I find this Youtuber good on Evergrande and the potential effects on the global economy: https://www.youtube.com/watch?v=rQ0t964s-8Q
It's definitely not just EG that is in trouble, there are a large number of distressed developers that are also looking likely to default in the same way (2nd highest debtor Kaisa has already defaulted). Local government has been relying on land sales to fund themselves for years and that has now suddenly dried up. Chinese people cannot easily invest in other assets so have been buying property like crazy (some of the stats are amazing, for example in 2018 > %80 of new dwellings were sold to people who already had at least 1). $10Tn in household debt in China in 2021. Then you have a demographic time-bomb and the phenomenon of "Tofu Dreg" construction to add to the mix. The use of VIEs for offshore bonds (and share listing) means that the USD debt is effectively unsecured and could be lost completely if things go completely pear-shaped. Not to mention the fact that the real numbers are probably significantly worse than what gets reported.
And yet, when EG and Kaisa announce defaults the S&P hits an ATH - it's hard to imagine that there could be no effect but still it does not seem to phase markets outside.
It's definitely not just EG that is in trouble, there are a large number of distressed developers that are also looking likely to default in the same way (2nd highest debtor Kaisa has already defaulted). Local government has been relying on land sales to fund themselves for years and that has now suddenly dried up. Chinese people cannot easily invest in other assets so have been buying property like crazy (some of the stats are amazing, for example in 2018 > %80 of new dwellings were sold to people who already had at least 1). $10Tn in household debt in China in 2021. Then you have a demographic time-bomb and the phenomenon of "Tofu Dreg" construction to add to the mix. The use of VIEs for offshore bonds (and share listing) means that the USD debt is effectively unsecured and could be lost completely if things go completely pear-shaped. Not to mention the fact that the real numbers are probably significantly worse than what gets reported.
And yet, when EG and Kaisa announce defaults the S&P hits an ATH - it's hard to imagine that there could be no effect but still it does not seem to phase markets outside.