Evergrande: The Corporate Giant That Became China’s Biggest Economic Disaster

Evergrande Group was once the poster child of China’s unstoppable economic ascent. With sprawling developments in over 280 cities, billions in revenue, and a flamboyant billionaire chairman at its helm, it was the ultimate success story of modern capitalism fused with Chinese ambition. But today, the company is synonymous with debt, despair, and dysfunction — a corporate supernova imploding under the weight of its own excess.

Evergrande’s meteoric rise and spectacular fall are not just the story of one company but a window into the fragile foundations of China’s economic miracle. It’s a tale of unchecked ambition, staggering mismanagement, and a government willing to let the chips fall where they may — all while millions of ordinary people are left holding the bag.

A Dream Built on Borrowed Time

In 1996, Xu Jiayin (Hui Ka Yan) founded Evergrande with grand visions of building homes for China’s booming middle class. By the mid-2010s, Evergrande wasn’t just building homes — it was building empires.

At its zenith:

• Evergrande owned 1,300 projects in over 280 cities, dominating China’s real estate market.
• The company employed over 200,000 people directly and indirectly supported millions through its supply chains.
• Its annual revenue peaked at ¥507 billion ($78 billion), more than the GDP of some countries.

But Xu wasn’t content with just being a real estate magnate. Evergrande expanded into electric vehicles, healthcare, tourism, and even bottled water, branding itself as an all-encompassing conglomerate. The company’s ambitions were as dizzying as the debts that financed them.

By 2021, Evergrande’s liabilities had swelled to ¥2.43 trillion ($340 billion) — a sum so colossal that if it were a country, it would be the world’s 54th largest economy.

Debt-Fueled Mania: The Casino Economy

Evergrande’s business model was simple yet perilous: borrow heavily, sell homes before they’re built, and keep the cash flowing to start new projects. For a time, it worked like a charm. But as Beijing began reining in the debt-fueled excesses of its economy, Evergrande’s house of cards began to wobble.

In 2020, the Chinese government introduced the “Three Red Lines” policy to prevent reckless borrowing:

1. Developers had to maintain healthy debt-to-cash ratios.
2. Leverage could not exceed strict debt-to-asset limits.
3. Debt-to-equity ratios were capped.

Evergrande didn’t just breach these red lines — it smashed through them at full speed. By 2021, it was clear that the company could no longer sustain its debt mountain. The tipping point came when Evergrande began missing payments on loans and wealth management products, leaving creditors and investors scrambling for answers — and their money.

Broken Dreams and Mortgage Nightmares

Evergrande’s downfall wasn’t just a financial debacle; it was a human tragedy. Across China, millions of middle-class families had poured their life savings into Evergrande’s pre-sale model, paying for apartments that hadn’t even been built.

• Over 720,000 homes remain unfinished, leaving buyers trapped in mortgage purgatory.
• Furious homeowners have staged protests, chanting outside Evergrande’s offices and demanding justice.
• Mortgage boycotts erupted across 343 projects, with homeowners refusing to pay for properties they may never see.

For many, real estate is more than a roof over their heads — it’s their most significant investment. With 70% of Chinese household wealth tied to property, Evergrande’s implosion has shattered not only financial stability but also faith in the system.

Xu Jiayin: The Emperor Without Clothes

At the heart of this saga is Xu Jiayin, a rags-to-riches billionaire whose personal story mirrored Evergrande’s rise. Known for his extravagant lifestyle, Xu epitomized China’s new elite. His mansion, complete with crystal chandeliers and gold-plated furniture, was the stuff of legend.

But as Evergrande’s fortunes nosedived, so did Xu’s reputation. By January 2025, Chinese courts had imposed “high consumption restrictions” on him, barring luxury travel, extravagant spending, and private school fees for his children. Once a symbol of China’s wealth, Xu is now a cautionary tale — a reminder that even the mighty can fall.

A Financial Black Hole

Evergrande’s collapse has sent shockwaves through China’s financial system, exposing the fragility of its heavily leveraged property market.

• Local Economies: Evergrande’s projects were lifelines for thousands of contractors, appliance makers, and decorators. Many have gone bankrupt, plunging local economies into crisis.
• Banks: Financial institutions with exposure to Evergrande are now grappling with rising non-performing loans.
• Global Markets: Foreign investors owed $25.4 billion by Evergrande are bracing for steep losses, sparking fears of global contagion.

This isn’t just a Chinese problem; it’s a global one. Evergrande’s implosion has become a symbol of the risks posed by an overheated property market that drives nearly 30% of China’s GDP.

The Government’s Tightrope Walk

Beijing has responded to the crisis with a mix of caution and pragmatism. Keen to avoid the moral hazard of a direct bailout, the government has instead:

• Tasked local authorities with taking over Evergrande’s stalled projects.
• Loosened the “Three Red Lines” policy to stabilize the broader market.
• Sent a clear message: reckless borrowing will no longer be tolerated.

But for all its measures, Beijing faces a monumental challenge: restoring consumer confidence in a market where trust has been shattered.

The Bigger Picture: A Reckoning for China’s Economy

Evergrande’s collapse is not just a corporate failure — it’s a reckoning for China’s economic model. For decades, real estate was the backbone of China’s growth, driving infrastructure, employment, and wealth creation. But the sector’s unchecked expansion has left a legacy of ghost cities, soaring debt, and financial instability.

China now faces a pivotal question: can it transition from a property-driven economy to one focused on innovation and sustainable growth? Or will the fallout from Evergrande become the first domino in a broader economic crisis?