Study on Evergrande Group’s business model and debt crisis

Abstract

The real estate sector has experienced “thunderstorms” throughout the last two years. Numerous well-known real estate firms have fallen behind on their payments. Words like “bankruptcy” and “crisis” have been associated with real estate firms, attracting a lot of interest from the market and public. Debt financing is one of the keyways that real estate business’ function and the grow. On the one hand, it can help them grow their business, but on the other hand, it has an impact on their asset-liability performance. The current state of poor sales in the real estate sector will persist in 2022, impacting the operational performance of businesses within the industry, making capital circulation more challenging, and further solidifying the role of debt financing. Based on this, this paper chooses Evergrande Group, which rocked the nation in 2021 owing to the debt crisis, as a case study object under the macro background of the nation’s application of the “three red lines” policy for real estate financing. By examining the underlying causes of the Evergrande Group’s debt crisis, it seeks to offer a point of reference for other businesses that use comparable financing and management techniques, as well as a reference value for government decision-makers.