- Rating agencies see Evergrande on brink of default
- China punishes Lithuania with full import ban
- USA blacklists SenseTime
- Media entrepreneur Lai found guilty
- Brandstaetter to take over China portfolio in August
- Chinese Covid drug approved
- Johnny Erling on youth movement ‘lying flat’
Today we present the next episodes of the Evergrande drama (Soar high, fall hard) and the Lithuania thriller (David versus Goliath). The story about the Baltic country resembled a comedy for a while but could escalate into a trade war saga. China wants to reject all EU goods at its border that contain even one component from Lithuania. This is the retaliation for Lithuania’s rapprochement with Taiwan. Now Slovakia has sent its own delegation to Taipei. Amelie Richter analyses whether the country could also fear repercussions. All in all, along with a possible ban on imports from Xinjiang by the US, an ominous sense of new trade conflicts is building up.
Meanwhile, the Evergrande drama may be nearing its final act – at least as far as the actual company is concerned. Rating agencies have already spoken the truth, which the real estate group still refuses to accept: Evergrande is bankrupt. What else should it be called when there is no money left for installment loans, bond interest, and contractor bills? So behind the scenes, preparations are underway for a restructuring. However, lasting economic policy aftermath could follow. China’s bloated real estate sector will have to shrink back to health under the supervision of the state. This will not be without side effects.
Rating agencies consider Evergrande bankrupt
Perhaps that one, clearly defined “Evergrande moment” won’t happen after all. Instead, a “salami-slicing bankruptcy” is playing out before our eyes. Every week, the struggling real estate company misses one payment deadline but occasionally serves another – albeit usually late. In China, there are no punishments for delaying bankruptcy (China.Table reported). This gives Evergrande more opportunities to play for time than any German company would have.
On Thursday, however, the noose tightened considerably. The clearest statement came from rating agency Fitch. It downgraded Evergrande’s credit rating to RD (Restricted Default): basically bankrupt, although still partially capable of maintaining business operations. Just below that, however, comes a total default on the credit rating scale. The reason for the downgrade: Evergrande failed to settle $82.5 million in overdue interests on Monday (China.Table reported). Rating agency Standard & Poor’s is also not holding back with its prognosis either, announcing that defaults are “inevitable.” Such signals from both two major rating agencies mean nothing other than the beginning of the end for the Evergrande Group in its current form.
The Shenzhen-based real estate group, which has already just missed bankruptcy several times, has thus missed another reprieve. The Hong Kong stock exchange accordingly reacted alarmed: The shares of the real estate giant fell again on Wednesday. On Thursday, the price was hovering around the 20 euro cent mark. A year ago it was still at three euros. Meanwhile, the government has started suppressing Internet rumors about the imminent bankruptcy to avoid unrest.