- Evergrande reveals weaknesses of the Chinese economic system
- Is the land Silk Road an alternative to sea shipping?
- China’s TikTok sets time limit for children
- Guterres warns of Cold War between China and US
- Beijing reassures Wall Street investors
- Number of new Covid infections in Fujian drops
- Cargo vessel docks successfully with Tianhe space station
- Tools: What the new Data Security Law means for German companies
The impending bankruptcy of Chinese real estate giant Evergrande is causing unrest far beyond China’s borders. Their debt of the equivalent of €250 billion brings back dark memories. Some people see parallels to the U.S. banking crisis of 2008 or the Asian crisis of 1997. Frank Sieren analyzes the true dimensions of the Evergrande case for you – and explains why there is no risk of a collapse or even a global financial crisis. Nevertheless, this case clearly shows one thing: the weak points of China’s financial and economic system.
Another global problem is the current container deadlock at ports. Many industries suffer from a shortage of materials and supplier parts, production facilities are at a standstill, and store prices are rising. How fortunate that China’s state media are announcing a supposed remedy: the increasingly expanded freight railway between the People’s Republic and Europe as part of the prestigious “Belt and Road” initiative. Finn Mayer-Kuckuk has taken a closer look at the potential of the land Silk Road and comes to the conclusion: Even if land routes have gained recent importance, they will not be able to replace sea freight traffic.
I hope our latest issue will provide you with many new insights!
Michael Radunski
Feature
The true extent of the Evergrande crisis
Evergrande is not only one of the largest privately-held companies in China, but also one of the most over-indebted corporations in Asia. Its debt amounts to the equivalent of €300 billion, which is roughly equivalent to the national debt of the whole of Portugal.
The stock price of the Hong Kong-listed real estate developer conglomerate has dropped by around 75 percent since the beginning of the year. Some corporate bonds are trading at only one-third of par. Rating agency Standard & Poor’s has since downgraded Evergrande’s credit rating and its subsidiaries to the third-lowest grade of “CC” due to tight liquidity, declining sales, and deferred payments. Xu Jiayin, who founded the group in 1996, was already forced to withdraw from operational business in mid-August – most likely due to pressure by Beijing (China.Table reported).
A major factor of uncertainty is the number of obscure holdings of the Evergrande conglomerate, which invested in various areas from e-mobility to professional soccer. The loans and mutual financial obligations to more than 200 subsidiaries are almost impossible to keep track of.
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