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Evergrande crisis to hurt China’s economy: Former PBOC adviser Li Daokui

EvergrandeThe debt crisis will slow China’s economic growth, but the spillover effect on the country’s financial system will be minimal, according to a former adviser to the central bank of China.

Evergrande The most indebted real estate developer in the world Total debt is about $ 300 billion. The company is struggling to pay its suppliers and warns investors that it may default. I need one major payment soon this week..

“Evergrande’s default has an impact on the real economy. [a] “The development of many projects has slowed,” Li Dazhao, a former adviser to the People’s Bank of China, told CNBC.Squawbox Asia” on Wednesday.

“The real estate market will impact GDP growth next year as sector-wide funding slows,” said Lee, a professor of economic management at Tsinghua University.

He added that Evergrande’s defaults have minimal impact on China’s financial system, as there are no derivative products built on the company’s debt.

Derivatives are complex financial securities Extract value from underlying assets such as stocks and bonds. Traders use derivatives for a variety of purposes, such as hedging positions and speculating on underlying assets.

The evergrande we understand may not exist.

Li Daokui

Former Advisor of People’s Bank of China

“I think it’s a bit too early to predict the net impact. [of the crisis].. For now, a rough calculation is one basis point for GDP growth … if things are in control now, “Lee said.

Asian Development Bank Wednesday China’s growth forecast It was 8.1% in 2021 and 5.5% in 2022. this is, 2.3% increase last yearMost of the world economy was hit hard by the Covid-19 pandemic when China became the only major economy to grow.

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Will Evergrande dissolve?

According to Lee, the default of Evergrande could slow the progress of development projects around China and hurt the regional economy of mainland China.

It may encourage local and state governments to intervene with their own money to continue those projects, economists said.

Lee also said he hoped that China’s central bank would add liquidity to the target sector to prevent the spillover from Evergrande’s defaults from “too fast.”

Li predicted that in the medium to long term, embarrassed companies are likely to “dissolve” into four major groups: real estate development, finance, electric vehicles and other commercial ventures.

“Each of these four subparts of Evergrande will be sold to individual businesses, or even to some local governments,” Li said. “The evergrande we understand may not exist.”

— CNBC’s Weizhen Tan contributed to this report.

Evergrande crisis to hurt China’s economy: Former PBOC adviser Li Daokui

Source link Evergrande crisis to hurt China’s economy: Former PBOC adviser Li Daokui

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