China Evergrande quietly set off a chain reaction across the country
China Evergrande’s financial troubles have spilled over to construction companies, interior decorators and many others it owes money to
The current mantra for the property sector—“houses are for living in, not for speculation”—was first introduced in late 2016 at an economic working conference, and mentioned by Chinese leaders during the 19th Party congress in 2017.
It morphed into a relentless deleveraging campaign that led the housing market to its current predicament.
Many construction companies had previously accepted payments from Evergrande and other developers in the form of IOUs known as commercial bills. They typically allowed developers to postpone cash payments to their contractors and construction companies by a few months to a year.
Construction firms in turn gave similar payment promises to businesses that supplied them with cement and other building materials, as well as workers.
WSJ 13 October 2022
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