China Evergrande veers toward default — and a $300 billion global shock
Real estate tycoon Xu Jiayin and Evergrande, the company he founded in 1996 are coming under fire for it’s $300 billion in liabilities. Evergrande, one of China’s largest developers, would collect debt to fund expansions, and became too financially risky for the authorities to ignore. China’s central bank ordered the company to end it’s debt. The crisis is expected to end in one of China’s largest defaults.
The default will be a large shock for the country’s property market and will affect the Chinese Communist Party’s campaign that claims to tackle financial risk without harming economic growth. The threat of default caused panic of foreign creditors being left without payments on Monday, and the global stock markets tanked in response. China leadership appears to be leaning towards allowing a default, which reflects a shift in government priorities over the last decade. Analysts say the strictness of the credit policies may cause consequences for the property market and may cause the growth of the economy to slow. Xu stepped down as chairman of EEvergrande’s main unit in August and appears to be showing responsibility for the company’s debt crisis.