Caixin
Nov 26, 2021 06:10 AM
ECONOMY

Hainan’s Danzhou Challenges Evergrande’s Property-for-Debt Plan

Evergrande’s Ocean Flower Island project in Danzhou is one of the world’s largest man-made archipelagoes with planned investment of 100 billion yuan ($15.5 billion)
Evergrande’s Ocean Flower Island project in Danzhou is one of the world’s largest man-made archipelagoes with planned investment of 100 billion yuan ($15.5 billion)

What’s new: Regulators in Danzhou city in southern China’s Hainan province tightened oversight of China Evergrande Group deals to repay debts with properties as local authorities raise concerns over the risks of such transactions.

Housing authorities in Danzhou this week told Evergrande subsidiaries that it would closely scrutinize the debt claims of creditors for properties in Ocean Flower Island, a mega resort under development by Evergrande in the city. Transactions using assets in the projects to repay unrelated debts will be prohibited, the authorities said.

The city regulators said the move is aimed at protecting the liquidity of the Ocean Flower Island project and ensuring its delivery.

Why it matters: Evergrande has been advancing a plan to use projects under construction across China to repay massive debts. But local authorities are dubious about the plan out of concern over the impact on local economies.

Evergrande’s Ocean Flower Island project in Danzhou is one of the world’s largest man-made archipelagoes with planned investment of 100 billion yuan ($15.5 billion). The complex, including hotels, theme parks, shopping malls and residences, is set to fully open next year.

But as Evergrande’s debt crisis escalated, fears arose over the delivery of the project.

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (hello@caixin.com)

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