Embattled property firm Evergrande rattles financial markets

China’s embattled property developer Evergrande Group has caused concern among investors worldwide. With $300bn (£220bn) owed to its creditors and key debt interest payments due on Thursday, the firm’s troubles have rattled global financial markets.

© Provided by The Guardian Photograph: Aly Song/Reuters

As the second biggest property firm operating in the largest sector of the world’s second largest economy, it is clear why investors are worried, with some drawing parallels to the 2008 collapse of Lehman Brothers. It also comes as a significant test for China’s president Xi Jinping, as Beijing attempts to curb financial risks and concentrations of wealth while trying to limit the economic impact.

Adam Tooze, a history professor at Columbia University, said that while comparisons to 2008 were being drawn, there were differences. The property market is undergoing a correction which has to some extent been planned, with Xi imposing economic reforms.

“Unlike the disastrous chain reaction at Lehman, this is a controlled demolition, deliberately triggered by the regime,” said Tooze.

“Beijing is doing what critics have been asking China to do for a while – to deflate the housing bubble. It is doing what the west did not do in 2007-2008, ie use regulatory intervention to manage a hard landing short of an outright crash.”

For years there have been concerns raised about soaring levels of corporate debt in China, with rapid growth to more than 160% of GDP. The International Monetary Fund has previously warned the explosion in debt could trigger the next global financial crisis.

Video: Is the Evergrande Crisis a Contagion Risk? (Bloomberg)

On Wednesday, Evergrande moved to placate investors with a pledge to pay $36m (£26m) in interest payments due on its domestic bonds on Thursday. The company is still due to pay $84m on a separate US dollar bond. However, the signal that it has some cash ready for investor payouts helped to lift Asian financial markets.

After opening lower, the Shanghai composite index closed up 0.4% on Wednesday, while the Shenzhen benchmark fell 0.6%. Markets remained closed in Hong Kong and South Korea for the mid-autumn festival.

Against a backdrop of investor concern, China’s central bank announced it would pump $14bn into the banking system. Financial markets around the world rallied on Wednesday, with the FTSE 100 up more than 1%.

“This is not China’s ‘Lehman moment’,” said Freya Beamish, chief Asia economist at Pantheon Macroeconomics. “China’s authorities will neither allow a complete collapse, nor risk a financial crisis, to make a point about moral hazard.”

Instead, analysts expect Beijing’s push to tackle indebted companies will follow the route of managed decline, demonstrated by intervention from the central bank. Bondholders are likely to face losses, but homebuyers and suppliers are expected to be protected.

It is not a process without risk. Analysts expect the fallout to weigh down China’s economy, after years of the property sector – which accounts for 29% of GDP – serving as a powerful engine of economic growth. Parallels with a consumer debt crisis in Korea in 2003 are being drawn, when a massive credit card lending boom was followed by a painful bust, holding back growth as households reined in their spending.

© Photograph: Aly Song/Reuters Evergrande Group owes £220bn to its creditors but Beijing is imposing a ‘controlled demolition’ to avoid a Lehman-style collapse.

“Evergrande is like Lehman in that it has speculated on real estate. It has a lot of debt spread across the entire Chinese economy and Chinese society. It is opaque. It is worrying,” said Tooze.

“But is Evergrande really Lehman? Closer examination suggests that the Evergrande crisis is not like Lehman at all.”

Internet Explorer Channel Network
News Related


Discovery of 8-year-old's skeletal remains in Houston leads to 2 arrests, including boy's mother

Two adults, including the child’s mother, have been charged after an 8-year-old boy’s skeletal remains were discovered inside an apartment in Houston on Sunday, officials said. © Mark Mulligan Law ... Read more »

Meghan Markle gushes over Prince Harry and Archie as she reads out her kids' book

MEGHAN Markle gushed over Prince Harry and Archie as she read out her children's book The Bench. The Duchess of Sussex penned the book after originally writing a poem for Harry's ... Read more »

House GOP campaign arm releases ad campaign hitting Democrats on IRS bank-reporting proposal

The National Republican Congressional Committee (NRCC) rolled out a critical ad campaign targeting vulnerable House Democrats for their party’s proposal to increase the amount of information the IRS receives about ... Read more »

Biden mocked for stumbling through a line during campaign event

© Provided by Daily Mail MailOnline logo Gaffe-prone President Biden stumbled his way through a line on universal pre-K during a stump speech for Virginia gubernatorial candidate Terry McAuliffe on ... Read more »

Trump urges judge to block IRS from giving his tax returns to Congress

WASHINGTON — Lawyers for former President Donald Trump urged a federal judge late Tuesday to block the Treasury Department and the IRS from giving his tax returns to the House ... Read more »

Budget: Rishi Sunak under fire for lack of climate action days before COP26 kicks off

© Provided by City AM Rishi Sunak is under fire this afternoon for announcing cuts to taxes for domestic flights and a Budget light on environmental measures, only days before ... Read more »

Massive blaze fueled by gasoline destroys auto auction warehouse in New Jersey

A massive four-alarm fire fueled by tires and gasoline destroyed a New Jersey auto auction warehouse, fire officials said. Video obtained by WPVI shows firefighters in Pennsauken dousing the huge ... Read more »

Got leftovers from your Sunday roast? Whack them in this soup

We always cook a roast on a Sunday and if there is some leftover veg, I will make this soup with it,” says Rochelle Humes. © Provided by The Independent ... Read more »

Manchester United told three stand-out qualities Kalvin Phillips would add to their midfield

Manchester United have been told the three stand-out qualities that England midfielder Kalvin Phillips would add to their struggling line-up. As the dust continues to settle on that humiliating 5-0 ... Read more »

Arts and culture sector welcomes extension of tax relief in the Budget

The arts and culture sector has welcomed the Chancellor’s announcement of a tax relief extension in the Budget, but said the Government must go further to aid its post-lockdown recovery. ... Read more »

Budget 2021: Beer drinkers, energy bills, property - how will YOU be impacted by new plan?

The Chancellor cited Office for Budget Responsibility forecasts for returns to pre-Covid level growth by the turn of the year. Heralding the largest departmental spending increase this century, Mr Sunak ... Read more »

Pledge to Net Zero Initiative Joins Global UN Race to Zero Campaign

As a leader for the Pledge initiative, WSP is committed to delivering projects that reduce greenhouse gas emissions and contribute to a goal of reversing climate change. Northampton, MA –News ... Read more »

The best Black Friday sex toy deals 2021: What to expect this November

COME as you are this November, with a little help from some of the best Black Friday sex toy deals – whether you're looking to spice up your time in ... Read more »

Budget: Inflation to rise to 4% but economic growth forecast up

Inflation is to spike to 4 per cent next year as the economy struggles to keep up with demand in the wake of Covid and Brexit, the Chancellor has revealed. ... Read more »

These Are The BEST Slow Cooker Black Friday Deals For 2021

© From The Supplier Looking for the best Slow Cooker Black Friday deals? Here’s everything you need to know about Black Friday, and where to find the best slow cooker ... Read more »

Charges dismissed against Detroit officer who fired at media

DETROIT (AP) — A judge dismissed charges against a Detroit police officer who was accused of firing rubber pellets at three journalists covering a 2020 protest against police brutality. Judge ... Read more »

What To Do With Leftover Pumpkin Seeds This Halloween

© Westend61 – Getty Images From roasting them to planting them, there’s various ways you can avoid food wastage and benefit from those little seeds of goodness. Come end of ... Read more »

Third of new students in England show signs of depression, ONS survey suggests

Photograph: Guerilla/Alamy More than a third of <a href="/tag/first-year-students“>first-year students in England who started university this autumn have shown symptoms of depression and anxiety, a survey by the Office for ... Read more »

Budget 2021 speech in full: Watch and read every word of Rishi Sunak's autumn statement announcement

Rishi Sunak delivered his 2021 Budget to the House of Commons on Wednesday 27 October. The Chancellor promised to help families meet the rising cost of living as he painted ... Read more »

U.S. issues first passport with "X" gender marker

A woman holds passports while waiting to cross at the San Ysidro border crossing WASHINGTON (Reuters) – The U.S. State Department said on Wednesday it had issued the first U.S. ... Read more »

What happened when Middlesbrough boss Neil Warnock tried to buy Birmingham City star Troy Deeney

Two of the biggest names – and personalities – in the Championship come up against each other on Saturday as Birmingham City visit Middlesbrough. Blues travel to The Riverside in ... Read more »

Lightyear: First trailer for origin story movie for Buzz Lightyear

© Provided by Daily Mail MailOnline logo The film is set to be released on June 17, 2022 as an origin story. Lightyear centers around Buzz Lightyear, which will be ... Read more »

FIFA 22 Ultimate Team: Who are the Fastest Players to Use?

FIFA 22 Ultimate Team is a game mode enjoyed by many, and we have revealed the top 10 fastest players in the game. © GiveMeSport FIFA 22 Ultimate Team: Who ... Read more »

Scott Pelley

© John Paul Filo pelleyheadnewer.jpg © Provided by CBS News Scott Pelley / Credit: CBS News Scott Pelley, one of the most experienced and awarded correspondents in broadcast journalism, has ... Read more »

Prince Charles to deliver opening address at Cop26 after Queen ‘regretfully' announces she will miss event

© PA Wire Prince of Wales visit to Gloucester The Prince of Wales will deliver the opening address at the Cop26 UN climate change summit, Clarence House has announced. Charles ... Read more »

Anthony Joshua explains search for US coach and ‘new teachings' after loss to Oleksandr Usyk

© Getty Images GettyImages-1342074286.jpg Anthony Joshua has opened up on his recent visits to boxing gyms in the United States, admitting he has been looking to get out of his ... Read more »

Save 10% on SNOW at-home teeth whitening kit

Hot coffee, zesty tomato sauce, fine red wine, luscious chocolates — they can be part of what makes life so much fun. But they can also be why looking at ... Read more »

'Needs to go in January', 'Stealing a living' - Many Saints fans rage at 'waste of wages'

Southampton fans are far from happy with the cameo performance of Theo Walcott during the Saints’ League Cup exit at the hands of Chelsea. © Provided by Transfer Tavern Theo ... Read more »

Best Football Manager 2022 free agents to sign at the start of your new save

Thousands of players all over the world are getting stuck into Football Manager 2022, following the release of the FM22 Beta on Thursday. People who have pre-ordered Football Manager 2022 ... Read more »

Chandigarh drop in-form Arslan for Syed Mushtaq Ali T20 meet

© Provided by The Times of India CHANDIGARH: A new-look Chandigarh cricket team, comprising five new faces and a whole new set of support staff, including head coach Rajiv Nayyar, ... Read more »

Vatican says Pope Francis willing to visit Canada as Indigenous leaders seek apology

The Vatican says Pope Francis is willing to visit Canada, as Indigenous leaders call on him apologize for the Catholic Church’s role in residential schools.  © Provided by The Canadian ... Read more »

Who is Anna Delvey? The true story of fake socialite portrayed in Netflix's Inventing Anna

© AFP via Getty Images Anna Sorokin Netflix has released a first look at Shonda Rhimes’ upcoming series, Inventing Anna, which is set to premier in 2022. The series follows ... Read more »

'What A Way To Treat The Legend' Pak TV Host Insults Akhtar & Asks Him To Leave Show

© Provided by MensXP Former Pakistan fast bowler Shoaib Akhtar keeps finding ways to make the headlines. Sometimes he hogs the attention through his comments and sometimes through his actions. ... Read more »

T20 World Cup: Namibia Win Toss, Elect to Bowl First Against Scotland

© Provided by News18 T20 World Cup: Namibia Win Toss, Elect to Bowl First Against Scotland Namibia captain Gerhard Erasmus has won the toss and elected to bowl first against ... Read more »

Vaccine passes may be required for hospital visits, says Leo Varadkar

Vaccine passes may be needed for hospital visits, Leo Varadkar has said. © Niall Carson Tanaiste Leo Varadkar (Niall Carson/PA) The Tanaiste told reporters on Wednesday that the Government was ... Read more »

‘Big lies': Paul Pogba hits out at reports of rift with Manchester United manager Ole Gunnar Solskjaer

© Getty Images Paul Pogba was sent off for United after a VAR check upgraded his yellow card to a straight red – Getty Images Paul Pogba has hit back ... Read more »

Ryan Reynolds and Rob McElhenney attend first Wrexham soccer game

© Provided by Cover Media Ryan Reynolds Ryan Reynolds and Rob McElhenney tasted defeat in the first soccer game they attended as the co-owners of Wrexham A.F.C. The Hollywood duo ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic