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China's 'Lehman moment'

Evergrande crisis can have global ramifications

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financial crisis | Business Standard Editorial Comment | China

Business Standard Editorial Comment  |  Mumbai 



Financial stress in China’s largest real estate developer, Evergrande, has led to turmoil across global markets. Commentators are referring to this as “China’s Lehman moment”, in comparison to the 2008 bankruptcy of Lehman Brothers, which was a trigger for the global . Around 29 per cent of China’s gross domestic product is related to real estate. Evergrande has a total debt exposure (including trade payables) of over $300 billion, which includes $19 billion in offshore US dollar-denominated bonds. The real estate giant has issued warnings that it can default on $80 million worth of interest payments, due this Wednesday. Last week, trading was halted in Evergrande’s yuan debt, after rating downgrades. Fears of this default have led to a crash across Chinese debt assets, and triggered big sell-offs in stock markets across Hong Kong (where Evergrande is listed), other Asian markets, including India, as well as in Europe. It has also triggered a panic sell-off in industrial metals and fuels. The prices of real estate stocks in Hong Kong have dropped to 2016 levels, while real estate bonds yields have spiked to 14.5 per cent.

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First Published: Mon, September 20 2021. 23:22 IST

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