China: ‘Record amount of dissatisfaction’ says Jim Molan
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If the company were to fail to repay its vast $305billion (£221billion) debt, there are fears it could spark the collapse of the huge property market in China. While it is unlikely the company itself will be bailed out by the Chinese Communist Party (CCP), if the property market in China does collapse, it could spark “major problems” for the economy in the state, an expert has claimed. Speaking to Express.co.uk, professor Steve Tsang director of the School of Oriental and African Studies’ China Insititute said: “The individual companies don’t matter very much.
“They are unlikely to be bailed out.
“The property market matters, and if it triggers the collapse of the market, that is a very big deal.
“The CCP is banking on that it won’t do so.”
The property market is essential for China’s GDP and is valued at $55trillion (£40trillion) – four times larger than the country’s GDP.
When including construction and property-related goods and services, the annual housing activity accounts for 29 percent of the country’s GDP.
In order to clamp down on the property market, Xi Jinping attempted to bring the market under control with rules surrounding borrowing.
While Xi may want to fine-tune such a large portion of the Chinese economy, professor Tsang claimed the market often “overcorrects itself”.
He said: “Lending became more stringent and that they got into trouble.
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“A small correction would be welcomed by the CCP.
“The real issue is that you can never fine-tune it, the market usually overcorrects itself.”
Professor Tsang added: “If they can’t finesse the property market, it will continue unabated and bubbles eventually burst.
“That will cause major economic problems which will may not be contained in China.”
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Evergrande is one of the largest companies in the world and indeed, one of the biggest property organisations in China.
Amid its debt issues, Evergrande has allegedly missed five bond interest repayments to investors.
According to Deutsche Marktscreening Agentur (DMSA), those debts account to $148million (£110million) in debt.
After missing these deadlines, the DMSA insisted the company will declare bankruptcy in the near future.
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The company also faces multiple payments stretching into 2022.
On December 28, 2021, Evergande faces a $255.2million (£189million) payment and a second £117.5million (£87million) sum on January 22, 2022.
If such a large company were to go bust, it could spark shockwaves throughout the world’s economic system.
If lenders could no longer rely on organisations to repay debts, it may cause them to stop loaning money thus creating a credit crunch similar to what was seen in 2008.
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