They came from all over the country, dragging cheap suitcases and clutching file folders filled with records, chanting in front of the glassy skyscraper: “Evergrande, pay up!”
They were the owners of small lighting and plumbing and construction materials companies, suppliers for Evergrande, one of China’s largest property developers — now staggering under more than $300 billion in debt and facing potential collapse.
Dozens of protesters were gathering daily here in recent days at Evergrande headquarters. Many of these protesters were contractors who had accepted commercial papers, a type IOU, as payment for their projects. However, Evergrande was unable to pay them when they came due.
” They say, ‘We don’t have any money. Li Gexin, a manager at a Qingdao janitorial business, said, “Do whatever you want.” It had 200 workers who’d cleaned Evergrande’s sales offices for a year and were owed more than $300,000 in commercial papers.
“If we don’t get the money, we can’t eat,” said Li, who’d driven for 24 hours to the Shenzhen headquarters. He said that they needed the money to feed their families and buy medicines for their elderly relatives, pay their mortgages, and to provide their basic needs. Numerous other suppliers were present, sharing similar stories.
Legions of police bearing riot shields stood nearby. Others carried banners reading “Gathering Evidence” and walked among the crowds, taking photos of every person.
The distress surrounding Evergrande’s collapse is a window into China’s problem with bad debt. Evergrande, one of the most successful property giants in China, has enjoyed a boom over the past few decades thanks to its model of huge borrowing and rapid expansion. It relied on cash flows from apartments it planned to build.
This worked so long as they were able to continue getting loans for new projects despite a decline in housing demand. But in August 2020, government regulators laid down new rules about how much debt developers could take on. After a year of trying to reduce its liabilities and declining sales, Evergrande acknowledged in public statements this month it may not have the ability to repay its debts. Credit ratings agencies Fitch, Moody’s and S&P downgraded Evergrande to levels indicating “in or very near default.” Its stock value has dropped 80% this year, and it has an estimated 1.4 million more homes that it’s already sold but not yet built.