Research On Evergrande Debt Crisis Based On Financing Strategy

In the 90 s of last century,the reform of land finance and tax-sharing system pushed the real estate industry to the historical stage,and in the following thirty years,the real estate industry developed rapidly and grew into a huge beast.While the real estate industry has made high profits,it has also accumulated a lot of risks.By borrowing heavily from banks and issuing US dollar bonds to foreign investors,real estate companies have obtained huge amounts of money through aggressive financing strategies.Coupled with the use of financial leverage,real estate companies have leveraged larger amounts of land and assets.High debt ratio is a major magic weapon for real estate enterprises to expand their scale,among which Evergrande Group has taken this magic weapon to the extreme,and the contract sales have ranked first among Chinese real estate enterprises for many times.In 2020,the central government promulgated the "three red lines" policy,and Evergrande Group stepped on all the "three red lines",and according to the regulations,interest-bearing liabilities will not be increased.Evergrande Group’s financing environment deteriorated sharply,with a large number of debt defaults,and with the release of its interim financial report in 2021,Evergrande Group’s liabilities of up to 1.97 trillion yuan were revealed to the world,causing strong market turmoil.In this context,this paper first introduces the development history of Evergrande Group,relevant financing channels,and the specific situation of Evergrande Group’s debt crisis,and then analyzes the reasons for Evergrande Group’s debt crisis based on Evergrande Group’s financing strategy.Specifically,Evergrande Group’s financing strategy has the following problems: internal financing is seriously insufficient and overreliance on external financing;Excessive reliance on debt financing and unreasonable financing structure;Excessive use of current debt financing,high short-term debt repayment risk;Arrears of accounts payable to suppliers,which can easily lead to a crisis of trust;excessive issuance of overseas senior notes and excessive debt financing costs;Aggressive strategic financing increases the pressure on enterprises to repay debts;Offbalance sheet financing lacks capital supervision,and the transmission of interests within the group is serious.In view of these reasons,suggestions for improving financing strategies are put forward for relevant real estate enterprises,including: strengthening domestic financing and reducing excessive dependence on external financing;Strengthen equity financing and optimize financing structure;Balance current and non-current liabilities to reduce short-term debt service risk;Settle accounts payable in a timely manner and create a good corporate image;Broaden financing channels and reduce financing costs;Avoid aggressive strategic financing and do adequate research;Improve the fund supervision mechanism and establish a financial sharing center.Through the synergy of the above methods,we can prevent the emergence of Evergrande-style debt crisis.