Evergrande Crisis Shaking the Global Economy... Will Chinese Authorities Intervene?

"Chinese Government Expected to Intervene by Any Means" Observations

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Yu Je-hoon] The global financial markets are shaking due to bankruptcy rumors surrounding Evergrande Group, China's largest private real estate company. There are concerns that Evergrande's bankruptcy could be a prelude to a 'Lehman Brothers incident' that triggered the 2008 global financial crisis.

Founded in 1997 in Guangzhou, Evergrande Group is a representative conglomerate that benefited from China's 'real estate boom.' Based on its success in the real estate market, Evergrande expanded its business tentacles into real estate management, electric vehicles, media, IT, and finance. Leveraging this, Evergrande has been listed for six consecutive years in the Fortune 500 global companies selected by the U.S. economic media Fortune, ranking 122nd this year.

The problem grew as Chinese authorities began to strengthen regulations and tighten policies to curb bubbles in real estate and other asset markets. Evergrande, which relied on borrowing to expand its business, has been pushed to the brink of default. As of the end of last year, Evergrande's debt stood at 1.95 trillion yuan (approximately 350 trillion won), equivalent to 2% of China's total nominal GDP.

The bankruptcy of Evergrande, China's largest private real estate company, is highly likely to lead to a credit crunch in China's financial market. Evergrande's default could cause non-performing loans in banks and financial institutions in China's financial market, which could then spread to crises in other companies. There are concerns that this could lead to a Chinese version of the Lehman Brothers incident.

Industry insiders view the bond repayment due on the 23rd as a gauge of Evergrande Group's liquidity crisis. Standard & Poor's (S&P) recently noted, "Evergrande is unlikely to receive direct support from the (Chinese) government" and "is on the verge of defaulting on its upcoming debt repayments."

Market attention is focused on whether Chinese authorities will intervene. Experts believe the Chinese government is likely to soften the crisis through debt restructuring or other measures. Jimmy Chang, Chief Investment Officer (CIO) of Rockefeller Global Family Office, told CNBC in an interview, "Everyone expects the (Chinese) government to come up with some kind of solution," adding, "Since the unpaid debt problem, which amounts to $300 billion, could spread to other companies, ultimately some wealthy state-owned enterprises will take over."

This content was produced with the assistance of AI translation services.