An Analysis of the Causes of Evergrande Debt Crisis

Abstract

Since August 2020, new regulations on real estate financing have been issued, emphasizing “the need to improve the marketization, standardization, and transparency of financing”. Subsequently, the capital liquidity crisis caused by Evergrande’s high debt and high turnover mode has become the focus of public attention in the market and has triggered the credit crisis of the real estate industry to a certain extent. This study is based on the public information such as the financial statements. To analyze and study the causes of the crisis, this paper will analyze the causes of the Evergrande Group crisis by comparing the previous financial statements of the company, using the balance sheet and comparing the profitability, and putting forward suggestions on the future liquidity and long-term development of Evergrande Group. The suggestions give inspiration to the same industry or enterprises in the same model. Warning the existing housing enterprises, Evergrande Group serves as the most negative example in textbooks, playing a warning role to prevent such a serious crisis from happening again.