What Is Evergrande? Chinese Company Crisis Rattles Investors

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Evergrande is dominating headlines these days as the company is reportedly on the brink of default due to a cash crunch.

Investors' concern about the company is also reflected in its stock price, which has lost about 80% of its value this year. Experts worry that the fall of Evergrande might be similar to the fall of Lehman Brothers in 2008, which would mean that it would have a ripple effect on the economy.

"Last week, the state-backed Global Times newspaper said Evergrande shouldn't consider itself "too big to fail," suggesting Beijing may be willing to allow it to fall into administration instead of stumping up billions in financial support," TheStreet's Martin Baccardax wrote, breaking down the Evergrande crisis. "That might be a bet [Chinese President] Xi is willing to make now, given the unpopularity of development companies in an economy where ordinary citizens are sitting on billions in mortgage debt amid a decades-long surge in property prices."

Formerly known as the Hengda Group, Evergrande is founded in 1996 by Chinese billionaire Hui Ka Yan. Headquartered in Shenzhen, Guangdong, its main business is in real estate.

Owning over 1,300 real estate projects across 280 cities, the company is China’s second-largest property developer by sales. In 2009, Evergrande Group went public on the Hong Kong Stock Exchange raising $722 million. 

Aside from real estate, the company has also expanded its businesses in electric cars, consumer products, health-care services, etc.

The company also made headlines in 2010, when it purchased one of the biggest soccer teams in the country: Guangzhou FC. With an influx of cash in the team, the club became the only Chinese club to win the AFC Championship League two times (2013 and 2015). 

The company claims to employ over 200,000 people creating more than 3.8 million jobs each year. 

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