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Shares in China’s Evergrande Real Estate rose on Monday morning after the embattled firm’s chairman indicated the company would be concentrating in future on its growing electric vehicles unit rather than its troubled core property business.
The company, which has debts of about $305bn, managed to swerve a costly default last week as it came up with the money to pay a bond interest payment at the last minute.
Shares in Evergrande rose by as much as 6% so far during Monday trading, while shares in its electric vehicles unit – China Evergrande New Vehicle Energy Group – leapt by 17% at one point after Evergrande’s chairman said it would make the new vehicle venture its main business, although both firms later lost some of their gains and Evergrande stock is currently flat.
According to state media, Hui Ka Yan said on Friday that electric vehicles would overtake the business’s previous property focus within the next decade, a strategy which looked to prove popular with investors.
Evergrande’s vehicle business was founded in 2019 but hasn’t yet displayed any of its planned models or sold a single car.
Evergrande, which is China’s second-biggest property developer, sparked alarm on global financial markets in September, when it announced that it might not be able to pay its many creditors ranging from homebuyers, building contractors, banks and offshore investors.
On Friday it was reported that the firm had wired a $83.5m bond interest payment that it missed in September.
Evergrande said on Sunday it had restarted work on 10 projects across six cities including Shenzhen. Some construction had been halted during the summer because of delayed payments to suppliers and contractors.
Concerns in Evergrande haven’t entirely gone away, however, although Chinese state media reported on Monday that any spillover from the country’s property debt into the financial industry is controllable.
In a comment published by Xinhua news agency on the Chinese economy, including information attributed to “relevant departments” and “authoritative people”, it was reported that property companies were facing potentially defaulting on their debts because of poor management and a failure to adjust to market changes.
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