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Update: Evergrande (Chinese mega property developer) files for Chapter 15 bankruptcy protection


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WWW.CNBC.COM

Strategists do not now expect financial contagion from the crisis at a large Chinese property developer, but they do say there could be economic impact.

 

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A liquidity crisis at a large Chinese property developer has shaken global markets, and strategists say it could send ripples across the global economy.

 

But they also say the issue will likely be contained by the Chinese government before it wreaks damage in the banking system, and it is not expected to lead to a broader global financial contagion.

 

The critical question for investors is how and when do leaders in Beijing handle the situation and whether they launch a restructuring of China Evergrande Group, as many market pros expect.

 

 

 

 

 

 

 

 

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WWW.NYTIMES.COM

The Chinese property giant owes $300 billion and is on the hook for as many as 1.6 million apartments. It may owe tens of thousands of its employees money, too.

 

 

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4 minutes ago, Commissar SFLUFAN said:

China will probably nationalize the company, execute its management/executives, and send a bill for the bullet to their families.

 

And here in the States, we'd give them a cash payment, allow management/executives to receive their full bonuses, and send the bill to tax payers. I'm not saying we need to execute bankrupt executives, but we do have prime real estate in tropical Cuba.

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Honestly, there’s a good chance this doesn’t end up being much more than a hiccup for the Chinese.

 

The setup there is very different and the state is already heavily involved in companies like this.  They will probably undertake some reform program to straighten out its books and use government money to forgive/cancel/make whole any debts that might cause a ‘crisis’.

 

The key difference is that a massive proportion of the real estate market in China is de facto owned by the state, and the big property holdings that are private are managed partially by the party via party members who ‘monitor’ the property-holding entity’s activities.  This was not the case in Japan and the US when they had their real estate bubble, and everything was privately owned.

 

This setup has its own set of problems, (what happens when the bureaucrats in charge are incompetent?) but it does reduce the danger of ‘contagion’ from a bankruptcy like this leading to a debt crisis.  We definitely shouldn’t view an event like this through the lens of Western finance; it would be a very distortionary lens.

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