more evergrande fallout or something else?
They’re trying to authoritarian their way out of a massive speculation bubble.
I don’t think it will work, unless you can will away a black hole. Debt is a kind of gravity.
If they’re external creditors, it makes it a lot easier for them to go “nope, not paying that, what are you going to do?” when they’re one massive state-backed monolith.
Sovereign default is a thing. It’s a short term solution that can get a country out of immediate danger, but has very negative long term effects.
Evergrande was not a triggering event, it was an inevitable consequence. The CCP’s fiscal policy has driven “growth at all costs” for over 40 years now and they are running out of free runway. Their “private” sector (a bit of a misnomer considering how government-driven basically every company is over there) acquiesced to these government demands for growth, especially in real estate, long after traditional market fundamentals were saying to slow down, and now those “private” companies are saddled with investments without any way to make money off them post-pandemic. And their markets have realized that before the party did.
The party is only just now waking up to the fact that they can’t keep hitting GDP growth targets by pumping stimulus into their businesses and that their economy needs to begin maturing into a more stable form. We will not see a real “collapse” like some doomsday fans love to parrot, but there is a very large correction about to happen to their economic projections, in both GDP and demographics.
It could mirror the economic stagnation of Japan that begun in the 1990s. Very similar set of circumstances.
