30 Oct The Issue of Evergrande and the related developments
CONTEXT : The Evergrande Group, China’s construction giant, was in the news about a month ago as it ran out of money, and had no options to get more loans or overdrafts, and had almost $310 billion worth of liabilities and several angry lenders, suppliers and home buyers wanting clear answers that did not seem to come from anywhere.
How Evergrande reached the current situation ?
In January 2021, the Chinese regulators changed lending regulations to strengthen the anti-monopoly push and prevent disorderly expansion of capital, curbing the lending to big private businesses.
Though a delayed structural reform, it marked the beginning of the end for Evergrande.
The Evergrande crisis is a significant development that has struck the country’s ruling elites but it was since 2014 that China’s housing sector has been labelled as a “bubble waiting to burst”.
China’s spectacular rise so far is based on two pillars of exports and infrastructure:-
Recently, exports have slowed down and are not as profitable as before.
The infrastructure sector is at the centre of the guanxi (social network) induced corruption and cronyism, and is adding to the country’s debt problem.