{"id":59766,"date":"2021-10-09T08:13:06","date_gmt":"2021-10-09T13:13:06","guid":{"rendered":"https:\/\/olduvai.ca\/?p=59766"},"modified":"2021-10-09T08:13:06","modified_gmt":"2021-10-09T13:13:06","slug":"catastrophic-property-sales-mean-chinas-worst-case-scenario-is-now-in-play","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=59766","title":{"rendered":"“Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play"},"content":{"rendered":"
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“Catastrophic” Property Sales Mean China’s Worst Case Scenario Is Now In Play<\/a><\/h3>\n<\/header>\n
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No matter how the Evergrande drama plays out – whether it culminates with an uncontrolled, chaotic default and\/or distressed asset sale liquidation, a controlled restructuring where bondholders get some compensation, or with Beijing blinking and bailing out the core pillar of China’s housing market – remember that Evergrande is just a symptom of the trends that have whipsawed China’s property market in the past year, which has seen significant contraction as a result of Beijing policies seeking to tighten financial conditions as part of Xi’s new\u00a0“common prosperity”\u00a0<\/strong><\/em>drive which among other things, seeks to make housing much more affordable to everyone, not just the richest.<\/p>\n

As such, any contagion from the ongoing turmoil sweeping China’s heavily indebted property sector will impact not the banks, which are all state-owned entities and whose exposure to insolvent developers can easily be patched up by the state, but the property sector itself, which as Goldman recently calculated\u00a0is worth $62 trillion making it\u00a0the world’s largest asset class<\/u>,\u00a0contributes a mind-boggling 29% of Chinese GDP\u00a0<\/a>(compared to 6.2% in the US) and represents 62% of household wealth<\/strong>.<\/p>\n

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