It seems that there is not too much concern that China's property market woes and the collapse of Evergrande can provoke an international financial crisis. Hope they're right.
Here's another article's summary:
Many are concerned that losses would force bondholders to sell other
investments or shed riskier assets to raise cash, hurting markets that
may seem unrelated. The catchphrase being thrown about is “contagion,”
with many worried about tightly connected global markets.
Not all
analysts agree. Analysts at Barclays called such speculation “far off
base” while acknowledging the probable spillover effects with economic
implications.
“But a true ‘Lehman moment’ is a crisis of a very different magnitude” and Chinese authorities would need to make a series of policy mistakes in response to the crisis for this to be of the Lehman level, they added.
SocGen economists said investors seem to be “differentiating between
safe and risky borrowers,” which at the moment would limit the spillover
to the wider financial market. On the whole, the sector’s
investment-grade index also remained largely stable, they added.
They
agreed largely that China’s situation is “very different” as the
property sector’s links to the financial system are “not on the same
scale” and noted that the capital markets are not the primary means of
funding. The message is that as long as the regulators step in, the
situation is manageable.
“The lesson from Lehman was that moral hazard needs to take a back seat to systemic risk,” Barclays analysts wrote.
Update: a very unspecific explainer in Washington Post notes this:
Another
concern is credit markets. Evergrande has done so much borrowing, and
so many lenders are at risk of getting burned, would its potential
default have a ripple effect for other borrowers? On both of these
questions, experts say, it’s still too soon to tell.
But
troubling signs already are emerging: Remember, hundreds of millions of
Chinese homeowners who could see their property values drop, meaning
there’s a good chance they’ll rein in spending. Global consumer markets —
on everything from clothes to electronics to food — rely on the
prolific buying power of the Chinese middle class. If China is poised to
spend much less on consumer goods, there will be economic ramifications
around the world.
That bit in italics: is that right? I didn't really realise it was so significant on a global scale, seeing I always think of China as more the country getting rich by making stuff the West wants (and therefore driven by our consumers' demands, not their's)
Update 2: I have been waiting for a while for a review article about the incredible and sudden degree of Chinese government intervention into industry and society, and how it very much feels a bit like a Cultural Revolution (Lite, perhaps.)
I think this is the article I was looking for, from a couple of weeks ago in the Washington Post:
Xi Jinping’s crackdown on everything is remaking Chinese society
It starts:
The
orders have been sudden, dramatic and often baffling. Last week,
“American Idol”-style competitions and shows featuring men deemed too
effeminate were banned by Chinese authorities. Days earlier, one of
China’s wealthiest actresses, Zhao Wei, had her movies, television
series and news mentions scrubbed from the Internet as if she had never
existed.
Over the summer, China’s multibillion-dollar private education industry was decimated overnight by a ban on for-profit tutoring, while new regulations wiped more than $1 trillion
from Chinese tech stocks since a peak in February. As China’s tech
moguls compete to donate more to President Xi Jinping’s campaign against
inequality, “Xi Jinping Thought” is taught in elementary schools, and
foreign games and apps like Animal Crossing and Duolingo have been
pulled from stores.
A
dizzying regulatory crackdown unleashed by China’s government has
spared almost no sector over the past few months. This sprawling
“rectification” campaign — with such disparate targets as ride-hailing services, insurance, education and even the amount of time children can spend playing video games — is redrawing the boundaries of business and society in China as Xi prepares to take on a controversial third term in 2022.
And further down:
The
scope and velocity of the society-wide rectification has some worried
China may be at the beginning of the kind of cultural and ideological
upheaval that has brought the country to a standstill before.
Last week, an essay
by a retired newspaper editor and blogger described the changes as a
response to threats from the United States. “What these events tell us
is that a monumental change is taking place in China, and that the
economic, financial, cultural, and political spheres are undergoing a
profound transformation — or, one could say, a profound revolution,”
wrote Li Guangman.
The
essay, picked up by China’s state media outlets, prompted comparisons
with a 1965 article that launched China’s chaotic decade-long Cultural
Revolution, and left even some in the party establishment worried.
Hu
Xijin, the outspoken editor of the state-run Global Times, criticized
the article as misleading and an “extreme interpretation” of the recent
rush of regulatory orders that could trigger “confusion and panic.”
Differences over the article may be a sign of deeper dispute within the
party, according to Yawei Liu, a senior adviser focusing on China at the
Carter Center in Atlanta, who wrote that such disagreement indicates “raging debate inside the CCP on the merits of reform and opening up, on where China is today . . . and about what kind of nation China wants to become.”
Update 3: oh, another good piece in the Washington Post has dropped:
Anyone
who has visited China over the past several decades has heard anguished
stories from Chinese friends about the results of Mao Zedong’s social
engineering in the Great Leap Forward and the Cultural Revolution. China spent 40 years recovering from those disasters to become a great, modern nation.
So,
I can almost hear the gasps inside China, from the generation that
lived through the nightmare years, as President Xi Jinping has moved
down a Maoist path this year toward tighter state control of the economy
— including “self-criticism” sessions for Chinese business and
political leaders whose crime, it seems, was being too successful.
Xi’s
leftward turn represents a major change in the management of the
Chinese economy, in the view of a half-dozen experts I’ve consulted over
the past week. It has the idealistic goal of “common prosperity” and a
fairer distribution of China’s new wealth. But Xi will drive these
changes using the ruthless instrument of an authoritarian, one-party state — and you can already see the purges and figurative “dunce caps” for those he views as obstacles.
How much is driven by Xi's own inflated views of himself? Maybe a lot?:
Xi is a cunning and ruthlessly successful politician;
since taking power in 2013, he has purged a generation of leaders in
the Communist Party, the military, and the intelligence and security
services to gain absolute control. His hubris is that, like Mao, he now
seeks to become a man-God, whose thoughts are holy writ.
Xi’s
unabated hunger for power is evident in his drive for a third term as
party leader. That would break the two-term rule that has prevailed in
China’s modern history and provided the checks and balances of group
leadership. “China had solved the major problem of a one-party state —
succession. Now they are un-solving it,” argues a former top-level U.S.
national security official.
