Why Did China Even Allow Evergrande to Last This Long?
After short-sellers were discouraged by a 2016 Hong Kong ruling, the developer and its politically astute founder got to roam free and build up huge amounts of debt.
Evergrande founder Hui Ka Yan was all about “common prosperity” before it was cool.
Photographer: Bloomberg/BloombergMany comparisons have been made lately between the collapse of Lehman Brothers Holdings Inc. and the apocalypse at China Evergrande Group, the world’s most indebted real estate developer. But they are nowhere close. Lehman was a top-tier investment bank that went from good to bad during the 2007 subprime mortgage crisis. On the other hand, Evergrande — a well-known presence in Hong Kong’s capital markets for years — has always been bad.
For almost a decade, critics have been calling Evergrande out, questioning the asset quality of its unsold properties and asking if its auditors were asleep. All those warnings fell on deaf ears — and the developer-turned-conglomerate went on living out its nine lives. On Thursday, however, Beijing finally told local governments to prepare for Evergrande’s potential demise, the Wall Street Journal reported. The unanswered question is why the People’s Republic of China and its often merciless regulators allowed it to go on for so long.