The full text is 3,500 words in total and lasts about 5 minutes.
Source of this article: Liu Shengjun’s overall situation (produced by Liu Shengjun Micro Finance)
Text | Liu Shengjun
- Others fear that I am greedy, others are greedy and I am afraid. -Buffett
- If even Country Garden falls, it will be the last straw to crush the camel.
- Extremes must be reversed. "Model student" Country Garden crisis, on the contrary, indicates that the real estate industry is about to usher in a turning point.
- Evergrande’s problem is Evergrande’s problem; The problem of Country Garden is an industry problem. Different roads lead to different returns.
After Evergrande, Country Garden, the largest real estate company in China in terms of sales area, actually came to the brink of debt default in the first half of this year. It was predicted that the loss in the first half of this year exceeded 45 billion yuan, and its 11 domestic corporate bonds stopped trading, and its share price evaporated by nearly 50% in a week.
In fact, this is no exception. Like Country Garden, head housing enterprises such as Sunac and Greenland have a hard time. Which one is not trembling and treading on thin ice? Whoever falls first is likely.
On August 8th, Chen Qizong, a Hong Kong real estate tycoon, said with emotion, "Many of my old real estate friends, who have met here once a year for many years, are hard to meet now. A friend came to my place for dinner more than a year ago. He told me, can I make it this time? I dare not say. At last, when we said goodbye, my heart was sour. Of course, he is not bad now, but he was rescued. Another friend was more sure, and as a result, his end was not so good. "
According to statistics, Evergrande Group has a debt of 2.58 trillion yuan, Country Garden 1.7 trillion yuan, green land 1.2 trillion yuan and Sunac 1 trillion yuan. The liabilities of these four housing enterprises add up to nearly 6.5 trillion, which is equivalent to 5.4% of China’s GDP of 121 trillion in 2022!
Indeed, the head housing enterprises are too big and become unregulated "financial behemoths". Evergrande’s debt is equivalent to the asset size of the 19th largest bank in China. Anyone who studies finance knows the problem of "too big to fail". In 2008, the Federal Reserve blew up Lehman Brothers, a small bank, with a try attitude. Unexpectedly, the people who bombed the world went belly-up.
As a result, the "three red lines" were born. Everyone, including Country Garden, was dumbfounded by the fiercest regulation of China real estate in history.
Objectively speaking, it is necessary to prevent financial risks by limiting the "barbaric expansion" of head housing enterprises. However, in the implementation of the "three red lines", there has been a phenomenon of simplification, across the board, short-term long-term goals and protracted battles, which has led to the suspension of the whole real estate industry so far (what is the medium-and long-term solution to real estate? )。
The current situation of real estate is already very dangerous. All housing enterprises are unsafe. This further leads to the wait-and-see attitude of buyers. After all, no one wants to get into the trouble of "uncompleted residential flats". As a result, "negative feedback" began, and "guaranteeing the delivery of the building" did not help.
In July, house prices in 70 large and medium-sized cities nationwide fell, and the number of cities reached the highest range in history: house prices in 49 cities fell. In July, the sales area of commercial housing dropped by 46.1% from the previous month. From January to July, investment in real estate development decreased by 8.5% year-on-year, which seriously dragged down economic growth.
We must stabilize the property and can’t hesitate any longer. There is no need to worry about letting go of the purchase restriction and "soaring house prices". At this time, the environment has changed, expectations have changed, and the money bag has shrunk. What we really want to prevent now is not the sharp rise in housing prices, but the unbearable weight of the real estate systemic crisis.
Although Country Garden is dangerous, it is not Evergrande after all.
1. Evergrande is a "big" word. It relies on gambling and gambling blindly and expands savagely, and has no real core competitiveness. Evergrande blindly diversified and made a strategic taboo. We can get a glimpse from Evergrande Football, Evergrande Super Headquarters (unfinished) and Evergrande Automobile. Country Garden, which rose from "Give you a five-star home" in 1995, has considerable strength in product building, property service and refined management. Country Garden was once praised as a "model student" by the industry, but it didn’t get a hollow reputation. In 2022, Country Garden delivered 700,000 houses, and Vivanco Evergrande added up more.
2, Xu Jiayin blindly high-profile, Yang Guoqiang is very low-key and pragmatic. Xu Jiayin is one or two of the highest-profile entrepreneurs in China, and he is keen on publicity. Evergrande has not only a football team, but also a national song and dance troupe. Ma Weidou once recalled the first meeting with Xu Jiayin: Xu Jiayin was wearing a coat and walking with the wind. "Teacher Ma is here!" Xu Jiayin shoulders a shake, coat slipped from the shoulder with the action, behind the bodyguard "pa" stretched out his hand and caught. After taking a seat, Xu stretched out his index finger and middle finger, and the bodyguard behind him took out a cigar with a bang. Xu Jiayin "where people go, the elevator is controlled", "except the secretary’s bodyguard and personal butler, other people, especially men, are not allowed to approach" and "generally bring your own cigars, and you need to be equipped with cigar holders and cigar scissors." Diet "only eat imported fruits, including Japanese greenhouse honeydew melon, Japanese fragrant Yin Qing Ti, Qingwang watermelon, especially sweet winter jujube and mango." When KTV sings, "drink royal salute and soda water". When Evergrande hired Ren Zeping with a high salary, it was essentially a hype (Liu Shengjun fired in the early morning! Ren Zeping was "torn by hand": bragging, inciting and greedy for heaven! I hope you can get out of the swamp of desire as soon as possible! )。
In contrast, Yang Guoqiang, a farmer, is one of the lowest-key businessmen, and even when he reached the top of China’s richest man in 2007, he did not receive any media interviews. It is said that Yang Guoqiang reads 100,000 words every day. Yang Guoqiang, who is less than 70 years old this year, transferred his shares to his daughter Yang Huiyan several years ago. The author visited Country Garden headquarters a few years ago, and Yang Guoqiang personally toasted every guest at the table, which was very approachable.
3. It is difficult to engage in real estate without involving political and business relations, which is an extremely dangerous zone. A staff member of Guangdong judicial system told China Economic Weekly that in Guangdong officialdom, most of Wan Qingliang’s friends who were real estate developers were famous. Wan Qingliang, a "fan", is also a frequent visitor to Evergrande. Evergrande invested hundreds of billions of dollars in the Danzhou "Haihua Island" project, which was finally stopped by the environmental protection department. In September 2019, Zhang Qi, former member of the Standing Committee of Hainan Provincial Party Committee and former secretary of Haikou Municipal Committee, was dismissed. Zhang Qi used his position as secretary of Danzhou Municipal Party Committee to promote the Haihua Island project in violation of regulations, involving a total area of 783 hectares of reclamation. As a result, a large area of coral reefs and white butterflies were permanently destroyed. Zhang Qi, who "swelled his purse and destroyed the ecology", was sentenced to no life. Like Wanda Group, some people in Country Garden will inevitably take bribes, but with Yang Guoqiang’s personality, he must be very cautious in political and business relations.
The only free private high school in China, Guohua Memorial Middle School.
Yang Guoqiang, a peasant.
Of course, it is undeniable that Country Garden also made mistakes:
First, enter the third-and fourth-tier cities in a big way. In 2015, the shantytown renovation was carried out with monetary resettlement. For a time, hot money was rolling in the third-and fourth-tier cities, and Country Garden took the lead in blowing the horn of entering the third-and fourth-tier cities. Up to now, 80% of the land is still in the third-and fourth-tier cities. Now it seems that this is a major misjudgment. The purchasing power of third-and fourth-tier cities is insufficient, and it is easy to fall into a liquidity dilemma overnight.
Second, the Malaysian forest city project has been defeated. The "Forest City" project started in 2015 and plans to invest more than 100 billion US dollars. This "green and intelligent future city" in southern Malaysia, close to Singapore, has now become a "ghost town". However, the original idea is not unreasonable: to seize the psychology of high-net-worth people to buy a house overseas and settle down, the house price is equivalent to a quarter of Singapore’s. It’s just that people are not as good as heaven, and they have encountered black swan events such as exchange rate turmoil, difficulties in foreign exchange outflow, and sudden changes in Malaysia’s political situation, which led to the project being called to a halt, and they have no choice but to stop eating in the storm that has never changed in a hundred years.
No one can always win a business, such as a war. The key is to learn from failure.
Country Garden’s asset-liability ratio was 82.3%, while Evergrande once reached 132.6%, and the latter was insolvent. In 2021, Country Garden only failed to meet the standard of "excluding the asset-liability ratio of advance receipts not exceeding 70%". By 2022, Country Garden achieved "three red lines" without stepping on it. Evergrande stepped on all three red lines. Country Garden still has a chance to reorganize and survive.
Country Garden can’t fail for a simple reason: at present, regardless of potential buyers or upstream and downstream housing enterprises, the nerves are already quite fragile, and Country Garden is the industry benchmark. In addition, the financial giant "Zhongzhi Group" is also in trouble with Country Garden. Zhongrong Trust, a subsidiary of Zhongzhi Group, has fallen into a storm of suspension. Among the huge financial assets of Zhongrong Trust, real estate accounts for 11%. Once there are problems in Country Garden and Zhongzhi, the potential chain reaction cannot but be frightening.
If even Country Garden falls, it will be the last straw to crush the camel. Yang Guoqiang once encouraged his manager with such a request: Even if Country Garden falls, it will be the last real estate enterprise in China.
Practice has proved that the simple idea of "guaranteeing the delivery of buildings" is not feasible. "Baojiaolou" seems to help, but in fact it often aggravates the difficulty of capital turnover of housing enterprises. As long as the housing enterprises do not return to normal state, the normal operation of the industry will be difficult to maintain. At this time, it is unrealistic to expect people to buy houses (the sudden braking of real estate is unbearable: it is suggested to move from "guaranteeing the delivery of buildings" to "guaranteeing the main body"). "Protecting the main body of the market" should start from Country Garden.
Conclusion: Evergrande’s problem is Evergrande’s problem; The problem of Country Garden is an industry problem. Different roads lead to different returns.
Of course, Country Garden can’t wait for "Prince Charming" or "pie in the sky". Mo Bin, president of Country Garden, said in the announcement that Country Garden had encountered the biggest difficulty since its establishment. Wang Shi, an old friend of Yang Guoqiang, bluntly said, "At present, real estate enterprises are facing challenges one after another, especially large real estate companies are facing transformation. Lao Yang and I respect and admire each other. It is inevitable that there will be a shortage of funds during the transformation of Country Garden, but Mr. Xiang Yang Guoqiang will actively cope with the difficulties. ".
Country Garden faces a better environment than Evergrande. Evergrande is an early bird in the rectification of "three red lines". Now, the policy orientation has quietly changed. On July 24, 2023, the Politburo meeting proposed that "it is necessary to effectively prevent and resolve risks in key areas,Adapt to the new situation that the relationship between supply and demand in China’s real estate market has undergone major changes, and timely adjust and optimize real estate policies.Because the city makes good use of the policy toolbox to better meet the rigid and improved housing needs of residents and promote the stable and healthy development of the real estate market. "
On August 15th, Fu Linghui, spokesperson of the National Bureau of Statistics, responded to the Country Garden incident, saying, "At present, the real estate market is generally in the adjustment stage, and some housing enterprises have encountered certain difficulties, especially the debt risks of some leading housing enterprises have been exposed, which has affected market expectations. But we should see that these problems are phased,With the market adjustment mechanism gradually playing a role and the real estate market policy adjustment and optimization, the risks of housing enterprises are expected to be gradually resolved.. "
But in any case, the "big era" of real estate "big is good" has ended. Country Garden, which has been on the list of the world’s top 500 for seven consecutive years, please forget the charm of "the world’s top 500" from now on.
The author sends a message to Mr. Yang Guoqiang: Hold your ground steady and break your arm to survive. Learn from a painful experience, and from today on, get rid of the demons that "big is good". Face the new stage and new pattern of real estate, explore new models, and develop wholeheartedly with high quality, so as to "forget the pain without healing the scar" in the future (China real estate: new stage, new pattern, new model).
The historical picture that has not changed greatly in a hundred years is slowly opening.
Join the "study tour of entrepreneurs in secret places",
Join hands to cross the fog of world politics and economy,
Live up to Damei China,
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Liu Shengjun
Member of Shanghai Economic Committee of Zhi Gong Dang
An economist who insists on telling the truth
Political economy+great historical view
Participated in the Prime Minister’s Economic Symposium in 2014.
Chief economist of Tianjushi Group
Founder of Liu Shengjun Micro Finance
Chief Expert of Shandong Human Resources Development Promotion Association
Author of The Next Decade
Shandong Heze Dingtaoren