Will the bankruptcy of Ever Grande be the beginning of the collapse of real estate in China?

On August 17, 2023, China Evergreened Group, the world's most indebted property developer, filed for Chapter 15 bankruptcy protection in the United States. This is a non-US chapter of bankruptcy that allows foreign companies to protect their assets in the US from creditors. The filing does not mean that Evergrande is going out of business, but it does allow the company to continue operating while it works on a debt restructuring plan.

Evergrande's bankruptcy is a major event that has implications for the Chinese economy and the global financial system. The company's debt crisis has already had a ripple effect through the Chinese economy, causing a decline in home prices and stock prices. It is also a major test for the Chinese government, which has been trying to contain the crisis without causing a systemic collapse.

The full implications of Ever Grande's bankruptcy are still unknown, but it is clear that this is a major event that will be closely watched by investors and policymakers around the world.

Here are some of the possible consequences of Ever Grande's bankruptcy:

• A decline in home prices in China, which could lead to a slowdown in the economy.
• A loss of confidence in the Chinese real estate market, which could make it more difficult for other developers to raise capital.
• A spillover effect to other countries, as investors become more cautious about investing in China.
• A challenge to the Chinese government's ability to manage the economy.

It is still too early to say what the long-term impact of Evergrande's bankruptcy will be. However, it is clear that this is a major event that will have a significant impact on China and the global economy

• A decline in home prices in China: Evergrande is one of the largest property developers in China, and its collapse could lead to a decline in home prices across the country. This could have a ripple effect through the economy, as homeowners see the value of their assets decline. It could also lead to a slowdown in construction activity, as developers become more cautious about investing in new projects.
• A loss of confidence in the Chinese real estate market: Evergrande's bankruptcy could also lead to a loss of confidence in the Chinese real estate market. This could make it more difficult for other developers to raise capital, as investors become more hesitant to invest in the sector. It could also lead to a decline in demand for new homes, as buyers become more cautious about entering the market.
• A spillover effect to other countries: The impact of Evergrande's bankruptcy could also spill over to other countries. This is because China is a major player in the global economy, and its financial problems could have a knock-on effect on other countries. For example, a decline in Chinese demand for commodities could lead to lower prices for those commodities, which could hurt exporters in other countries.
• A challenge to the Chinese government's ability to manage the economy: Evergrande's bankruptcy is a major test for the Chinese government. The government has been trying to contain the crisis without causing a systemic collapse, but it is a difficult balancing act. If the government does not intervene effectively, it could lose credibility and its ability to manage the economy could be called into question.

It is important to note that these are just some of the possible consequences of Evergrande's bankruptcy. The actual impact will depend on a number of factors, including how the Chinese government intervenes and how the global economy responds. However, it is clear that this is a major event that will have a significant impact on China and the global economy.

the potential consequences of the crisis, both for China and the global economy.

For China:

• A decline in home prices: As I mentioned earlier, Evergrande is one of the largest property developers in China, and its collapse could lead to a decline in home prices across the country. This could have a ripple effect through the economy, as homeowners see the value of their assets decline. It could also lead to a slowdown in construction activity, as developers become more cautious about investing in new projects.
• A loss of confidence in the Chinese real estate market: Evergrande's bankruptcy could also lead to a loss of confidence in the Chinese real estate market. This could make it more difficult for other developers to raise capital, as investors become more hesitant to invest in the sector. It could also lead to a decline in demand for new homes, as buyers become more cautious about entering the market.
• A slowdown in economic growth: The decline in home prices and construction activity could lead to a slowdown in economic growth in China. This is because the real estate sector is a major driver of economic growth in China, accounting for about 20% of GDP.
• A rise in unemployment: The slowdown in economic growth could lead to an increase in unemployment in China. This is because the construction sector is a major employer in China, and a slowdown in construction activity could lead to job losses.
• Social unrest: The economic and social problems caused by Evergrande's bankruptcy could lead to social unrest in China. This is because the Chinese government has been trying to maintain social stability, and a major crisis like this could pose a challenge to its authority.

For the global economy:

• A decline in Chinese demand: As I mentioned earlier, China is a major player in the global economy. If Chinese demand for goods and services declines, it could have a knock-on effect on other countries. This could lead to a slowdown in economic growth in other countries and could also lead to job losses.
• A decline in commodity prices: China is a major importer of commodities, such as oil and copper. If Chinese demand for commodities declines, it could lead to lower prices for those commodities, which could hurt exporters in other countries.
• A financial crisis: If Evergrande's bankruptcy is not handled well, it could lead to a financial crisis in China. This could have a ripple effect through the global financial system, causing financial problems in other countries.

It is important to note that these are just some of the potential consequences of Evergrande's bankruptcy. The actual impact will depend on a number of factors, including how the Chinese government intervenes and how the global economy responds. However, it is clear that this is a major event that could have a significant impact on China and the global economy

identify the key stakeholders involved in the crisis, such as the Chinese government, Evergrande's creditors, and other property developers.

• The Chinese government: The Chinese government is the most important stakeholder in the Evergrande crisis. The government has a vested interest in preventing the crisis from spreading and causing a financial meltdown. The government has already taken some steps to intervene in the crisis, such as providing liquidity to Evergrande and allowing it to delay payments to its creditors. However, the government is walking a fine line between intervening enough to prevent a crisis and intervening too much, which could damage the economy.
• Evergrande's creditors: Evergrande's creditors are the other major stakeholders in the crisis. These creditors include banks, bondholders, and suppliers. They are owed billions of dollars by Evergrande, and they are facing the risk of default. The creditors are under pressure to get their money back, but they are also aware that if they push Evergrande too hard, it could collapse and cause a financial crisis.
• Other property developers: Other property developers in China are also stakeholders in the Evergrande crisis. These developers are facing the risk of a decline in demand for their products, as well as a decline in the availability of credit. They are also facing the risk of copycat defaults, as other developers may be forced to default on their debts if Evergrande does.
• Homeowners: Homeowners who have bought apartments from Evergrande are also stakeholders in the crisis. These homeowners are facing the risk of default, as Evergrande may not be able to complete construction on their apartments. They are also facing the risk of a decline in the value of their apartments, as the real estate market in China is likely to be affected by the crisis.
• Investors: Investors who have invested in Evergrande are also stakeholders in the crisis. These investors are facing the risk of losing their money, as Evergrande may not be able to repay its debts.

These are just some of the key stakeholders involved in the Evergrande crisis. The actual impact of the crisis will depend on how these stakeholders interact with each other and how the Chinese government intervenes.