Their ignorance is of many different levels. From time immemorial, people living in
Read more

Talking about Delhi: Government will bring home loan subsidy scheme

Image
New Delhi: The government is planning to re-implement the Home Loan Subsidy Scheme to win the Lok Sabha and the five state assembly elections to be held before it. Sources say that the central government will soon announce a Rs 60,000 crore home loan subsidy scheme for people living in raw houses, slums and rented houses in urban areas. Most likely, this scheme will be announced on Gandhi Jyanti, i.e. October 2. Under this scheme, loans of up to 9 lakh rupees will be available at subsidized interest rates starting from 3 percent to 6 percent per annum and 25 lakh people living in urban areas will benefit. This scheme will be different from the existing Pradhan Mantri Awas Yojana-Urban. Sources claim that people taking loans of less than 50 lakh rupees for 20 years will be able to take advantage of this scheme. The plan will be approved in the next cabinet meeting. Modi did not look at Shivraj, did not even mention him In Madhya Pradesh, BJP has given tickets to three Union Minister
Read more

Ultimatum of Akal Takht, terrorism will flare up in Punjab?

Image
- Although Akal Takht has said that we will not do violence, but looking at the history of Akal Takht, Bhagwant Maan knows very well what this threat means. When the demand for Khalistan gained momentum in the 1970s, the Akal Takht used to advise Sufiani to behave peacefully, but through the back door he helped the militants. In fact, in 1983, due to a decision taken by the Akal Takht, terrorism flared up in Punjab. To suppress the Khalistanists who are raising their heads in Punjab, the Punjab Police has conducted an operation and put a number of Khalistanists in jail. Akal Takht has come into the fray where the Khalistanists are on the run with Sardar Amritpal Singh and the Punjab Police is pulling out all the stops to catch him. The Akal Takht is considered the highest religious institution in the Sikh sect. The Akal Takht has given an ultimatum to the Bhagwant Mann government to release all the jailed people within 24 hours. Jathedar of Akal Takht Giani Harpreet Singh criticized
Read more

Talking about Delhi: The government was shocked by the report about the China border

Image
New Delhi: There is peace on the border between India and China now, but the report presented during the DGP conference has shocked the government. According to this report, Indian Army is not patrolling 26 points out of the 65 patrolling points of the Line of Actual Control (LAC). The areas from Karakoram Pass to Chumur are not being patrolled by the Indian Army so China can intrude and claim these areas. Areas that are not patrolled become buffer zones, thus weakening India's claim over them. There is a threat that China will gradually enter the region and eventually take over it. China's military is clever in taking advantage of this situation. China keeps a close watch on Indian Army movements by installing cameras on high peaks. Then the infiltration starts as soon as the opportunity arises. Voices of discontent against Yogi Adityanath in UP Ahead of the Lok Sabha elections in Uttar Pradesh, voices of dissatisfaction against Yogi Adityanath have started to rise. The B
Read more