Evergrande empire literally about to crumble
“This is the first phase of the financial meltdown and panic will start soon.”
They are the ominous words of veteran ratings analyst Dr Marco Metzler, who believes the demise of Chinese property giant Evergrande will “trigger the biggest financial crisis since 2008”.
Now, Evergrande hasn’t collapsed yet, but the start of 2022 has brought another sign the end is nigh.
As the headline of this article suggests, the company’s empire will soon literally start to fall to pieces.
Island dream becomes a nightmare
The latest concerning development is that Evergrande’s Ocean Flower Island, which was officially opened as the world’s largest artificial island last year, is in serious trouble.
Local authorities have demanded 39 of the island’s towers be demolished because environmental and zoning regulations were ignored over 10 years of development.
Reuters reports that the buildings in question were blocked off with blue metal sheets last month, however there is no official word on when the demolition will take place.
Regardless, the major setback for the enormous, flower-shaped project would be another nail in the coffin for what was once China’s top-selling developer, which is now reeling under more than $300 billion in debt and struggling to repay creditors and suppliers.
The Chinese Communist Party’s anti-graft watchdog has reportedly been taking a closer look at Ocean Flower Island since Evergrande’s financial troubles began to worsen in 2020.
Evergrande and China’s Ministry of Ecology and Environment have not responded to media requests for comment.
Evergrande headquarters abandoned
In another sign Evergrande is on its last legs, the company has moved out of its Shenzhen headquarters to nearby Guangzhou to cut costs.
Pictures posted online show the company’s logo partially removed from the side of the previous headquarers and the interior of the building completely empty.
Last September, the Shenzhen building was the scene of very large protests when Evergrande investors crowded the reception area to demand repayment of loans and financial products.
What happens next?
Dr Marco Metzler, an investment banker with decades of experience in financial markets, says Evergrande has officially defaulted on both onshore and offshore bonds since December last year and should no longer be allowed to operate.
“Nevertheless, it continues to operate as if nothing had happened. But if it is finally and legally forced into insolvency, it will trigger the biggest financial crisis since 2008,” he said.
Dr Metzler believes were just started the phase of a crashing market and in soon people will panic and we will see crashes of more than 50%
He goes even further to say the trust in the dollar and the world financial system will fade away.
“I will comment on this in detail as soon as we see the big market crash,” he said.