Economics This last Friday (December 3, 2021) the China Evergrande Group, which is one of the largest property development companies in the world, announc

Economics This last Friday (December 3, 2021) the China Evergrande Group, which is one of the largest property development companies in the world, announc

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Economics This last Friday (December 3, 2021) the China Evergrande Group, which is one of the largest property development companies in the world, announced that the company would be seeking to restructure its debt. Then, earlier today (Monday, December 6, 2021), the company added that it is forming a “risk management committee” to handle the details of its debt restructuring. This committee will include a number of Chinese State officials and the committee’s objective will be to try to salvage what can be salvaged from the company’ liquidity crisis.
For some background: The company has grown exponentially, with the company’s asset holdings increasing by a factor of over 22, while its equity value increased by a factor of over 16, just since 2010. At the same time, the company has taken on huge dept to finance its expansion; to the point where the current outstanding debt exceeds 310 billion US dollars. This debt is held by a variety of different banks, investors, and suppliers around the world and if the company were to go bankrupt, this would represent one of the largest bankruptcies in history. Based on this, some have argued that this company is truly “too big to fail.”
In this context, your assignment is to write an essay outlining how and why you believe things went wrong for the company. As part of your answer, make sure that you discuss to what extent you believe that the company’s current liquidity problems should have been foreseeable, and also what you believe the likely incentives were for those who made the decisions that eventually landed the company in its current liquidity crisis.
 
Note that you are free to use any and all resources at your command in writing your answer, with the caveat that everything you write must be in your own words, all direct quotes must be properly identified.
Some Potential References:

WSJ article on China Evergrande’s Managed Restructuring (Links to an external site.)

WSJ 12-6-2021 China Evergrande’s Managed Restructuring Is Under Way.pdf
 Download WSJ 12-6-2021 China Evergrande’s Managed Restructuring Is Under Way.pdf

Xi Jinping Sails Into an Economic Shoal – WSJ (Links to an external site.)

WSJ 12-6-2021 Xi Jinping Sails China’s Economy Into a Shoal.pdf
 Download WSJ 12-6-2021 Xi Jinping Sails China’s Economy Into a Shoal.pdf

Evergrande Group – Wikipedia (Links to an external site.)

Evergrande: will it collapse and what would happen if it did? | China | The Guardian (Links to an external site.)

 
Back in 2012 an American Investor suggested that Evergrande was headed for insolvency. The report below is the Hong Kong government’s refutation of that investor, which eventually culminated on a 5 year ban on that investor in Hong Kong.

Evergrande_Report.pdf (mmt.gov.hk)

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