One of the largest developers in the Middle Kingdom – Evergrande Group – announced the upcoming default.
The fact that Chinese companies are deeply in debt has been trumpeted by analysts for many years. Beijing’s economic boom was also associated with gigantic borrowing. And now there is a risk that big business will not cope with payments and defaults will begin. The first bell has already taken place. One of the largest developers in the Middle Kingdom – Evergrande Group – announced the upcoming default.
The company is urgently looking for a billion dollars to pay interest to creditors. But this is difficult to do. The developer has a difficult financial situation due to poor sales of apartments. At the same time, the total debt of the developer is a cosmic amount – more than $ 300 billion (22 trillion rubles, or the entire volume of the federal budget of Russia for this year). Even for the Chinese economy, this is a lot.
Some analysts have already begun to compare what is happening with the 2008 crisis. Then everything happened according to a similar scenario. Shares of American companies were gradually declining, but there were no prerequisites for a sharp fall. And then there was an unexpected bankruptcy of the investment bank Lehman Brothers, whose debt amounted to about $ 700 billion. And off we go. Investors lost confidence in all assets and began to hastily sell securities. This set off a domino effect and triggered a global recession around the world.
If this happens now (and many analysts have been talking about a potential crisis for several years now), it could sharply lower the price of oil and thereby hit both our country’s export revenues and the ruble exchange rate.
Nevertheless, according to experts, this time the Chinese authorities can take into account the American experience and prevent the mistakes of that time. One of the options is to partially pay off the company’s debts with the help of the state and transfer its assets to competitors. Another thing is that it will not be possible to save the entire Chinese business drowning in debt in this way. And sooner or later, quantity can turn into quality.
Therefore, it is advisable to prepare for the worst-case scenario – for example, get rid of some of your own debts and form a family money-box in different currencies.