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Opinion
Nisha Gopalan

China’s Most Indebted Firm Is Too Big to Fail

This property developer is borrowing even more to expand into unlikely projects, such as electric vehicles. But there’s a method to the madness.

On top of the world.

On top of the world.

Photographer: Paul Yeung/Bloomberg

There's a lot working against China's most indebted property firm. China Evergrande Group is sitting on $113.7 billion in debt and its core profit fell 45% in the first half of the year. Real-estate growth is slowing, with banks under orders to curb home loans. President Xi Jinping’s refrain that houses are for living in, not speculation, has been cropping up more frequently. 

Time to rein things in, right? Not Evergrande. The company, whose portfolio already includes theme parks and a football club, now wants to become the world’s biggest electric-vehicle maker in the next three to five years. It’s burning through precious cash – 160 billion yuan ($22 billion) – to build factories in Guangzhou.