China, Evergrande and the Future

The head of teetering Chinese developer Evergrande has urged staff to resume construction and sales to deliver properties, state media reported Thursday, as it battles to avoid a collapse many fear could send shockwaves through the world’s number two economy.

Furious homebuyers and investors around the country have gathered to demand repayment as the developer drowns in a sea of debt worth more than $300 billion, and struggles to meet its obligations.

The comments come as the company is due to pay interest to foreign bondholders Thursday, with expectations it will miss the deadline, starting the clock on a countdown to what could be a default in 30 days.

Xu Jiayin, the billionaire who founded the company in 1996, called more than 4,000 Evergrande managers to a meeting shortly before midnight on Wednesday, where he called on them to “devote all their energy to resuming work and production and ensuring that properties are delivered”, the state-owned China Securities Journal reported.

He also stressed that the group must “make every effort to fulfill” payment plans the company had previously announced, the Journal reported.

The privately owned conglomerate had previously offered to repay some debts in kind, promising creditors including suppliers, contractors and investors in its wealth products, parking spaces and commercial units instead of cash.

Xu on Wednesday night promised to maintain a “highly responsible attitude toward investors”.

“Only by fully resuming work and production, resuming sales and resuming operations can the rights and interests of home buyers be protected and smooth payment of investment product buyers ensured,” he said, according to the report.

The crisis sent shivers through world markets on Monday as traders feared a collapse at one of China’s biggest property firms would spill over into the economy and have painful knock-on effects globally, just as countries battled to overcome the impact of the coronavirus pandemic.

However, those concerns were eased slightly Wednesday when Evergrande said it had reached a deal with domestic bondholders to repay interest on their notes Thursday.

Wednesday’s remarks come days after the tycoon reportedly told staff he believed the group will “step out of the darkest moment soon”.

Evergrande’s liquidity crunch has triggered public anger and rare sustained protests outside its offices in China as investors and suppliers demand their money back.

The group has admitted facing “unprecedented challenges” and warned that it may not be able to meet its liabilities.