Evergrande is court mandated to melt.
China’s seventh largest real estate developer (eighth largest in the world, by the by), the default Evergrande Group, has been ordered to liquefy its assets by a Hong Kong court.
So what? Evergrande’s been in default since 2021 and rotting from the inside, all the while it keeps churning out empty houses for China’s crumbling real estate market. Of course they’ve been ordered to go liquid to pay their debts – their substantial debts, mind – and besides; it’s only a Hong Kong court who ordered it. We know damn well who wears the pants between Hong Kong and mainland China.
That the company is being ordered to cash out is nothing surprising (after a default and failure to provide a reconstruction plan), the circumstances of that default are rather awe-inspiring… and a shape of things to come for China’s struggling economy. Evergrande’s good for some 240 billion USD, but has, reportedly, unpaid debts to the tune of some 300 billion USD.
Savour that for a second, will you? 300 billion USD is more money than most countries’ GDP. It’s 25% more than the entire company’s worth. And still, the real estate developer is trucking on, building more condos which’ll stay empty because of the collapsing Chinese housing market.
Boo-hoo, a big-deal developer is rotted. Who cares. Well, considering the Chinese economy is one of the keystones to the global one, a collapse there will inevitably have consequences world wide. Not to mention that it’s not just the Chinese Communist Party which has a stake in the company, but foreign investors as well. And seeing as China has previously proven… hesitant to repay foreign debt, the death throes of Evergrande could send cold shivers into every single mofo who ever put a single cent into the Chinese market. Speaking of which, trading was immediately halted with Evergrande stock once the announcement of liquefaction was made. So there’s exit strategy for the stock market traders right now.
The bottom line is this: Evergrande’s drawn out death is a sign of the times of the Chinese boomer economy. Y’know, that little thing that’s been the main cause of the climate crisis for twenty years. And since almost every globally connected economy on the planet is hitched on China’s expansion, it’s MAD to think the splash won’t get you wet. This would also explain China’s sabre-rattling vis-a-vis the sovereign neighbouring nation of Taiwan, seeing as there’s nothing’s as pathetic, weak, and effective to rally a failing domestic support as the Rally Round the Flag syndrome.
Did you hear the one about how you cook a frog alive?
If you throw a frog into boiling water, it’s just gonna jump out. But… if you progressively raise the temperature, the frog won’t notice a thing until its skin is popping and muscle fibres are hardening.
The global economy is a pretty big bowl of water. It’ll take some time to get the water simmering. But then again, there’s no rush, is there? There’s nowhere else to go, no edge to jump over to save ourselves, because the first thing to pot did was to make sure it reached everywhere. And we’ve been progressively raising the temperature for a very long time now…
/Sebastian Lindberg 30/1-2024