Evergrande is a big Chinese business that develops large buildings, such as offices, homes and hotels.
News reports note Evergrande owns more than 1,300 buildings in 280 cities. The company also has investments in an electric vehicle company, a media company, a soccer team, a food company and other things.
Evergrande borrowed money from banks and governments. It also sold investment products to average people to raise money for its projects. Evergrande agreed to pay interest on its debt.
However, Evergrande recently sent letters to some governments and large investors saying it might not be able to pay back some loans on time. The Reuters news agency reports that Evergrande owes about $305 billion.
This news made many banks and investors worry because if Evergrande could not pay, they could not make payments on their own debts.
When the news came out that Evergrande was uncertain it could meet payment deadlines, stock markets around the world went down, which shows how the financial problems of one very large company in China can cause problems around the world.
The company’s debt problem not only affects large banks and investors. It also affects regular people throughout China.
A worker named Li Hongjun in the Chinese city of Suzhou is worried he will soon run out of food. That is because Li is working in a building owned by Evergrande and has not been paid since August. He said he will soon have to ask the government for help so he can buy food.
Another person, Christina Xie, works in Shenzhen. She said she invested all her savings, nearly $60,000, into a fund, or investment, run by Evergrande. These funds are known as Wealth Management Products, or WMPs. She was promised a payment of about $4,600 earlier in September. It did not arrive.
She said her investment was supposed to pay 7.5 percent interest per year. Xie planned to use the money to retire.
“Now, it’s game over,” she said, adding that an investment manager promised the payments were guaranteed.
People throughout China recently joined protests related to Evergrande’s financial problems. They are angry that Evergrande was allowed to build so much debt without the Chinese government setting limits.
Some people who purchased homes in Evergrande buildings are still waiting to take ownership. One woman, who did not want to give her name, said she has been waiting since April 2020.
She said she is paying about $465 per month for a home she does not occupy.
Research from financial experts at Capital Economics show Evergrande took in about $202 billion in payments from home buyers, but the company has not delivered 1.4 million promised homes and buildings.
In addition, there are about 80,000 people like Xie who put money into Evergrande WMPs, about $15 billion over the last five years. They are worried about getting their money back.
I’m Dan Friedell.
Dan Friedell adapted this story for Learning English based on reports by Reuters. Susan Shand was the editor.
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Words in This Story
fund –n. an amount of money that is used for a special purpose
deadline –n. a date or time when something must be finished : the last day, hour, or minute that something will be accepted