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China Evergrande diversifies away from property business in bid to meet Beijing’s debt ‘red lines’

  • The Chinese property giant has reduced its debt burden but pledged to halve it again in two years
  • The ‘new’ Evergrande is a conglomerate hosting diversified businesses and technologies and is determined to meet Beijing’s debt criteria

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Not the company it was - Evergrande is diversifying away from home building. Photo: Reuters
Pearl Liu
China Evergrande, the country’s biggest home builder, said it is transforming itself into a diversified conglomerate as the central government clamps down on the heavily indebted real estate industry.
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“We are not the Evergrande we used to be. The new Evergrande is no longer just a property company, but a conglomerate hosting diversified businesses and technologies,” said company chairman Hui Ka-yan, the 14th-richest person in China.

Hui’s remarks came during an annual results briefing on Wednesday after Evergrande reported it carried debts of 670 billion yuan (US$102 billion) at the end of last year, down 200 billion yuan from a year earlier.

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Chinese real estate developer displays floor plans on models’ backs

Chinese real estate developer displays floor plans on models’ backs
The dramatic reduction of debt still leaves Evergrande very much the wrong side of all three “red lines” laid out by Beijing last summer.

The three red lines, outlined last August during a financial symposium, represent different limits on borrowing: liability-to-asset ratio excluding advanced receipts at 70 per cent, net debt-to-equity ratio at 100 per cent, and cash to short-term debt ratio at one time.

The company’s boss pledged to deleverage further.

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“We will further halve our debts over the next two years and hit 350 billion yuan or less by June 2023,” said Xia Haijun, chief executive officer. “And we aim to meet two of the metrics by the end of this year and achieve all three by 2022.”

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