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The Chinese real estate developer announced conflicting results. The company cut its losses and returned to the Hong Kong stock exchange, which can be seen as a fairly positive sign. But Evergrande still remains indebted at $328 billion, up from $340 billion a year earlier.

China is struggling with a real estate crisis. The former No. 1 property market is facing financial difficulties after overconfident building frenzy led to empty buildings. The problems at Evergrande are spreading like an oil slick throughout the industry. Today, China hopes to avoid a "Lehman Brothers" moment. The real estate sector directly and indirectly accounts for an estimated 30 percent of China's GDP.

In the news: Evergrande limits losses.

  • Between January and June, Evergrande reported a loss of 39 billion yuan ($5.38 billion). This is still significant, but less than the 86.17 billion yuan for the same period last year.
  • Revenue was 128.81 billion yuan, compared with 89.28 billion yuan in June 2022.
  • But the group's cash position remains a problem and may lead to further payment problems: from $2 billion at the beginning of the year to $556 million today. This is very weak for a group of this size.
  • Evergrande's debt remains huge: $328 billion, up from nearly $340 billion at the end of 2022.

The return to the stock market: a painful issue.

  • The publication of its 2021 and 2022 results last month enabled Evergrande to return to the Hong Kong Stock Exchange.
  • But the stock's value fell 87 percent on Monday from its last trading session on March 21, 2022.

The bottom line: can China avoid an implosion of its real estate sector?

  • In mid-August, Evergrande launched in the United States to protect its assets and begin paying off its foreign debts.
  • At the same time, , another Chinese real estate giant, is at risk of default and has 30 days to repay interest. A rescue plan that should have been voted on Friday has been postponed this week. So the sword of Damocles still hangs over the developer.
  • Since mid-2021, companies accounting for 40 percent of China's house and apartment sales have been in default.
  • According to some experts, Beijing should deploy the budget bazooka and buy up roughly to clean up China's real estate sector.
  • For now, China is foregoing a bailout plan. The country already has a very high debt burden and faces a rather slow post-COVID recovery.

(evb/nd)

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