Evergrande

[Nom De Plume]

What's the event we are worrying about?

China is the world's second biggest economy.

Its property sector makes up 25 per cent of gross domestic product or GDP.

Evergrande is China's second biggest property developer, the world's most indebted, and it's in severe financial distress.

Inside sources have told financial news service Bloomberg that Evergrande already missed interest payments to two of its largest bank lenders on Monday.

The company now needs to make good on an $US83.5 million corporate bond interest payment tomorrow.

Financial markets are speculating it will not be able to do this, although it has a 30-day grace period before a missed payment would formally be a default.

But those interest payments are just the tip of the iceberg. The company has a total debt exposure of roughly $US305 billion ($419 billion).

Do you see where this is going?

The implication for Australia
A Chinese property market crash would cripple China's economy.

China is Australia's largest trading partner, so this has obvious and sizeable flow-on effects for Australia's economic growth, stock market and superannuation balances.

Risk of global financial crisis

However, there is another financial bogey man.

Many emerging countries, including China, borrow in US dollars.

As it stands, there's a total of $4 trillion in outstanding debt held by all emerging economies, according to Canadian research and analytics company BCA.

China's outstanding foreign debt, according to China's State Administration of Foreign Exchange, totals $US2.29 trillion.

https://www.abc.net.au/news/2021-09-22/ ... /100480268

[Black Orchid]

The Chinese government caused this by enforcing unrealistic restrictions on Evergrande so they'll more than likely come to the rescue. Here's another interesting article.

https://udumbara.net/what-evergrandes-t ... nd-economy

[Black Orchid]

Evergrande shares plunge on market return as deal falls through.

There are concerns that the crisis at embattled China Evergrande could spill over into the wider economy.

https://www.news.com.au/breaking-news/e ... 3c0881262c

Its been teetering on the brink of collapse for weeks but China Evergrande, the country’s second biggest property developer, could be facing up to doomsday as it admitted it may not be able to meet its financial obligations.

With more than $A400 billion in debts, the property developer is dealing with several looming deadlines to pay up, as attempts to save it fall through.

An offshore bond payment that China Evergrande initially missed on September 23, but got a 30-day grace period on, is set to expire on Saturday with $110 million owing.

There’s another $60 million interest payment too, which wasn’t paid when due on September 29, and the grace period is also set to run out.

Discussions for a $A7 billion deal for Hong Kong-listed Chinese developer Hopson to take a majority stake has also fallen through.

Credit rating service Moody’s has basically given the property developer a junk rating, warning that there are “weak recovery prospects for Evergrande’s creditors if there is a default”.

Experts believe that China Evergrande’s collapse is all but inevitable.

https://www.news.com.au/finance/economy ... 64f4943d98