At least two Chinese cities have taken steps to prevent real estate company Evergrande, which is facing a serious liquidity crisis, from misusing the income from sales of its properties and defaulting on its obligations to clients, it reports. Financial Times.
According to a circular that the newspaper has had access to, the housing office of one of the neighborhoods of Guangzhou (Canton) last Wednesday asked an Evergrande subsidiary to transfer the pre-sale income of the stagnant Sunshine Peninsula residential project to an account controlled by the state so that “the interests of home buyers can be protected and construction can continue.”
The housing bureau of Zhuhai city, located near Macau, relayed a similar request to a residential project by the real estate company this month, people familiar with the situation confirmed to the Financial Times.
With the money in government accounts, Evergrande cannot transfer it or use it for other types of operations, such as paying off your debt. It is currently the most indebted Chinese real estate company: it has liabilities for a total amount that exceeds 300,000 million dollars, affecting more than 250 banks and non-bank entities.
Meanwhile, the Chinese government’s priority is to complete the real estate company’s ongoing projects, although it is unknown how the stalled projects where sales revenue have already been reallocated are planned to get started. A company executive told the Financial Times that they do not have “enough resources to complete all projects on time” and need “more external assistance.”
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