Evergrande's whopping $81 billion loss is almost triple Iceland's GDP - it's a reflection of China's deepening property crisis
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- Chinese developer Evergrande just reported a massive two-year loss of $81 billion - almost triple Iceland's GDP.
- China's property-market slump has worsened, with investment sliding and the industry as a whole contracting.
- Wall Street banks have warned that the sector could remain a drag on the world's No. 2 economy for years to come.
China's Evergrande, the world's most indebted developer, just reported a combined $81 billion loss for the last two years – a figure that's twice the GDP of Nepal and almost triple that of Iceland.
The embattled builder's financial woes are emblematic of the deepening troubles of the Asian nation's property sector. Investment in the sector fell 7.9% in the first half of this year, official data show. The industry as a whole shrank last quarter, resuming a contracting trend in place since 2021, Bloomberg reported.
Property sales in China by floor area plunged more than 28% in June from a year earlier, after an almost 20% in slump in May, Reuters reported, citing official data.
Evergrande's net losses for 2021 and 2022, excluding non-controlling interests, were 476 billion yuan ( $66 billion) and 105.9 billion yuan ($14.7 billion) respectively, exchange filings show. In comparison, Nepal's 2022 GDP was $40.8 billion and Iceland's was $27.8 billion, according to World Bank data.
The Chinese developer hit the headlines back in 2021 when it defaulted on its debt — an event that reverberated through global markets and have had wide-ranging effects on the Asian nation's property sector. Mass defaults and abandoned projects have become a headwind for China's struggling economy – other big developers such as Sunac and Kaisa have also missed debt payments.
Wall Street banks have warned that the real-estate industry could remain a drag on the world's second-largest economy for years to come.
"We see persistent weaknesses in the property sector, mainly related to lower-tier cities and private developer financing, and believe there appears to be no quick fix for them," Goldman Sachs economists wrote in a research note last month, per CNBC.
"We only assume an 'L-shaped' recovery in the property sector in coming years," they said, per the outlet. This is the most severe type of business downturn – where a recovery is expected to follow an "L" shape when mapped on a line graph.
China's overall growth has slowed too. Data released on Monday clocked second-quarter GDP growth at 6.3% from one year earlier – falling short of analysts' expectations.
Disappointing economic figures have led analysts to predict a fiscal stimulus package to reignite growth, but no intervention measures have been announced just yet.