The "Evergrande" crisis and the end of China's model to build unlimited: Empty properties to house 30 million families
There are enough vacant properties in China to house more than 90 million people. To put it in perspective, each of the five G7 countries, France, Germany, Italy, the UK or Canada can put its entire population into those empty Chinese apartments.
.The average size of a family in China is a little over three people. "We estimate that the existing but unsold housing inventory is in the range of 3 billion square feet, which is enough to house 30 million families," said Logan Wright, a Hong Kong-based director.
.Unfinished buildings, which formed a complex called Sunshine City II, had been left empty since 2013 as one developer had no money and another found defects in the construction work.
Such "urban scars" are common throughout China, where Evergrande, the world's largest debt-ridden property company, is suffering from a liquidity crisis that could turn out to be final.
The Evergrande crisis, for all the high drama of its destruction, is merely a symptom of a much bigger problem. China's large real estate sector, which contributes 29 percent of the country's gross domestic product (GDP), is so overcrowded that it threatens to relinquish its long role as a major driver of Chinese economic growth. and, instead, make a crawl for it.
Evergrande is proving to be the first major victim. As the company said on Wednesday it would meet its payment obligations for a domestic bond, a major overhaul comes on Thursday when Evergrande has to make an interest payment on a US dollar bond.
Risks stemming from the Evergrande saga include both financial contagion and the prospect that a powerful wealth sector will hit some of the vital organs of the Chinese economy, potentially reducing GDP growth for years to come.
The consequences of the crisis are already significant. The fall in Evergrande's share price has reduced the company's market capitalization from $ 41 billion last year to about $ 3.7 billion now.
And worries about its possible collapse sparked a sell-off in global markets this week. About 80,000 people in China holding about $ 40 billion in the company's asset management products are anxiously awaiting to see if Evergrande will meet its payment obligations.