Vocabulary

 

crowd	footage	step up (2)
sector	challenge	correspondent
believe	indebted	headquarters
step in	surround	pay/paid/paid
owe	purchase	in terms of
default	offshore	pay back (2)
repeat	ripple (2)	see/saw/seen
chunk	borrow	all over (2)
fail	property	speculation
drag	swing (2)	drag down
speed	share (3)	find/found/found
crisis	raise (2)	repercussion
pre-	cash (2)	catch/caught/caught
amass	land (3)	sell/sold/sold
bull (3)	downfall	lose/lost/lost
bar (3)	value (2)	pandemic
hurt	announce	mount (2)
rule (2)	lockdown	complaint
footage	potential	buy/bought/bought
author	go wrong	compensation
exact	thing (2)	complaint
clip (2)	contain	reimburse
try	struggle	resume (2)
roil	bail out	raise questions
macro	erode (2)	real estate
memo	face (2)	acknowledge
vow	firm (2)	push through
push	struggle	accounts for
pain	admit (2)	overcome
defeat	spirit (2)	authorities
though	contain	underway
source	reluctant	shareholder
effect	rally (2)	go/went/gone
affect	sense (2)	take down
reduce	sign (2)	determine
wide	supplier	high/higher/highest
spread	bond (2)	think/thought/thought
unrest		take action

 
 
 
 
 
 

Video

 

 
 
 
 

Transcript

Social media footage shows crowds protesting in front of the offices of the Chinese real estate developer Evergrande.

Xie Yu, WSJ Markets Correspondent: “Evergrande is one of China’s biggest property developers. It has the biggest sales in terms of property sales in China.”

In recent days, security has been stepped up outside its headquarters as the struggling company faces complaints from small investors, unpaid suppliers and people unhappy that the homes that they purchase haven’t yet been completed.

In total, Evergrande owes more than $300 billion.

Alex Frangos, WSJ Markets Editor: “It’s one of the most indebted companies in the world. Evergrande borrowed a lot of money, what we call ‘offshore’ in international financial markets. And it’s probably not gonna pay it back.”

.     .     .     .     .     .     .     .

 
Evergrande’s massive debt problem has rippled out into global markets with the S&P 500 seeing big swings. Beyond the potential default, international investors are particularly worried about what may happen next as a big chunk of China’s economy is linked to real estate.

Xie Yu, WSJ Markets Correspondent: “If Evergrande fails and drags down the whole property sector, people worry if [the] Chinese economy could develop at high speed as it did in the past years.”

More bullish investors think China could find a way to contain the fallout, but others are less certain that this can be safely diffused. This one company has got markets on edge, and it struggles could have big repercussions for global investors.

Xie Yu, WSJ Markets Correspondent: “In recent months, Evergrande has been caught into one of the largest crisis in its history.”

.     .     .     .     .     .     .     .

 
For years, Evergrande raised a lot of its cash by borrowing billions of dollars from banks and investors, and pre-selling unfinished apartments so that it could amass more land and develop projects in over 200 Chinese cities.

It has some 800 projects underway.

But this year, its shares have lost about 80% of their value in just a few months.

Problems started for the company when pandemic lockdowns hurt property sales, and when Chinese authorities said they wanted to fight speculation in real estate and announced rules that barred Evergrande from taking on new debt.

Xie Yu, WSJ Markets Correspondent: “Many of its construction projects all over China has stopped. It started to face mounting pressures, complaints, and protests from suppliers, contractors, home buyers, and small investors all over the country.”

.     .     .     .     .     .     .     .

 
In this footage from Chinese social media, people can be seen asking for compensation. The Wall Street Journal couldn’t determine the author of the video or the exact date of this particular protest, and this clip has since been taken down.

These photos show small investors being surrounded by security as they tried to enter the company’s headquarters in Shenzhen.

Evergrande has repeatedly said that it would try to reimburse people and resume construction. Evergrande’s struggles are raising questions over China’s property market.

Xie Yu, WSJ Markets Correspondent: “Evergrande is such a big player on China’s property industry. The property industry account[s] for about 25% of the total economy. So, if growth in that sector is eroded, we will see the macro economy [come] under big challenges.”

.     .     .     .     .     .     .     .

 
In a memo on September 21st, Evergrande’s chairman acknowledged the issues that the company faces, but vowed to push through the pain.

Hui Ka Yan, Evergrande Chairman: “I firmly believe that Evergrande people’s spirit of never admitting defeat, and becoming stronger when the going gets tough, is our source of strength in overcoming all difficulties!”

Wall Street Journal reporting found that Chinese authorities have asked local governments to contain the potential downfall of Evergrande.

But the government has been reluctant to bail it out. And global investors are watching to see how this could affect this year’s market rally.

Alex Frangos, WSJ Markets Editor: “The stock market has gone up a ton since the pandemic especially in the US, and there’s this sense of, what can make things go higher and what could go wrong?”

Some investors think letting Evergrande fail would be a sign that China is serious about reducing debt in the economy.”

Xie Yu, WSJ Markets Correspondent: “People we[‘ve] talked to widely believe Beijing won’t step in to protect shareholders or bond holders this time. But they might take some actions if they see social unrest spread, or if they see financial markets being roiled heavily by Evergrande.

*     *     *     *     *     *     *

 

Questions

Investment. Is Evergrande a tech giant? Is it high-tech company?

Agent, Brokerage, Consultant. People in Shenzhen, China were cheerful and celebrating. They were in a very festive mood. True or false?

Bank, Borrow, Lend. At the moment, is Evergrande very profitable? Is it prospering?

Real Estate, Property. Is the economy of China is immune to the woes of Evergrande, or could there be a contagion?

Speculation, Bubble. Over the years, what was Evergrande’s business strategy? Did they operate conservatively and cautiously, or was it (over)ambitious, (over)optimistic and (over)confident?

Debt, Liability. What was the turning point of Evergrande’s fortunes? What may have been the “straw that broke the camel’s back”?

Shares, Bonds. Is the Evergrande leadership optimistic and confident, or pessimistic? Do they have a positive or negative outlook?

Assets, Liquid Assets, Liquidity. Has the government been stepped in? So far, has the government been involved? Will the government definitely rescue Evergrande?
 
 
 
Ponzi Scheme. Why may have led to this situation? Why is Evergrande in trouble?

Mortgage, Rent. Real estate and properties a large part of my country’s economy, Yes or no?

Construction, Contractor. Do many people invest in housing and property? Describe their investments.

Vendor, Supplier. How would you describe housing and property values? Describe the trend over the years.

Confidence, Optimism. Do experts and ordinary citizens feel that there is a property bubble?

Stock Market, Share Prices, Indices. What might happen in the future?

Interest, Returns, Dividends. What should people, businesses and governments do?