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Evergrande crisis
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China’s local authorities take a hard look at Evergrande’s projects to ring fence any collapse from hurting their jurisdictions

  • A community in Guangzhou Huangpu district ceases Evergrande’s contract for local shantytown renovation project
  • At least nine provinces demand Evergrande affiliates to transfer project revenue to government-managed bank account to avoid the funds being used for other purposes or businesses

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Sales agents outside the sales office of China Evergrande Grouup at the Billion Plaza II in Lai Chi Kok on April 18, 2020. The developer’s inaugural housing project in Hong Kong’s Tuen Mun area flopped after an initial buzz during its launch. Photo: Xiaomei Chen
Iris Ouyang
Local authorities in mainland China are taking a hard look at the property projects undertaken by China Evergrande Group, as they ring fence their jurisdictions and communities from a possible collapse in the world’s most indebted developer with US$300 billion of liabilities.
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At the Yunpu Street area in the Guangdong provincial capital of Guangzhou, where the property magnate Hui Ka-yan first founded Evergrande in 1996, the Canglian community banned the developer from taking part in the reconstruction of a local shanty town, according to a notice last week. The Canglian community was concerned about the cash-starved developer’s capacity to complete the work at the 113-hectare project, which is expected to last three years.
For Evergrande, the snub by Canglian could be the first domino piece to fall. The developer is involved in the reconstruction of 146 shanty town projects across mainland China, an order book estimated at 100 billion yuan (US$15.5 billion) by Kaiyuan Securities. Nine in 10 of them, 131 in all, are located in the Greater Bay Area (GBA) comprising Hong Kong, Macau and 11 cities in southern China. Shenzhen, the headquarters of Evergrande since 2017, had 62 of those projects, according to a separate assessment by TF Securities.

Urban reconstruction forms a crucial part of the public works and infrastructure projects under way in China as the world’s most populous nation tries to keep the economy humming to keep the labour force employed and sustain domestic consumption, while the global coronavirus pandemic has decimated economies around the world. China has 53,988 of these shanty town works projects in 2021, according to government data.

A notice by the Nansha housing authority in the Guangdong provincial capital of Guangzhou, about putting all sales proceeds from Evergrande's local sales office in escrow to ensure stability, dated September 22, 2021. Photo: Iris Ouyang.
A notice by the Nansha housing authority in the Guangdong provincial capital of Guangzhou, about putting all sales proceeds from Evergrande's local sales office in escrow to ensure stability, dated September 22, 2021. Photo: Iris Ouyang.
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Evergrande’s woes don’t end there. The district housing regulator of Nansha in Guangzhou has instructed the developer’s local sales office to put all sales proceeds in escrow under the local authority’s management to protect the interest of homebuyers and ensure the completion of the project, according to a September 22 notice seen by South China Morning Post. Officials at the housing authority declined to comment. Authorities at the Fusui county of Chongzuo city in Guangxi, and the Jiangjin district in Chongqing, did the same.

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