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As China's property giant Evergrande veers toward collapse, its unpaid debts spark protests

Alice Su, Los Angeles Times on

Published in News & Features

It would hurt not only the developer’s creditors and investors, but also all those who bought unfinished homes, put their savings in Evergrande’s wealth management products, or were among its contractors and subcontractors paid in IOUs.

Some of these suppliers had put up their own homes as collateral in loans to cover their work for Evergrande, confident that “such a big company” could not possibly fail to pay. Now they are under pressure from both the banks and their workers.

The entire construction supply chain had been using Evergrande IOUs instead of cash for years, said Cai, a supplier from Wenzhou who asked to be identified only by her last name.

When Evergrande was late paying the July commercial papers, she assumed that if the project she’d worked on was in trouble, the company would be able to transfer money from another Evergrande project.

“We thought, it couldn’t be that all their projects in the whole country are out of money. It’s not realistic, right?” she said. But suddenly no one wanted Evergrande’s IOUs anymore. They’d become “worthless pieces of paper,” she said. “Then we panicked.”

At the headquarters, police herded protesters toward a cafeteria on the fifth floor of a nearby building. There, Evergrande staff sat scattered at orange plastic tables labeled with the name of each province. Suppliers were encouraged to register their complaints with the staff, then promised that they could receive Evergrande properties — unsold apartments, commercial storefronts, or parking spaces — at a discount to offset what the company owed them.

 

Chen Xiaowang, the owner of a lighting company and electronics company in Wenzhou, sat at the Shaanxi province table. Evergrande’s Xi’an branch owed him more than $200,000 he said. He’d already had to lay off half his workers. The other day the staff here told him he could get parking spots in Xi’an, but when he called the office there, they said they had not received instructions on that from their superiors.

A few hours later, he’d received a call from the local police in Wenzhou, he said, showing The Times the call records. They told him to go home and stop “making trouble” in Shenzhen.

“This isn’t the right way to do things,” Chen said.

Outside, several women sat against the wall on suitcases and pieces of cardboard. They had been here for four days, staying in low-budget hostels and eating one bowl of noodles per day.

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