China's 'Gwansi' Real Estate Developer Also Faces Default Crisis

[Image source=Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Starting with Evergrande, Chinese real estate developers are facing a wave of debt default crises, and it has been revealed that a developer owned by the Taizidang is also among the defaulting companies.

According to Bloomberg on the 21st (local time), Huayangnian Group, which failed to repay bonds worth $206 million (approximately 243 billion KRW) earlier this month, is led by Zheng Baobao, the nephew of former Vice President Zheng Qinghong, who was once the leader of China's Taizidang.

Huayangnian's debt amounts to $12.8 billion (approximately 15.2 trillion KRW).

Zheng Qinghong was a close aide to former President Jiang Zemin and led the Shanghai faction (political and business networks from Shanghai). Bloomberg reported, "Former Vice President Zheng Qinghong is still known to have political influence."

Zheng Qinghong's son, Zheng Wei, was previously suspected of receiving preferential treatment when he acquired a 92% stake in Luneng Group, a power company based in Shandong Province valued at $10 billion (approximately 10.8 trillion KRW) in market value in 2007, for $550 million (approximately 590 billion KRW).

The fact that a company like Huayangnian, which has powerful 'guanxi,' has defaulted without government bailout measures highlights the Xi Jinping administration's firm stance on the matter, analysts say.

Bloomberg stated, "As Chinese President Xi Jinping promotes the slogan of 'common prosperity' and strives to reduce wealth disparity, the case of Huayangnian Group is drawing attention."

Willie Lam, Associate Professor at the Chinese Research Center of the Chinese University of Hong Kong, said, "Even companies that have enjoyed political protection until now have no choice but to obey President Xi's new directives."