The Rise and Fall of China's Evergrande Group

You might have heard something about Evergrande Group (恒大集團) recently. This is a sprawling company with billions of dollars in debt, a little bit of a cash crunch, and is looking for a way out.

Who knows what is going to happen. Everything is all up in the air and we are hearing new things each day. But the whole saga has gotten me interested in how a real estate company has managed to grow so far, and so fast. That is what we will talk about today.

In this video, we look at the rise and fall of what had once been China's biggest real estate conglomerate. A company now with $300 billion in liabilities.

Errata:
26:20 - 22% discount, not 78% discount. Google Translate error.

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[trillionsflames]

Lol when I saw Jackie Chan in the bottled water ad. There were many companies who hired Jackie Chan as their brand ambassador went bankrupt or suffered big losses. This has became a meme.

[crylittlebitch]

hey man, I've been following the channel for a while and just wanted to say that I really like the way your videos have developed, the topics are more interesting (at least to me) and I also like the dry jokes in between!

[francois]

I just knew I would get some quality analysis by Jon when I saw this video. Everyone one else is quick to make a video which basically says:

- Evergrande is huge in China!
- Evergrande has many unhappy employees!
- Evergrande has many unhappy creditors!
-Evergrande is Lehman Brothers!

Thanks for the details and context, Mr Asianometry. We'd be lost without you.

[twomix]

"Evergrande wasn't just touching the Red Lines. It took them to prom and got them pregnant in the backseat of a Volkswagon Beetle" made me laugh out loud.

[manfreddng]

A well-researched video on the company Evergrande and the entrepreneurial ups and downs of their founder, Xu. Keep up the good work

[katphisH]

The little quips and sarcasm are a nice touch, they keep the video conversational and help to sustain attention

I have an economic channel here in Slovakia and now I am preparing video about this topic and I found your video. Really great work. You have my sub :)

[jont]

The difference was bezos was actually making money, but he was spending those excess profit he made into growing and expanding his logistics infrastructure and rnd, and he did not had to raise ever growing amounts of debt in order to show a profit, all of it came from growing revenues.i mean building warehouses and distribution centers to handle the growing demand of millions of orders is not easy.But once I think he reached his growth potential in like mid 2010s, he just let loose and let the growing revenues and profits pile up.

On the other hand Evergrande was just raising huge amounts of debt every year and unpaid liabilities just to produce a tiny result.

[terrywilkinson]

What an extremely interesting, in depth and thorough piece of research. I am enjoying your detailed work and your presentation is also almost gripping. Thank you

[KingsKeep]

I’m subscribing to your Patreon after watching this video!! Excellent analysis on what has led up the company’s current situation! Also, the side comedy gave me a few good laughs as well!

[kicapanmanis]

Come for the interesting in depth topics, stay for the deadpan humor.

[hansonhong]

Great video! The “three highs one low” actually refers to high leverage, high gross margins and high turnover, low prices

[cousefirst]

Glad to see this video take off! You deserve it man 😀

[zhaoluyue]

A few factual error observed here:

25:13 You might want to point out that only if the company crossed all three red lines that they couldn't take on more liability with interest. For those cross 2 lines, 5% increase in liability with interest each year; for 1 line, 10% increase.

26:20 They discount the real estate units to 78%, not by 78%, or it would be crazy.

[AG-eny]

Wow this was amazingly put together. Thx.

[sathyath]

Evergrande's case was initially the case of illiquidity. Not insolvency. In normal scenario, when a company facing an illiquidity issue, they can just rise money from loans or equity. But in evergrande's case, the stock price was already on heavy downturn trend, while the debt was already maxed out. It's like someone just losing their job and already maxed out their credit cards.
So in this case, what was once a illiquidity scenario, became an insolvency scenario. Not to mention their founders who cashed out prior to the downfall.. It really shows the bad ethos and will to save the company.

[NexusApollo]

Another amazing video, especially with the indepth look into Evergrande origins and its present situation given how much attention the company has been getting internationally.

Also, congrats on reaching over 80k subs! With the quality content on this channel, I can confidently say you deserve much more. As a long time watcher, it's amazing to see this channel grow with leaps and bounds. Can't wait for the 100k milestone and many milestones afterwards!

[PunchClock]

People/channels likes yours brings otherwise irrelevant information to the forefront of the average person's inquisitive nature when questions arise about issues in relation to impacts on a possible global scale. Great work!

[anfangerm]

Evergrande is the hottest financial topic in Chinese.
But why am I the only one that is worrying about Evergrande FC, the Chinese super league football cup giant

[jrshaul]

This is quality journalism. Too many "internet geniuses" can't even pronounce "Guizhou."