China's Evergrande: What to know
Evergrande's crisis is being compared to collapse of Lehman Brothers
China will likely ‘step up,’ stop Evergrande crisis from being global phenomenon: David Rubenstein
The Carlyle Group co-founder David Rubenstein discusses China’s potential 'Lehman Brothers moment' amid the Evergrande crisis, U.S. debt and his new book, ‘The American Experiment.’
One of China's largest lenders, Evergrande Group, is facing billions of debt with the threat of default. The crisis is sending shockwaves through global financial markets, including in the U.S., where the company is being compared to Lehman Brothers, whose implosion in September 2008 sparked the Great Financial Crisis.
FOX Business takes a look at Evergrande's business and its role in the world's financial system.
EVERGRANDE GROUP
Evergrande is one of China's leading lenders for everything from property to autos. The company has 2.3 trillion Chinese yuan in assets, which equates to about $355 billion in USD, according to the lender, which employs 200,000 workers.
By 2022, Evergrande expects to reach 3 trillion yuan in total assets, 1 trillion yuan of annual sales and 150 billion yuan of annual profits and taxes to become "one of the world's top 100 companies."
FACING DEFAULT ON BILLIONS
Rating agencies say Evergrande Group appears unlikely to be able to repay all of the 572 billion yuan ($89 billion) it owes banks and other bondholders, as reported by the Associated Press, which also noted Beijing is likely to step in to prevent systemic damage.
"I suspect the Chinese government is on top of this, and I don’t doubt they will deal with it severely, but I don’t think it will have the global effects the market is suggesting this morning," said Carlyle Group co-founder David Rubenstein during an appearance Monday on "Mornings With Maria."
One U.S. investor in China tells FOX Business "just about every bank in China has exposure to the company," which explains the heightened contagion fears.
U.S. INVESTORS?
According to Factset data, BlackRock has some holdings in Evergrande across several units, while Goldman Sachs, JPMorgan and JPMorgan have small, fractional holdings. "I don't think the major US banks are on the hook for very much money," Rubenstein noted.
Inquiries by FOX Business to these banks were not immediately returned.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BLK | BLACKROCK INC. | 1,022.80 | +3.35 | +0.33% |
| GS | THE GOLDMAN SACHS GROUP INC. | 608.57 | +3.14 | +0.52% |
| JPM | JPMORGAN CHASE & CO. | 249.72 | -0.07 | -0.03% |
| GS | THE GOLDMAN SACHS GROUP INC. | 608.57 | +3.14 | +0.52% |
EVERGRANDE'S DEFENSE, MANAGING CRISIS
As the lender's crisis continues to unfold, it has attempted to calm investor fears.
"The recent online remarks about Evergrande’s bankruptcy and reorganization are completely untrue," the company said Sept. 13. "The company has indeed encountered unprecedented difficulties, but the company resolutely fulfills its corporate responsibility, goes all out to resume work and production, guarantee the delivery of buildings, try all means to resume normal operations, and fully protect the legitimate rights and interests of customers"
Chairman of Evergrande Group Xu Jiayin attends a press conference with new head coach of Guangzhou Evergrande Fabio Cannavaro on Nov. 9, 2017, in Guangzhou, Guangdong Province of China. (Photo by Visual China Group via Getty Images/Visual China Group (/Visual China Group via Getty Images / Getty Images)
EVERGRANDE CHAIRMAN & STOCK
Xu Jiayin, also known as Hui Ka Yan, is among China's richest people with a net worth of over $10 billion, according to Forbes. Xu took the lender public on the Hong Kong Stock Exchange in 2009.
According to a company bio:
"61 years old, Chairman of the Board of Directors of the Group and Chairman of the Real Estate Group, Professor Xu coordinates the overall development strategy of the Group. He has more than 37 years of experience in real estate investment, real estate development and corporate management. Professor Xu has been a professor of management at Wuhan University of Science and Technology since 2003 and was hired as a doctoral supervisor of the school in 2010."
The Associated Press contributed to this report.