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Evergrande, a Chinese property developer, has defaulted on debt. This could possibly be very bad on a global scale

Global crash warning as Evergrande defaults on debt: $300billion black hole cripples world | City & Business | Finance | msn.com | Express.co.uk

https://www.bloomberg.com/news/articles/2021-12-09/evergrande-defaults-for-first-time-as-china-debt-strains-spread

https://fortune.com/2021/12/08/evergrande-kaisa-default-debt-crisis-restructuring-comeback/

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  • Comments (16)

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      $300 Billion eh? All the sudden my $2000 credit card bill doesn’t look too bad.

      • 2

        One UK commentator just said if they go bust the markets that have invested in Evergrande also have major shares in most western banks and mortgage lenders and they will want to recoup their losses by ramming up interest rates on loans and mortgages.

    • 3

      Here’s an explanation from another forum on why this is a big deal:

      Evergrande, a Chinese property developer and the most indebted corporation in the world, has defaulted on its debt after failing to make its interest payments on $1.2B of international loans. The payments were due a month ago, and grace periods lapsed Monday, December 6, 2021. This most recent development could have serious ripple effects that could have, not just a trickling, but an absolute downpour for the Chinese economy and the broader international financial landscape.

      Evergrande has been selling assets in recent months to raise the money it owes to customers, investors and suppliers. The company had been scrambling for months to raise cash to repay lenders, and its billionaire founder, Xu Jiayin, has even been selling off personal assets to prop up its finances.

      Credit ratings agency S&P, said earlier this week that “default looks inevitable for Evergrande” with repayments of $3.5 billion on US-dollar denominated bonds due in the coming months. In a statement last Friday the company said it could not guarantee “to perform its financial obligations”, sending its share price crashing. So far this year, the stock has lost 87% of its value.

      There are several reasons why Evergrande’s problems are serious. Evergrande has about $300 billion in total liabilities, and analysts have worried for months about whether a default could trigger a wider crisis in China’s property market, hurting homeowners and the broader financial system. The US Federal Reserve warned last month that trouble in Chinese real estate could damage the global economy.

      If Evergrande defaults, banks and other lenders may be forced to lend less. This could lead to what is known as a credit crunch, when companies struggle to borrow money at affordable rates. A credit crunch would be very bad news for the world’s second largest economy, because companies that can’t borrow find it difficult to grow, and in some cases are unable to continue operating. This may also unnerve foreign investors, who could see China as a less attractive place to put their money.

      On a more microeconomic level, many people bought property from Evergrande, including prepaid deposits, even before building work began and they could potentially lose that money if Evergrande goes bust. There are also the companies that do business with Evergrande. Firms including construction and design firms and materials suppliers are at risk of incurring major losses, which could force them into bankruptcy.

      Evergrande Real Estate currently owns more than 1,300 projects in more than 280 cities across China. However, the broader Evergrande Group now encompasses far more than just real estate development. Its businesses range from wealth management, making electric cars and food and drink manufacturing. It even owns one of country’s biggest football teams – Guangzhou FC.

      Evergrande expanded aggressively to become one of China’s biggest companies by borrowing more than $300B. However, in 2020, Beijing brought in new rules to control the amount owed by big real estate developers. The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat.

      • 3

        I think “Big deal” could possibly be the ultimate understatement 🙂  If EG goes its like the second, third and fourth biggest companies in the same sector could also go according to some money geeks over here.

        I’m a fiscal coward, if i think any of the banks and financial companies i trade with may be at risk I’m definately going to withdraw every pound I can.

    • 2

      I edited your title to be a bit more clear and added links to the body of your main post. I couldn’t find links to City & Business or Finance. Maybe you could add those in if you still have them?

      Really appreciate you bringing this topic up! Seems like one major disaster that affects the whole world pops up every day doesn’t it?

      • 2

        They are copied from the Microsoft news thingy and they wont let me copy the URLS thats why I put others up.  if folks simply google Evergrande Default they should find numerous links.

      • 2

        Sounds good. Thanks Bill. 

        Yes, a Google search of ‘Evergrande default’ leads to more articles than you can read. It’s a hot topic right now.

    • 2

      I realise this is big business and global financial networks but the part of me that hates the idea of owing people money just cannot comprehend this! At some point someone somewhere has thought that lending more money to a company with already massive debts was a good idea 😱  I feel sorry for the suppliers, because the size of the company will have meant wanting to keep the contract despite the mounting money due. I’ve seen this happen locally but that was only a tiny fraction of what this company owes.  

      • 3

        Its like the 2008 Sub Prime mortgage loan scandal but on steroids. With covid and this coming out of china i am starting to feel quite uncomfortable. Tomorrow I intend to take some of my cash reserves from the bank, just for peace of mind.

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        Good plan Bill! 

    • 3

      $300 billion is a lot, but crypto currencies alone total $3 Trillion and they are nothin but air.

      For that matter, US housing values inflated by 30% LAST YEAR and the face value today is $36 Trillion —and the US government floats all (at least most) of the paper. Only 18% of working people can afford the average mortgage now, the lowest ever.

      Talking about vapor, the US stock market is oversold by 2 or 3 times with a current face value of $50 TRILLION!

      Short term interest rates in the US (fed funds) is .08%, with an inflation of 6% that mean the government is loaning money at NEGATIVE 5.92%—they are paying banks to take money overnight just to keep them solvent. 

      Crimeny, just those 3 items are $30 or 40 trillion in froth!!

      Since the great recession governments everywhere have been trying with every method available to keep the economy inflated—since the ’80’s actually. In China people with money buy apartments (but don’t rent them) because there just aren’t that many places to stash wealth. I think 20-30% of the dwellings in China are vacant, renting your investment causes it to lose money!!!

      I’m a doomer, no doubt, and no money man, but those numbers are pretty staggering.

      • 2

        US housing values inflated by 30% LAST YEAR … Only 18% of working people can afford the average mortgage now, the lowest ever.

        Tell me about it 🙁 It’s been a crazy year and I’m still stuck renting