Analysis And Enlightenment Of Evergrande Group’s Debt Crisis Event

At the beginning of 2021,the government officially issued the "Three Red Lines" policy to prevent systemic financial risks.This policy strictly and closely monitors the financing of the real estate industry.In 2022,the country re emphasizes the position of the real estate industry as a pillar of the national economy,requiring the promotion of stable development of the real estate market and supporting the demand for rigid and improved housing;At the same time,requirements have been put forward for the management mode of real estate,which is to transform the traditional "high debt,high leverage,and high turnover" model and shift to a highquality development model.Although Evergrande Group holds a leading position in the real estate industry,the ultimate outcome under the traditional business model is still the depletion of liquidity,difficulties in obtaining funds,default on commercial invoices,inability to repay wealth management products,and default on project payments,resulting in serious cash flow problems.The main reason for this is that Evergrande’s financing leverage is too high,and the pressure to repay principal and interest is too great.The debt default event of Evergrande Group is sufficient evidence that the traditional high leverage business model of real estate enterprises has deviated from the requirements of high-quality and healthy development,making it difficult to sustain.The lesson is profound,worth summarizing,and should be considered as a warning.This article is based on the perspective of high leverage financing,and conducts research using the framework of "case analysis,cause analysis,characterization analysis,and countermeasure inspiration".It analyzes the reasons for the debt crisis of Evergrande Group,as well as the potential manifestations,proposes countermeasures for the problems existing in Evergrande Group,and obtains relevant inspirations for the development of the real estate industry.Based on the above research ideas,this article is divided into seven parts in structure,namely introduction,relevant concepts and theoretical overview,introduction to Evergrande Group’s debt crisis cases,analysis of the causes of Evergrande Group’s debt crisis,characterization analysis of Evergrande Group’s debt crisis events,suggestions and inspirations,conclusions and prospects.In response to the debt crisis incident of Evergrande Group,this article proposes suggestions and inspirations.Among them,the suggestion includes five aspects.Firstly,transform development strategies: reduce financing leverage and avoid aggressive land acquisition;Enhance core business competitiveness;Be cautious in diversified development and divest of non-performing industries.Secondly,improving the quality of financing and improving the debt structure: expanding external financing channels;Enhance internal financing.Thirdly,carry out operational activities reasonably: carry out dividend activities reasonably;Reasonably introduce strategic investors.Fourthly,leverage the government’s rescue policies.Fifth,carry out business model transformation.The lessons and inspirations from the debt crisis of Evergrande Group include three aspects.Firstly,at the level of real estate enterprises,it is necessary to strengthen the management of cash flow;Strengthen the dynamic tracking of financial indicators;Fully implement feasibility studies for diversified projects.Secondly,at the level of the real estate industry,it is necessary to move in line with national policies;Improve the current pre-sale system;Efforts will be made to promote high-quality development of the real estate industry.Thirdly,at the government level,we must adhere to the continuity and stability of real estate policies and guide the market to actively anticipate;We should properly settle defaulting real estate enterprises and adhere to the goal of "ensuring the delivery of buildings" without wavering;Continue to strengthen the supervision of real estate finance.