Well, we know what to expect from any financial drama, at least in America. The taxpayer will pony up and foot the bill for the speculation of the rich because they're just too big to fail. Imagine being unable to buy a home because some "property" company was snapping up houses at ridiculous prices, they can't make a return on their investment, and file bankruptcy. The banks can't afford it, so the government bails them out with tax dollars that you paid into. Oh wait, we don't need to imagine.

 

Yes the world is awash with debt, and there may well be a financial meltdown of some sort at some point.
With Evergrande's dollarbond, due march next year, trading at 27% or so, so having a theoretical yield now of around 500%, the question isn't if Evergrande will default, but how soon. The bondmarket, evidenced by that 500% yield, says it won't be long. I don't think Evergrande's demise will trigger such a meltdown though.
It will cause some problems for smaller banks with large exposure to Evergrande and its supplier-creditors but the ripple effects will still be limited.

 

I am in agreement with the govt. bail out. China wants to be a super power, not the start of an economic downfall. They have bailed out (or subsidized) other companies to save face on the local markets. Also, I am doubtful they want to mess up their 30+ years of economic growth over 10%.
The govt will get involved, have more oversight and control, and just get richer. Unlike the tech companies they are now over regulating for dual listing this ....I hope.... is just a news cycle. Could be a good time to buy their ADR or equivalnt shares.... but I wont

 

The US government allowed Lehman Brothers to fail and that is regarded as the spark causing the 2008 financial crisis - the 'too big to fail' paradigm may actually be true.

The UK government bailed everyone out and then let the failed bankers (in banks which the UK taxpayer owned) to receive obscene bonuses on top of their obscene salaries. Some probably received Honours. But pity the person who evades small taxes or makes a minor infringement of a benefit claim - no bonuses, no Honours, just the weight of the criminal injustice system.

 

There's been an unwritten agreement between the Chinese Gov. and the people that they get to stay in power as long as the economy is good, shows growth, and the gov knows this. So it's very important that the economy doesn't collapse.

 

The Chinese government controls the economy, all information and the all the guns. How can there be an objective agreement with the people that allows the government to stay in power?

 

I remember as a child that Mao's 'Little Red Book' was the in thing - no idea why as young teens we were reading it but the part that stuck in my mind was when he said "Power comes from the barrel of a gun".

 

Mao said this famous phrase in 1927. But since decades the Chinese are following another strategy. Their gun is now econmics and investing money around the world. Whereas the Americans still believe in guns and invading other countries trying to implement their doctrin in countries of interest. But it seems there is not much power nor success coming from these guns anymore. The last the war they won was second world war. This was it. Maybe they should try it the chinese way. But I guess it might be a bit too late to turn the tide.


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Correct on the financial side - especially their desire to make the yuan THE reserve currency.