Beijing unlikely to save Evergrande, report says

[shockedcanadian]

China learning from the Wests mistakes.

As an economic libertarian (and moderate civil/foreign policy believer), this is a wise decision by the government. It is going to hurt Chinese citizens faith in the free market, but will also reinforce the concept into their ideology. The concept of risk/reward and careful assessment before you dive and not buying snake oil.

How much was lost and who paid a price with the bailout in 2009? I may argue that it was necessary, but, only if there were consequences to those who abused their authority.

Beijing unlikely to save Evergrande, report says

Evergrande, the massive Chinese real estate developer that rattled the US market on Monday after reports that it is struggling to avoid defaulting on $89 billion in debt, is unlikely to benefit from a Beijing bailout, according to a report.

www.foxbusiness.com

Evergrande, the massive Chinese real estate developer that rattled the US market on Monday after reports that it is struggling to avoid defaulting on $89 billion in debt, is unlikely to benefit from a Beijing bailout, according to a report.


S&P Global Ratings, the credit rating agency, said in a report on Monday that Beijing "would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy," according to Bloomberg. "Evergrande failing alone would unlikely result in such a scenario."

The US stock market fell 614 points, or 1.78% on Monday along with the S&P 500 index and the Nasdaq Composite declining 1.7% and 2.19%, respectively. The Dow was down almost 972 points at its worst levels of the day.

"I suspect the Chinese government is on top of this, and I don’t doubt they will deal with it severely, but I don’t think it will have the global effects the market is suggesting this morning," said Carlyle Group co-founder David Rubenstein during an appearance Monday on "Mornings With Maria."

 

[asaratis]

Though it appears to be a small part of China's economy, it may start a domino effect leading to a significant collapse. Note that some of the problems confronting Evergrande were spawned by the Chinese virus lockdowns, just has have been some of ours.

Evergrande Default Could Rock China’s Entire Economy

www.theepochtimes.com

Evergrande accounts for 4 percent of total Chinese real estate high-yield debt. The company’s debt is of such significant size that it may pose systemic risk to China’s banking system. Late or defaulted payments by Evergrande could cause a chain reaction of defaults across institutions. An Evergrande sell-off could drive down prices, crashing over-leveraged developers. Authorities worry that this threatens to destabilize the entire real estate sector, which comprises about 30 percent of the Chinese economy.


Additionally, Evergrande has implications for the labor market. The company employs 200,000 people regularly and 3.8 million per year, on a project basis. After 18 months of sporadic COVID-19 lockdowns, China needs more, not fewer, jobs.

I'm wondering if China will demand that the US repay some of our $1.1 Trillion in loans that we continually increase to support our overspending addiction.

U.S. Debt to China: How Much Is It, and Why?

China has long been one of the major foreign holders of U.S. national debt. Learn how much of the debt China holds and why it chooses to invest in U.S. Treasurys.

www.thebalance.com

If China Called in Its Debt Holdings​

China's position as America's largest banker gives it some political leverage. It is responsible for lower interest rates and cheap consumer goods. If it called in its debt, U.S. interest rates and prices would rise, slowing U.S. economic growth.




On the other hand, if China called in its debt, the demand for the dollar would plummet. This dollar collapse would disrupt international markets even more than the 2008 financial crisis. China's economy would suffer along with everyone else's.




If China ever did call in its debt, it slowly would begin selling off its Treasury holdings. Even at a slow pace, dollar demand would drop. That would hurt China's competitiveness by raising the yuan’s value relative to the dollar. At some price point, U.S. consumers would buy American products instead. China could start this process only after it further expanded its exports to other Asian countries and increased domestic demand.