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Johnny Erling on Kissinger and the Temple of Heaven

Dear reader,

China’s economic miracle is fueled by exuberant capital injections. Ever since the 1990s, this pattern is repeating: Ambitious company executives take out far too many loans in their relentless desire to expand their business. Public banks then have to painstakingly deleverage sprawling groups of companies. Now it looks like the Evergrande real estate group is next in line. The company has created many millions of square meters of residential and commercial space all over China. Now debt-servicing difficulties are emerging. Our team of writers in Beijing explains whether a ‘second HNA’ is imminent. In case you need to refresh your memory: After the company HNA went on an investment spree that lasted for several years, the Hainan-based tourism group had to declare bankruptcy in January, which resulted in its divestment.

It has now been a year since the Hong Kong Security Law has been introduced. Its implementation marks the end of the free enclave of Hong Kong on Chinese territory. Marcel Grzanna summarizes how close-meshed surveillance has become since. There is virtually no hope left for a return to democracy.

Henry Kissinger is a diplomatic legend. In 1971, he secretly traveled to Beijing on two occasions to bring about a chance for open talks. Since then, he has strived to create a sustainable and predictable relationship between the US and China. Now, at the ripe age of 98, he faces the downfall of his efforts. A new confrontation seems almost inevitable. US-Americans refuse to understand that China will never allow itself to be tied into the old world order. And our columnist Johnny Erling explains how all of this is connected to the Temple of Heaven in Beijing.

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Finn Mayer-Kuckuk

Feature

Is Evergrande the new HNA?

Just four years ago, Evergrande founder Xu Jiayin was China’s richest man for a time. But the real estate conglomerate’s mountain of debt keeps growing. Beijing has urged Xu to resolve these problems quickly. But banks and rating agencies are shaking their heads.

As the Communist Party celebrated its 100th birthday in Beijing on July 1, guests included some of the country’s most influential entrepreneurs. Of particular note was Xu Jiayin, the head of Chinese real estate developer Evergrande, who shortly after published photos of himself at the celebration. Did the entrepreneur try to prove with his appearance that he remains on good terms with Beijing despite all his financial problems?

If that was his intention, the maneuver didn’t help Xu much. Evergrande, which is one of China’s largest real estate companies, can’t seem to get a break from negative publicity. The company’s stock price dropped again this week to a new annual low, following six months of virtually uninterrupted decline.

Investors are fleeing in droves amid concerns that the company is facing a serious debt crisis. “Could Evergrande collapse?” Hong Kong newspaper South China Morning Post recently asked, recalling the fate of HNA, the mega-corporation based in the southern Chinese province of Hainan. In January, after years of aggressive expansion, the travel group and major investor was forced to file for bankruptcy practically overnight. A government-appointed task force is now restructuring the company.

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