Some banks in China appear to be hoarding yuan at the highest cost in almost four years, a sign they may be preparing for what a Mizuho Financial Group Inc. Chinese junk-bond yields jumped to an 18-month high and shares of real estate companies plunged after Evergrande had its credit rating downgraded and requested a trading halt in its onshore bonds.
NIGHTMARE HOUSE 2 CRASHES ON STARTUP FULL
Beijing’s bungled stock-market rescue in 2015 showed how difficult it can be for policy makers to control financial outcomes, even in a system where the government runs most of the banks and can exert outsized pressure on creditors, suppliers and other counterparties.Ĭontagion risk was on full display Thursday. Yet a benign outcome is far from assured. Markets seem to agree: the Shanghai Composite Index is less than 3% from a six-year high and the yuan is trading near the strongest level in three months against the dollar. Rather than allow a chaotic collapse into bankruptcy, they predict regulators will engineer a restructuring of Evergrande’s $300 billion pile of liabilities that keeps systemic risk to a minimum. It would also lead to panic selling in capital markets.”įor now, Shen and nearly all of the other bankers, analysts and investors interviewed for this story say Beijing is in no mood for a Lehman moment. Profit margins across the supply chain would be squeezed. “Debt recovery efforts by creditors would lead to fire sales of assets and hit housing prices. “As a systemically important developer, an Evergrande bankruptcy would cause problems for the entire property sector,” said Shen Meng, director of Chanson & Co., a Beijing-based boutique investment bank. Pressure to intervene is growing as signs of financial contagion increase. While it’s impossible to know for sure what would happen if Beijing allows Evergrande’s downward spiral to continue unabated, China watchers are gaming out worst-case scenarios as they contemplate how much pain the Communist Party is willing to tolerate. Global investors who bought $527 billion of Chinese stocks and bonds in the 15 months through June begin to sell. Credit-market stress spreads from lower-rated property companies to stronger peers and banks. Covid-weary consumers retrench even further, and the risk of popular discontent rises during a politically sensitive transition period for President Xi Jinping. Construction of unfinished properties with enough floor space to cover three-fourths of Manhattan grinds to a halt, leaving more than a million homebuyers in limbo.įire sales pummel an already shaky real estate market, squeezing other developers and rippling through a supply chain that accounts for more than a quarter of Chinese economic output. (Bloomberg) - Protests intensify at China Evergrande Group offices across the country as the developer falls further behind on promises to more than 70,000 investors.