Recently, Evergrande Real Estate Group Co., Ltd. and its affiliates have once again triggered legal disputes and enforcement incidents, and have been subject to enforcement worth hundreds of millions of yuan. This is not the first time that Evergrande Real Estate has fallen into the quagmire of being executed, and its cumulative total amount of execution is as high as more than 70 billion yuan.
Such frequent and large-scale execution events clearly show many problems in Evergrande Real Estate's own operations. This has also raised concerns about the industry as a whole and the regulatory environment – is there a need for stricter and more regulated regulation in the real estate sector to prevent similar risks from recurring?
It is not difficult for us to find that the subject matter involved in the execution of Evergrande Real Estate comes from many aspects, including construction project money, bill payment, etc. This suggests that the problem may not be limited to Evergrande, but a more common phenomenon in the industry. Driven by interests, there may be phenomena such as evasion of pre-sale payments and arrears of project payments between real estate enterprises and in cooperation with related enterprises.
If it is not regulated and stopped in time, such problems can easily deteriorate further, and eventually lead to more incidents of dishonesty and violations. In this turmoil, we see that Evergrande real estate-affiliated enterprises are also deeply involved. Real estate companies have the characteristics of high leverage and high turnover, which will lead to extremely fragile capital chains.
Once a problem arises, it is easy to transfer the risk in the name of the affiliated enterprise and create a new violation. Therefore, the regulatory authorities need to focus on strengthening the comprehensive monitoring of real estate enterprises and their related parties to avoid intra-industry competition and benefit transfer.
The real estate industry also needs to build a more robust compliance culture within the business. Pay attention to business ethics, establish the business philosophy of integrity first, and not only for the immediate interests and damage the long-term development. At the same time, it is also necessary to require decision-makers to take full responsibility for the operation of the enterprise. Avoid moral hazard and safeguard the legitimate rights and interests of shareholders and consumers.
All in all, the continuous fermentation of Evergrande Real Estate's execution problem has sounded the alarm for us. It suggests that the regulatory level needs to continue to improve regulations to promote a more standardized operation of the real estate industry. At the same time, enterprises should also pay attention to the construction of integrity culture and effectively improve the compliance of operations.
In view of the implementation of the Evergrande system, we can also think about the following points:
This is not unrelated to the rapid expansion of the entire industry. In recent years, driven by policies, Chinese real estate companies have expanded with high debt, and Evergrande has also rapidly risen to become a real estate giant. But behind the overextended, there may be more risks. This requires real estate companies to remain rational in their development and avoid losing their risk control capabilities due to high leverage and scale expansion.
Evergrande's issue also exposes the importance of internal control. In the process of rapid expansion, Evergrande is likely to have problems with management and control, resulting in poor internal coordination and poor execution. This requires enterprises to establish a matrix management and control model, strictly implement business processes, and avoid regulatory loopholes.
Government regulation should keep pace with the times and benchmark against international standards. As the market evolves, traditional regulatory models alone are no longer able to cope with the increasing complexity. It is necessary to establish an intelligent and three-dimensional supervision model to prevent risks through big data and real-time monitoring.
At the same time, it can also consider introducing mandatory provisions such as "internal control" and "compliance audit" to promote enterprises to establish the best supervision and operation mechanism in an all-round way.
Improve regulations and avoid regulatory blind spots. At present, there are still some gaps in the compliance requirements of laws and regulations, and we can consider learning from the successful experience of other mature markets, continue to improve relevant laws and regulations, and provide more powerful institutional tools for regulatory work.
We hope that Chinese real estate companies can achieve more standardized operations and effectively improve their risk prevention and control capabilities under regulatory requirements. Only by strengthening internal control and compliance can we maintain steady development in the face of market fluctuations. This requires the government, enterprises, and the public to form a joint force to gradually mature and standardize China's real estate and provide strong support for the country's economic development.
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