Is it China’s Lehman Brothers moment? Unveiling Evergrande debt crisis, financial risks, and regulatory implications

ABSTRACT The ongoing Evergrande debt crisis has been widely dubbed as China’s Lehman Brothers moment as the Chinese corporate conglomerate failed to pay interest on its corporate debt worth £228bn. The case of Evergrande reflects the tightly intertwined links between financial markets and the real economy as well as the fragile balance between financial stability and economic growth that policymakers often find difficult to strike. It also exposes the interconnections between financial stability and investor protection and the multifaceted nature of investors both on-shore and off-shore ranging from global banks and asset managers to vulnerable consumers who have spent their lifesaving in pre-sale purchases. The combination of these unique features provides a fruitful ground for exploring the legal and regulatory challenges, in particular with regard to the protection of domestic and offshore financial investors, monitoring risks to financial stability in China and potential spillover effects.


A. Introduction
The ongoing Evergrande debt crisis has been widely dubbed as China's Lehman Brothers moment as the Chinese corporate conglomerate failed to pay interest on its corporate debt worth £228bn. 1 The case of Evergrande reflects the tightly intertwined links between financial markets and the real economy as well as the fragile balance between financial stability and economic growth that policymakers often find difficult to strike.It also exposes the interconnections between financial stability and investor protection and the multifaceted nature of investors both on-shore and offshore ranging from global banks and asset managers to vulnerable consumers who have spent their lifesaving in pre-sale purchases of properties.The combination of these unique features provides fruitful ground for exploring the legal and regulatory challenges, in particular with regard to the protection of domestic and offshore financial investors, monitoring risks to financial stability in China and potential spillover effects. 2 In 1996, Mr. Hui Ka Yan established Evergrande, previously known as Hengda Group, in Guangzhou, the capital city of the Chinese province of Guangdong (Canton). 3The company has become one of the biggest property developers in the world largely due to China's rapid-growing economy and booming housing market over the past three decades.In 2021, Evergrande had an annual turnover of over $73.5bn, employed 123,276 people and was responsible for over 1300 property projects in more than 280 Chinese cities. 4 Mr. Hui's business empire goes beyond the realm of property development and expands to wealth management, theme parks, electric cars, internet companies, and even mineral water.He also owns one of China's most successful football clubs, Guangzhou FC, which participates in the Chinese Super League. 5hile Evergrande is ranked no.122 in The Fortune Global 500 List, it is also said to be the world's most indebted company with a total amount of liabilities exceeding $300bn (£228bn).In the second half of 2021, Evergrande failed to meet interest payments on its bonds to international investors. 6In December 2021, the credit rating agency Fitch downgraded Evergrande's credit status to 'default', sending a clear message to international financial markets about the potential magnitude of the corporate giant's debt problem and its possible contagion effect. 7In September 2022, Evergrande's lenders appointed a receiver to seize its Hong Kong headquarters and force its sale. 8he $300bn Evergrande's debt originates from various sources notably, Chinese and international banks, corporate bondholders, and the purchasers of wealth management products issued by Evergrande. 9Evergrande's default and potential bankruptcy might have a ripple effect on international financial markets, which could potentially trigger another financial crisis in China and beyond.
Against this backdrop, this article analyses the legal and regulatory implications of the ongoing Evergrande debt crisis.Following this introduction, Part B explores the factors that contributed to the eventual Evergrande debt crisis, such as China's financial and housing policies that were aimed at curbing the country's overheated property market.Part C considers the Chinese laws designed to protect domestic and offshore investors, including bondholders, in the event of default.Part D evaluates financial stability vulnerabilities that could arise from possible default by Evergrande and the highly leveraged real estate sector and its domestic and global financial effects.Part F suggests that the internationalisation of the bond market and the contagion channel between the real estate market and financial markets may give rise to negative externalities that, in turn, could present financial stability risks.When selecting and activating macroprudential tools, the People's Bank of China is advised to take an evidence-based and gradual approach that is cognisant of unintended consequences.Moreover, its regulatory intervention cannot be conducted in silos.The case of Evergrande demonstrates how financial stability and investor and consumer protection concerns often go hand in hand and should be addressed in concert.It also shows how the interests and expectations of onshore investors may not coincide with those of offshore investors and therefore, that any regulatory response should consider the long-term implications of domestic and local protectionism.

B. What led to the Evergrande debt crisis?
The real estate market and the financial system in China are inseparable.Housing holdings are a key component of households' savings and overall assets, local governments heavily rely on revenues from the property market to fund their operations10 and banks, through lending channels, are exposed to various risks in that market.11Moreover, the real estate market in China is one of the most important sectors of the country's economy.In 2022, it is estimated that the notional value of the Chinese property market (around $55trn-$60trn) is larger than the total capitalisation of the US stock market, making it the biggest asset class in the world. 12In 2020, the total housing market value to gross domestic product (GDP) ratio in China stood at a staggering 414%, compared with 148% in the US and 339% in the UK. 13 This can be partly attributed to the traditional Chinese culture of favouring investment in real estate, inadequate social protection systems and limited alternative investment options (e.g. the stock market return remains relatively low). 14he rapid growth of the real estate market in the last two decades was sustained by overleveraged debt accumulated through excessive borrowing of property developers.As such, it is estimated that property developers in China have borrowed, to date, a total amount of $1.8trn from banks, and it is expected there will be an even larger size of borrowing from the shadow banking system which is difficult to gauge (Table 1). 15o curb the unsustainable growth and control house prices in major cities that have become unaffordable for many working-class families, the Chinese authorities have imposed, in recent years, a series of stringent regulations on the property market. 16As a first step in taming rampant increases in property debt, the People's Bank of China (PBOC) and the Ministry of Housing imposed, in August 2020, a new leverage ratio on property developers, known as the 'Three Red Lines'. 17This required property developers to maintain their liabilities-to-assets ratio below 70% (subject to certain exclusions), a net debt-to-equity ratio below 100%, and a cash-to-short-term debt ratio below 100%. 18In 2020, Evergrande failed the Three Red Lines. 19In December 2020, further restrictions were introduced.PBOC and the China Banking and Insurance Regulatory Commission (CBIRC) issued a piece of regulation capping the ratio of outstanding property loans to the total loans of banks to varying degrees depending on their size and type of lending. 20Throughout 2021, the Chinese government made a series of new rules to manage the overheated property market, including several restrictions on the sales of national lands in 22 key cities, the setting of guide prices for second-hand houses, and the potential introduction of property tax. 21hina's local governments have also imposed other restrictions on property transactions to control the sharp growth, including price floors at 15% of approved prices, 22 the suspension of transactions on existing homes, a cooling-off period for re-selling newly purchased homes, and the power of the government to stop developers unloading a large volume of properties in inventory if it is considered to destabilise markets. 23estrictions on the housing market were also imposed on the demand side.These included restrictions on purchasing houses (e.g. in many large cities a family is only allowed to buy up to two properties) and mortgage loans (e.g. down payment of 30% for the first house, 50% for a second house, and no mortgage lending available for additional houses).
These strict and onerous housing policies have led to a loss of revenues and financing difficulties for several developers in China who have been heavily reliant on debts to expand their businesses over the past decade.Sales of new houses and second-hand houses have plummeted in recent years, resulting in decreasing incomes for developers 24 and their difficulty to generate sufficient cash flow to repay the interest on their debt obligations.The combination of these conditions prepared the ground for Evergrande to miss an $83.5m interest payment on an overseas bond in September 2021. 25ore specifically, Evergrande's diversification resulted in a severe liquidity shortage when it started experiencing difficulties in its main business line in property development.As discussed below, most of the other sectors that Evergrande tapped into, such as electric cars, mineral water, and football club do not bring in profits for the corporate group.On the contrary, the non-core businesses of Evergrande depleted Evergrande's cash reserve.As such, Evergrande's electric car subsidiary (Evergrande New Energy Auto) agreed to invest CNY 280bn in building two new energy car manufacturing centres in South China's Guangzhou and North China's Shenyang to compete with other electric vehicle rivals such as Tesla. 26 Clearly, Evergrande's failure may result in a huge amount of bad loans for major banks in China, which could undermine their liquidity and potentially destabilise the entire banking system.A failure of Evergrande will also have a direct, immediate, and visible effect on millions of homeowners who purchased properties via pre-sales.It is common practice for Chinese families to buy flats and houses when they are still being built (or even when the properties are still being planned), as the market has been in short supply for decades.Evergrande has approx.800 unfinished projects in China and an estimated 1.6 million people who have invested in those projects, often with their life savings, are awaiting their completion. 32These buyers would become the largest number of involuntary creditors in any insolvency process and a potential source of social unrest that the Chinese government would try to avoid.According to the PRC Enterprise Bankruptcy Law, where an enterprise cannot pay off its due debts and its assets are not sufficient for paying off all the debts, or it apparently lacks the ability to pay off the debts, the debts shall be liquidated. 33It is unclear whether Evergrande will enter a formal bankruptcy proceeding in mainland China as its business is still operating to generate revenues to pay off certain debts.Also, Evergrande is expected to receive some form of additional support from the Chinese Government as it is deemed 'too big to fail'.This will likely keep Evergrande's business afloat so that it could continue delivering houses to buyers. 34he protection of investors involves the application of a plethora of legislation, including the PRC Civil Code, PRC Company Law, PRC Partnership Enterprise Law, PRC Trust Law, Interim Measures for the Supervision and Administration of Privately Offered Investment Funds, as well as the latest PRC Securities Law 2020 that promogulated new rules on financial frauds and investor protection mechanisms. 35It would be more likely for domestic banks and bondholders to claim back their investment through a formal civil proceeding or other voluntary agreements with Evergrande given that the property giant still owns many valuable assets including over 1000 real estate projects and relevant equity investment in their businesses.However, for Evergrande's offshore bondholders, who are owed a total amount of over $20bn, there seem to be limited legal options.The Chinese law currently prevents China-incorporated companies from providing direct guarantees for the debt instruments issued by their offshore subsidiaries, unless they are formally registered and approved by the PRC State Administration of Foreign Exchange. 36In practice, bondholders can overcome this obstacle by setting up an offshore special purpose vehicle (SPV) which then issues corporate bonds.This often comes with the keepwell structure, a contractual agreement between the Chinese parent company and its offshore subsidiary in which the former provides a written undertaking to maintain the latter solvent and in good financial health according to certain financial ratios or liquidity levels. 37In contrast to debt guarantees and security, a keepwell structure does not create a direct and explicit debt claim on the provider of such structure.Moreover, as opposed to providing a direct guarantee, the keepwell structure does not involve regulatory approval, making it a popular practice for Chinese developers that issue international bonds to raise funds.
The keepwell structure was first used in 2012 to protect overseas bond investors against default, and since then, around 13% of the outstanding offshore loans issued by Chinese companies (worth $119bn) involve the use of the keepwell deeds. 38It has been serving as a credit enhancement tool for many Chinese overseas corporate bonds to boost the confidence of international investors in buying such bonds which are often referred to as Chinese keepwell bonds.However, the enforceability of keepwell agreements in mainland China is uncertain since the courts have wide discretion in determining their validity based on factors such as the public interest.This casts doubt on the ability of Evergrande's overseas bondholders to seek direct compensation from the parent company based in Guangzhou.Meanwhile, courts in Hong Kong SAR tend to support such a claim, as its judicial practice is more in line with international standards. 39o date, there have been few legal cases that could shed some light on the use of keepwell agreements for Chinese property developers.For example, in February 2020, the restructuring plan of the Peking University Founder Group (PUFG) was approved by the Beijing 1st Intermediate Court which also appointed an administrator. 40Later, the administrator decided to not recognise the claims of bondholders associated with keepwell deed arrangements worth $1.7bn.The decision has raised concerns amongst overseas investors of Chinese corporate bonds about the enforceability of keepwell agreements, which has negatively impacted the reputation and saleability of such financial instruments.Although keepwell agreements often stipulate a clause that allows Hong Kong courts or arbitration panels to have exclusive jurisdiction to hear any disputes with regard to the enforcement of such agreements, in practice, once receiving any restructuring applications against a Chinese company, mainland China's courts have exclusive jurisdiction as per PRC Enterprise Bankruptcy Law. 41Still, it may not be a bleak picture for foreign investors.In another case heard by a Hong Kong court, Re CEFC Shanghai International Group Limited (2020), a claim of an offshore bondholder against a Chinese company breaching its keepwell agreement was successful and upheld by the Shanghai Financial Court. 42It might suggest a new tendency for mainland Chinese courts to start recognising the keepwell arrangement to protect the legitimate interests of certain foreign investors, when the new specialised financial court system has been set up in Shanghai (established in 2018), Beijing (2021), and Chengdu-Chongqing region (2022). 43However, in the current economic climate, it is less likely that offshore bondholders will be able to fully enforce their agreements as Chinese courts are expected to favour domestic investors and thus give them some preferential treatment.Accordingly, foreign creditors of Evergrande may need to seek alternative solutions to claim their funds, such as filing for insolvency proceedings for the SPVs that sold these bonds.The liquidator would then, on behalf of the SPVs, pursue a claim against their parent company in China, which will increase the chance of recovering the debts.The Chinese courts, under such circumstances, will only need to order repayment to a Chinese company's overseas subsidiaries instead of handing out money to overseas investors directly, which seems to be a more probable solution.

D. Financial stability implications
In addition to investor and consumer protection concerns, Evergrande's debt crisis could also result in the build-up of vulnerabilities in the closely interlinked China's property and banking and non-bank financial sectors, endangering the stability of the financial system in China and potentially, spilling over to international capital markets.
A recent IMF Global Financial Stability Report considers the macro-financial transmission channels that could result in domestic and global financial instability. 44While the aggregate direct exposures of Chinese banks to Evergrande appear to be limited, exposures of the financial system to Evergrande could be substantial if stress spreads to the broader property development sector. 45A sharper-than-expected slowdown in the property market would lead to retrenchment of real estate investment with sizable effects on other private investments (for instance, construction materials, home appliances and furniture) and shrinking revenues of local governments.A house price fall would result in weaker income and employment and thus, negatively affect private consumption. 46here is evidence that this is already happening with stress spreading to other big developers in China such as Kaisa 47 and weakening demands in the property market. 48imilar to Evergrande, many of these property developers have adopted the debtfuelled growth strategy to cash in on China's rapid urbanisation and property boom over the past two decades.In the absence of comprehensive and timely data on the indirect interconnectedness of financial institutions (including the shadow banking sector) to Evergrande, it is difficult for macroprudential authorities in China to measure and monitor these exposures and their potential contagion effect.Moreover, the feedback loop between the real economy and the financial system is of the essence. 49A knock-on effect of Evergrande's financial position on the real estate sector could, in turn, reinforce vulnerabilities in the financial system and have a magnified destabilising effect.Finally, potential risks to financial stability may not be contained within China.Given that China has become a key growth engine of the global economy and in light of the vital role that the real estate sector plays in China, a slowdown in economic growth in China could limit global growth prospects. 50Moreover, slow economic growth in China could negatively affect the exposures of international investors and markets to Chinese financial assets, resulting in a reassessment of risks, fire sales, and even a deterioration in global risk appetite. 51For instance, a crisis in property development in China could have a devastating impact on Australia's economy since China's construction energy uses around 25-30% of Australia's steel production largely from Australia's iron ore.Accordingly, a drop in demand for property in China could mean 'around A$6.5 billion wiped out of Australia's economy'. 52uch is, therefore, hanging on a thread 53 and deteriorating market confidence could quickly become a triggering event and push the financial system over the edge.Evergrande had suspended construction on pre-sold homes across more than 90 Chinese cities.There are reports that many homebuyers have been boycotting their mortgage payments totalling around CNY 2.4 trillion. 54A recent investigation of funds pledged as security for loans by Evergrande offshore subsidiary 55 that was seized by local banks, 56 further adds to a sense of unrest amongst offshore investors. 57This may seem to be the same old story but its manifestation, this time, is in the non-financial property sector.As the old story goes, risks are building up in a highly leveraged and interconnected environment with high growth.The well-known notion of the trade-off between safeguarding financial stability and maintaining economic growth is also evident.Increased macroprudential regulation which is designed to curb debt and credit during the upswing is essential but can have the intended consequence of slowing economic growth. 58

E. What else can be done by policymakers and regulators?
Two observations are warranted for the Evergrande debt crisis.
First, policy and regulatory decisions to prevent and mitigate risks to financial stability should not be taken in silos.Macro-economic implications must be considered alongside investor protection and potential distributional effect, as well as broader implications on the risk appetite of foreign investors. 59This is a thorny issue as indicated by Andrew Bailey, the Governor of the Bank of England, that the authorities are managing the crisis ' … by effectively preferring onshore to offshore creditors' and that this is ' … a concern to us'. 60 The favourable treatment of local investors over international investors is an obstacle to strengthening globalisation in the post-Covid era.This type of unintended consequence of 'putting off fire' action should be carefully considered.The regulatory actions taken to slow real estate investment and sales and dampen house price growth also resulted in the build-up of vulnerabilities in the property market as large and highly leveraged developers are now facing severe liquidity stress unable to honour their debt obligations and complete the construction of unfinished homes paid for in advance by households. 61econd, as the name Evergrande suggests, its essence is being great.It comes as no surprise that many market participants view Evergrande as 'too big to fail' TBTF and with this title, the corresponding market expectation of government intervention to avail its collapse.The current regulatory strategy for TBTF was designed with financial institutions in mind with the prominent manifestation most apparent during the 2007-2009 financial crisis. 62However, with the growth of non-bank sectors providing financial services and potentially becoming systemically important, the journey to expanding the term to other corporations whose collapse would destabilise the financial system is short. 63n 2022, China Banking and Insurance Regulatory Commission established a financial stability fund that has raised CNY 64.6 billion ($9.55 billion) in the first round of funding 64 and the city of Zhengzhou has already established a bailout fund to ensure that construction is resumed.65 In addition, in July 2022, the People's Bank of China released a rescue plan to provide CNY 1tn ($148bn) of loans for refinancing China's stalled property developments.66 The plan would involve an initial offering of CNY 200bn of low-interest rate loans to Chinese commercial banks at 1.75% per year.Hopefully, this method will stave off the temporary liquidity crisis for the defaulting property developers, thus protecting financial stability.But such rescue plans would come with a price of reduced market discipline and moral hazard, which merits further attention.67 Once stress recedes, authorities will need to reduce real estate-related financial vulnerabilities.There is a wide range of regulatory measures such as measures aimed at reducing the reliance of developers on pre-sales as a source of liquidity and others aimed at weakening the strong incentives of local government to boost property markets.68 Property tax reform will form a key part of these measures.There are already plans to trial property taxes on residential and commercial properties; however, in light of the pending crisis, a much more limited piloting programme in ten cities was announced. 69Most importantly, policy targeted at reducing these vulnerabilities in the real-estate sector should be 'clear, coordinated and well communicated' as this was recently identified by the IMF as the Achilles' heel of policy response to the recent financial stress.70 Finally, strengthening the availability and comparability of data on real estate will assist in taking timely action by both the government and financial institutions.

F. Conclusion
There is nothing new about debt-fuelled businesses, rapid economic growth and the build-up of risks.The 2007-2009 Global Financial Crisis was partly attributed to the overheated property boom in the US and the rapid growth of mortgage lending that came to a sudden halt.However, it is probably the first time that we witness a non-financial business group that could potentially destabilise international financial markets.The Evergrande crisis reflects the complexity of the modern economy and the intertwined channels of the financial system and the real economy and in particular, property markets.This complexity is exacerbated by the use of innovative financial structures and legal arrangements linking onshore parent companies that conduct the main business and their offshore subsidiaries that are the issuers of financial instruments.This structure lacks sufficient and effective remedial methods for foreign equity and bond investors to seek compensation from the parent companies that hide behind complex legal relationships.Policymakers should, therefore, rethink the strategy of regulating large corporate conglomerates that have borrowing capacity similar to banks' deposit-taking function.Otherwise, a new round of financial crisis with contagion effect would likely arrive when the music stops.
2 China has one of the largest financial industry in the world.Chinesebanks have remained (almost) intact from the Global Financial Crisis 2007-2008, and they have become the most valuable and profitable banks in the world.See Lerong Lu, 'Private Banks in China: Origin, Challenges and Regulatory Implications' (2016) 31 Banking and Finance Law Review 585, 586. 3 'Evergrande: 8 'Evergrande Lenders Appoint a Receiver to Seize Hong Kong HQ -Sources' The Guardian (8 September 2022) <https:// www.theguardian.com/business/2022/sep/08/evergrande-lenders-appoint-receiver-hong-kong-hq-china-developer>accessed 1 October 2022. 9Wealth Management Products (WMPs) refer to 'an intermediary or wrapper around banned or heavily regulated products, thereby constituting a pool of securities that include trust products, bonds and stock funds'.See Shen Wei, 'Wealth Management Products in the Context of China's Shadow Banking: Systemic Risks, Consumer Protection and Regulatory Instruments' (2015) 23 Asia Pacific Law Review 55, 58.
a 15 'Chinese Property Developers Analysis' Reuters (22 September 2020) <https://reuters.com/article/chinese-propertydevelopers-analysis-fin-idCNKCS26D011>accessed 5 January 2022; For an overview of China's shadow banking system, see Lerong Lu, Private Lending in China: Practice, Law, and Regulation of Shadow Banking and Alternative Finance (Routledge 2018) 32.See also Guofeng Sun, 'China's Shadow Banking: Bank's Shadow and Traditional Shadow Banking' (2019) BIS Working Papers No 822, Bank for International Settlements on shadow funding of real estate outpacing that of other sources. 16 18ibid. 19'34 Property Developers Touched Red Line, How Do They Self-Rescue?' Securities Times China (25 September 2021) <https://data.stcn.com/djsj/202109/t20210925_3714696.html>accessed 19 March 2022. 20For large banks, it is 40% for property loans and 32.5% for home mortgage loans; for medium-size banks, the caps are 27.5% and 20%, respectively.There is a four-year grace period to implement the regulation.See the State Council of PRC website at <https://english.www.gov.cn/statecouncil/ministries/202012/31/content_WS5fedca5dc6d0f72576 Guangzhou Evergrande Football Club, which has won five 943027.html>.On the establishment of Real Estate Loan Concentration Management System for Banking Institutions see China Banking and Insurance Regulatory Commission website at <https://www.cbirc.gov.cn/en/view/pages/ItemDetail.html?docId=957560>. 21en Keywords in Property Market 2021' The Paper (31 December 2021) <https://m.thepaper.cn/newsDetail_forward_16095097>accessed 1 October 2022.22Forexample, in 2018, Shenzhen Municipal Government made a rule that property developers could only adjust sale price of their properties within 15% of the government approved price.See Shenzhen Market Administration's official website, <https://amr.sz.gov.cn/0501W/Default.aspx?page=4> accessed 19 March 2022.23Controlling the number of inventories for property developers has been a common strategy for Chinese government to manage the housing price.See, for example, Chinese government, 'The Real Estate Market Regulatory Policy Takes Effect' <https://www.gov.cn/shuju/2017-05/31/content_5198257.htm>accessed 25 February 2022.24NationalDevelopment and Reform Commission (China), 'The Full Implementation of the Long-term Mechanism for the Real Estate sector started to cool off the marketthe real estate market analysis in the first half of 2021 and the prospect for the whole year' (30 August 2021) <https://www.ndrc.gov.cn/xxgk/jd/wsdwhfz/202108/t20210830_1295304.html> 26 February 2022.Though according to a recent IM research, those initiatives did not cool down the house prices.See T Bayoumi and Y Zhao, Incomplete Financial Markets and the Booming Housing Sector in China (2020) IMF Working Paper 265. 25 'Evergrande: Chinese Property Giant Misses Another Payment Deadline' BBC (30 September 2021) <https://www.bbc.co.uk/news/world-asia-china-58749594> accessed 5 January 2022.26'HowCould Evergrande Car Worth CNY 400bn?'ChinaNews (29 January 2021) <https://www.chinanews.com.cn/cj/2021/01-29/9399225.shtml>accessed 5 January 2022.championships in China, has spent heavily on recruiting top players around the world.In February 2016, it signed Colombia striker Jackson Martinez from Atletico Madrid for €42 million, and it also opened the world's largest football school in Qingyuan at the cost of CNY 1 billion ($156 million).27Recently,it was also revealed that London's most expensive property (in Rutland Gate sold for £210mn in 2020) is owned by Mr Hui through a shell company.28Thisrapid expansion of Evergrande to other sectors beyond property development contributed, to some extent, to its inability to pay its debts.It comes as no surprise that Evergrande's share price plummeted by over 90%, from a peak of over HK$ 27.00 in July 2020 to HK$ 1.42 in December 2021.29C.The protection of domestic and offshore investorsThe primary concern of Evergrande's debt crisis lies in how likely its debt and equity investors, particularly retail investors, could recover the funds from their investments.Evergrande is publicly listed in Hong Kong and it has hundreds of thousands of shareholders across the world, including Chinese Estates Holdings Limited and the US-based Vanguard Group.
30In addition, Evergrande's bondholders are likely to bear the losses of their principal if Evergrande's financial situation does not improve in the near future.As of June 2020, the total interest-bearing outstanding debt for Evergrande was around CNY 835.5bn, including CNY 232.3bn (or 28% of the total) from 128 banking institutions, CNY 368.4bn (44%) from non-bank financial institutions (most of which are trusts and factoring companies), CNY 49.6bn from corporate bonds issued within China, as well as CNY 185.2bn worth overseas bonds.31Fivebanks have lent Evergrande over CNY 10bn, including CITIC Bank, Agricultural Bank of China, Zheshang Bank, Everbright Bank, and ICBC.