China’s second-largest real-estate developer by revenue—with liabilities equal to around 2% of the country’s gross domestic product—is in danger of going under. After weeks of ignoring Evergrande ’s wobbles, on Monday Wall Street finally stood up and listened: the S&P 500 dropped 2% and global bond funds, some of them invested heavily in Chinese developers’ dollar debt, retreated. Evergrande must pay $83.5 million in bond interest on Thursday, and is fending off protests and court cases from its domestic suppliers, customers and investors.
A default on dollar debt or at least a deep haircut is likely. Large-scale financial turmoil in China isn’t inevitable. If Evergrande’s woes further infect the broader real-estate market or Beijing doesn’t act quickly enough to restructure the company’s businesses and its onshore debts in an orderly manner, it may not be far behind.
What China Must Do to Contain Evergrande Fallout Source link What China Must Do to Contain Evergrande Fallout