Central Local Governments Urge "Hengda to Withdraw from Regional Redevelopment"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Local governments in China have begun risk management related to Evergrande's real estate development projects, which are on the brink of bankruptcy.

According to the South China Morning Post (SCMP) on the 5th, the authorities of the Changlian area in Guangzhou, Guangdong Province, banned Evergrande's participation in redevelopment projects last week. This measure was taken out of concern that Evergrande, facing a liquidity crisis, would participate in redevelopment projects scheduled to last three years.

Evergrande is carrying out 146 redevelopment projects in underdeveloped areas across China, of which 131 are located in the Guangdong-Hong Kong-Macao Greater Bay Area. SCMP stated, "For Evergrande, Changlian's rejection could be the first domino piece."

The housing management authorities in Nansha, Guangzhou, reportedly instructed Evergrande on the 22nd of last month to place all sales proceeds under the authorities' management to protect homebuyers' interests and ensure the completion of housing construction projects. SCMP added, "Authorities in Chongzuo, Guangxi Province, and Jiangjin, Chongqing Municipality, have taken similar measures."

Earlier, Chinese economic media Caixin reported, citing sources, that at least nine local governments have started managing Evergrande's housing projects.

The Nanhai District of Foshan City, Guangdong Province, ordered the exclusion of Evergrande's ongoing construction projects from the loan collateral approval list, and in Hong Kong, Evergrande's first planned housing construction project was canceled after banks stopped approving collateral loans since July.

It has been reported that police are guarding the entrance of an apartment construction site office in the Huachang area of Shenzhen City, where Evergrande is conducting a project. This is due to local authorities closely monitoring the construction project, which aims for completion by the end of 2023.

SCMP explained, "On the occasion of the 100th anniversary of the Chinese Communist Party this year, local governments in China are striving to maintain stability and prevent protests, and are unwilling to take risks."