Beijing Instructs State-Backed Firms to Buy Evergrande Assets

Chinese authorities are pushing government-owned firms and state-backed property developers to acquire some of Evergrande Group’s assets to dampen the potentially disastrous impacts of the failing real estate giant. Shengjing Financial Holding Investment Group, a subsidiary of the state-owned Assets Supervision and Administration Commission of Shenyang People’s Government (Shenyang SASAC), purchased Evergrande Nanchang’s shares in Shengjing Bank twice, on Aug. 17 and Sept. 28. In the second purchase, the asset management group bought 19.93 percent of Evergrande Nanchang’s shares in Shengjing Bank, at a price of 5.7 yuan ($0.88) per share. In addition, Evergrande’s proceeds from the sale, which amounts to 99.93 billion yuan ($1.5 billion), can only be used to repay its debts to Shengjing Bank. Evergrande announced on Sept. 29 that Shenyang SASAC holds 58.33 percent of shares in Shengjing Financial Holdings; Shenyang Municipal Finance Bureau holds 30.74 percent; Shenyang City Construction Investment Group holds 6.25 percent; and Liaoning Provincial Finance Bureau holds 5.04 percent. In a Sept. 29 announcement, Shengjing Bank stated that, after Shenyang SASAC took over the shares held by Evergrande Nanchang twice, Shengjing Financial Holdings now accounts for 20.79 percent of the total issued shares, becoming its largest shareholder. Moreover, Shenyang SASAC-backed entities hold a combined 29.54 percent of its total shares. At the same time, Evergrande Nanchang’s shares dropped to 14.57 percent. In addition to illustrating the improved shareholder credibility after the transfers, the bank’s announcement also declared that it would strengthen its adherence to the Chinese Communist Party (CCP). On Sept. 28, Chinese state media said that Beijing had instructed local governments to handle Evergrande’s debt crisis in an interview with an insider who works in a regulatory agency over construction in an undisclosed province. The central authorities proposed that “Whoever is the parent should come get his or her child,” meaning Evergrande’s problems in different regions—including unfinished projects, debts to suppliers, and debts to investors—should be tackled by local governments. The priority is to complete Evergrande’s unfinished constructions, to assuage the anxiety of home buyers. This kind of solution, “whoever is the parent should come get his or her child,” has been adopted before to resolve complex issues. In 2016, when the State Council of the CCP dealt with Internet financial problems, it formulated a set of rectification plans based on this method. This time, Shenyang SASAC took over Evergrande’s debt in Shengjing Bank, as the bank is headquartered in Shenyang City, Liaoning Province. With regard to the method of having local governments handle complex national issues related to their respective regions, Hong Kong-based finance and economics columnist Liao Shiming shared his views with The Epoch Times. “Shengjing Financial Holdings purchased some of Evergrande’s equity, and it is probably one of the few high-quality assets for Evergrande, but Evergrande has no right to decide what to sell, how much to sell, and how to sell. It is very likely that Evergrande will be split in the process,” Liao said in an interview on Sept. 30. He believes Beijing’s main concern is social stability, as the fall of Evergrande involves too many victims. “The CCP asks local governments to handle the problems incurred by Evergrande, in order to avoid social unrest,” Liao said. “As to how the local governments will handle these problems, the central authorities do not care. Many outsiders think the CCP will try to rescue Evergrande and help to repay its debts. That is not true, as can be seen from the CCP’s ‘each parent takes his own child’ policy.” As early as 2015, Ding Zhijie, the current director of the Foreign Exchange Research Center of the Foreign Exchange Administration, pointed out that the policy of “each parent takes his own child” would only worsen financial problems. “The logic was still planned economy … and it is ‘mission impossible’ for local officials,” he said. In today’s China, not many local governments are in a position to “take his own child” as Shenyang does. Sober Observer, a well-known financial Youtuber, has stressed in his program that due to repeated government regulations and cooling of the real estate market, many local governments relying on real estate as their main income are suffering from the economic winter. Most of them won’t be able to solve Evergrande’s huge debt problem. It is already very difficult for them to deal with their own local debts. In addition, Sober Observer mentioned that there are many other Chinese real estate companies deeply in debt, hundreds of them, such as Country Garden and Greenland. Their debts range from hundreds of billions to trillions of yuan. These companies are eagerly waiting for the authorities to come to the rescue. But where is the money to

Beijing Instructs State-Backed Firms to Buy Evergrande Assets

Chinese authorities are pushing government-owned firms and state-backed property developers to acquire some of Evergrande Group’s assets to dampen the potentially disastrous impacts of the failing real estate giant.

Shengjing Financial Holding Investment Group, a subsidiary of the state-owned Assets Supervision and Administration Commission of Shenyang People’s Government (Shenyang SASAC), purchased Evergrande Nanchang’s shares in Shengjing Bank twice, on Aug. 17 and Sept. 28.

In the second purchase, the asset management group bought 19.93 percent of Evergrande Nanchang’s shares in Shengjing Bank, at a price of 5.7 yuan ($0.88) per share. In addition, Evergrande’s proceeds from the sale, which amounts to 99.93 billion yuan ($1.5 billion), can only be used to repay its debts to Shengjing Bank.

Evergrande announced on Sept. 29 that Shenyang SASAC holds 58.33 percent of shares in Shengjing Financial Holdings; Shenyang Municipal Finance Bureau holds 30.74 percent; Shenyang City Construction Investment Group holds 6.25 percent; and Liaoning Provincial Finance Bureau holds 5.04 percent.

In a Sept. 29 announcement, Shengjing Bank stated that, after Shenyang SASAC took over the shares held by Evergrande Nanchang twice, Shengjing Financial Holdings now accounts for 20.79 percent of the total issued shares, becoming its largest shareholder. Moreover, Shenyang SASAC-backed entities hold a combined 29.54 percent of its total shares. At the same time, Evergrande Nanchang’s shares dropped to 14.57 percent.

In addition to illustrating the improved shareholder credibility after the transfers, the bank’s announcement also declared that it would strengthen its adherence to the Chinese Communist Party (CCP).

On Sept. 28, Chinese state media said that Beijing had instructed local governments to handle Evergrande’s debt crisis in an interview with an insider who works in a regulatory agency over construction in an undisclosed province. The central authorities proposed that “Whoever is the parent should come get his or her child,” meaning Evergrande’s problems in different regions—including unfinished projects, debts to suppliers, and debts to investors—should be tackled by local governments. The priority is to complete Evergrande’s unfinished constructions, to assuage the anxiety of home buyers.

This kind of solution, “whoever is the parent should come get his or her child,” has been adopted before to resolve complex issues. In 2016, when the State Council of the CCP dealt with Internet financial problems, it formulated a set of rectification plans based on this method.

This time, Shenyang SASAC took over Evergrande’s debt in Shengjing Bank, as the bank is headquartered in Shenyang City, Liaoning Province.

With regard to the method of having local governments handle complex national issues related to their respective regions, Hong Kong-based finance and economics columnist Liao Shiming shared his views with The Epoch Times.

“Shengjing Financial Holdings purchased some of Evergrande’s equity, and it is probably one of the few high-quality assets for Evergrande, but Evergrande has no right to decide what to sell, how much to sell, and how to sell. It is very likely that Evergrande will be split in the process,” Liao said in an interview on Sept. 30.

He believes Beijing’s main concern is social stability, as the fall of Evergrande involves too many victims. “The CCP asks local governments to handle the problems incurred by Evergrande, in order to avoid social unrest,” Liao said. “As to how the local governments will handle these problems, the central authorities do not care. Many outsiders think the CCP will try to rescue Evergrande and help to repay its debts. That is not true, as can be seen from the CCP’s ‘each parent takes his own child’ policy.”

As early as 2015, Ding Zhijie, the current director of the Foreign Exchange Research Center of the Foreign Exchange Administration, pointed out that the policy of “each parent takes his own child” would only worsen financial problems.

“The logic was still planned economy … and it is ‘mission impossible’ for local officials,” he said.

In today’s China, not many local governments are in a position to “take his own child” as Shenyang does.

Sober Observer, a well-known financial Youtuber, has stressed in his program that due to repeated government regulations and cooling of the real estate market, many local governments relying on real estate as their main income are suffering from the economic winter. Most of them won’t be able to solve Evergrande’s huge debt problem. It is already very difficult for them to deal with their own local debts.

In addition, Sober Observer mentioned that there are many other Chinese real estate companies deeply in debt, hundreds of them, such as Country Garden and Greenland. Their debts range from hundreds of billions to trillions of yuan. These companies are eagerly waiting for the authorities to come to the rescue. But where is the money to save them, he asked.


Kathleen Li

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