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China: Largest ever bankruptcy coming
  • Vitaliy_KiselevVitaliy_Kiselev

    The Chinese economy, with nearly 300% of GDP in debt, is on the brink of its first major corporate crisis.

    The second largest construction company, Evergrande, may face a default after reaching a total debt of 1.97 trillion yuan ($ 305 billion).

    Evergrande's two largest non-bank lenders have demanded immediate repayment of some of the loans amid reports of a potential default by the company.

    On Friday, the national clearing center CSDC cut the company's securities from the repo market. The inability to pledge Evergrandе bonds and get financing for them caused panic among investors.

    Evergrande bonds fell sharply on Monday, prompting the Shanghai Stock Exchange to suspend trading. The drop in securities was caused by a decrease in the company's credit rating by the national agency Chengxin.

    If Evergrande goes bankrupt, it will set off a chain of upheavals in the financial sector, the social sector, the real estate market and everything connected with it.

    Last week the international rating agency Moody’s downgraded the outlook for Chinese developers to “negative”, citing falling sales, liquidity risks and a snowball of debt, which is becoming increasingly difficult to refinance.

    Things are bad.

  • 4 Replies sorted by
  • Vitaliy_KiselevVitaliy_Kiselev

    And this is related to more general thing:

    Chinese developers are threatened with staff shortages in connection with the mass exodus of specialists, the newspaper "Tsaijing" writes. According to statistics, last year the number of employees of the famous developer Vanke fell by 20%, Taihe Group - by 31.5%, Hejing Pacific - by 47%.

    The mass exodus is associated not only with expectations of stagnation in the real estate market, but also with more long-term phenomena. Managers understand that the "golden age" of the rapid development of the real estate sector in the PRC is over, and they are beginning to look for more stable jobs, albeit with lower wages. The signs of an impending crisis are obvious: in 2020, for the first time, managers of development companies were not raised, but reduced their salaries. The fall averaged 5%.

    “Currently, the average annual salary for a middle manager in the real estate sector is 600,000 to 800,000 yuan per year. However, many, because of uncertainty about the future, leave for state-owned companies for positions with a salary that is two times lower. On average, they lose 200-300 thousand yuan a year on wages, but they gain guarantees of stability, ”a representative of one of the real estate operators told Caijing.

  • endotoxicendotoxic

    China is developing early signs of an accelerated neo liberal side effects.

  • Vitaliy_KiselevVitaliy_Kiselev

    @endotoxic

    It is complex thing with China, as big left public turn indicate that they can be forced to axe lot of capitalism.

  • endotoxicendotoxic

    If China can sustain its massive amounts of people which is chinas biggest asset, they can axe whatever they want, wile maintaining control. Specially if you are communist, and born in that regime.

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