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China and Evergrande Story
The Real Estate Giant of China, Evergrande, has filed for bankruptcy in the United States, the affiliated companies under Evergrande have also filed for bankruptcy in Manhattan bankruptcy Court. This comes at the time when China’s economy is weakening and its exports are falling at a significant rate.
Evergrande has become the talk of the town in the debt crisis as China’s property crisis worsens. The firm has a total liabilities of around $300 billion. Various other property developers have defaulted since then in the country. Morgan Stanley this year has cut China’s growth to 4.7% which was predicted 5% back then.
India’s move towards deflation is rather worrying one, when Evergrande’s news came world richest 500 person lost around $135 billion dollar in total, Elon Musk net worth fell by $7.2 billion, Jeff Bezos saw a decline upto $5.6 billion etc. Since most of the top celebrities do invest in such companies.
China is looking to bring digital Yuan in order to avoid US sanctions and other restrictions in order to support Chinese governance systems. Interestingly China’s counterpart India has also proposed for Digital Rupee and it is working tremendously in the field.
The China story of Evergrande
Interestingly Evergrande did not start its journey just like a real estate company it rather started initially as a drinking water supplier company then moved to pig farming and finally landed into the world of housing and infrastructure.
In the year 2022, China’s revenue from commercial building occupation and real estate exponentially fell down to 26.6 percent as compared to the growth in 2021 by 8.5 percent.
Investment in real estate fell to 9.8 percent which was 6 percent positive in 2021. After Corona, China’s exports have fallen to a significant rate of 14.5 percent.
According to the Asian Development bank the unemployment in China is increasing and it has hit hard the section of 16-24 year old which accounts 21.3 percent. The firm accounts for 40 percent of China’s home sales. In the filing in Manhattan court, the company has asked for the reconstruction of the restructured talks. Trading in the stock of Evergrande Services has been suspended since March 2022.
The company is working on offshore debt, and has offered its creditors to exchange their debt in the form of new notes and stake in two of its firm subsidiaries.
According to the experts, the Chinese economy is not going to take off in recent times. IMF has previously forecast that the country’s will account for 35 per cent of Global Growth and in turn China’s geopolitical ambitions have also sensed the same.
What’s Next For the Chinese Engine?
China has been accused of revealing less economic data especially which is negative in terms from the time Xi Jinping stepped into the world of Presidency. The country is focusing more on state-led-enterprise companies from which one can sense the smell of communism.
Last month President Biden said that China is just like a bomb to explode and it rather gives a brief sense of a void bubble. According to the analysis, countries like USA who have a great economic influence in both the markets would like to ensure that the savings of its citizens is rather not used by the Chinese in wrong terms that can be aggression in military advances or to be used in sanctions.
It started in the late 90s when the government leased state property to private developers in order to develop housing infrastructure and build massive scrapers, and for sure this was done with the back of a huge debt amount. Well the sector grew as much as its prices tallied to more than 50 times the average national income.
This all was about Evergrande with a $300 billion default but to the readers there is another one in the queue “COUNTRY GARDEN”! Is $200 billion enough ??
