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Shuli Ren

Evergrande Gives China an Impossible Equation to Solve

The developer’s biggest problem is that its working capital is tied to a massive inventory, largely composed of unfinished projects. Empty parking lots, anyone? 

Is Evergrande a house of cards?

Is Evergrande a house of cards?

Photographer: Noel Celis/AFP/Getty Images

A restructuring at the world’s most indebted real estate developer is looming. The Chinese government has already hired financial advisors to assess China Evergrande Group. With more than $300 billion in liabilities on its books and not even $15 billion in cash, Evergrande is racing against time. It will not be able to make loan interest payments due Monday, Bloomberg News reported.

Fiscally constrained itself, Beijing is not keen to bail out companies. Plus, in the last few years, regulators have already gained some expertise in winding down unwieldy debt-fueled conglomerates. The restructurings of Anbang Group Holdings Co. and HNA Group Co., while painfully slow, were largely orderly and did not prompt a Lehman-like moment. So can China do it again with Evergrande? First, it has an impossible equation to solve.