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Evergrande Explained | China’s Lehman Moment, why you should be worried for our wealth

Sep 20, 2021 11:55 IST | By Editorji News Desk

China's Evergrande Group is giving nervous flashbacks to the financial market of 2008 with a sense of déjà vu of the Lehman crisis. EJ Explains why the Evergrande crisis is not restricted to mainland and how a possible default could unravel a global bull run. 

Who is Evergrande?

Founded in 1996 Evergrande Real Estate is the mainland's biggest property developer, owning more than 1,300 projects in more than 280 cities. 

What is the problem?

The ballooning debt of the firm that is edging at default, 1.97 trillion yuan of liabilities of the firm equals 2% of China's GDP. As per Bloomberg, Evergrande is also scheduled to pay interest on bank loans Monday, with a one-day grace period. Monday and Tuesday are public holidays in China. While details on the amount due aren’t publicly available, Chinese authorities have already told major lenders not to expect repayment as per reports. 

When did the debt downfall begin?

Evergrande which is now the world's most indebted comopany had a liquidity scare in 2020. Default was averted as when a group of investors waived their right to force a $13 billion repayment.

Is it a "Too Big To Fail" contender?

Reuters reports that the editor-in-chief of state-backed Chinese newspaper Global Times warned debt-ridden property giant Evergrande Group that it should not bet on a government bailout on the assumption that it is "too big to fail".

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