The potential collapse of the Chinese construction giant Evergrande, one of the most indebted companies in the world, brought to the global financial market the fear of a financial crisis like the one that occurred in 2008, which was centered on Lehman Brothers.
Evergrande entered a challenging situation at the end of 2020, after Chinese regulators ruled that real estate developers would have to reduce debt before taking on new debt.
The company, based in Shenzhen, China, had the equivalent of US$88 billion in loans outstanding in the quarter ended in June, 42% of which were due in less than a year. Evergrande sold US$2.2 billion in assets in the first half of the year, according to Dow Jones Newswires
Therefore, according to market analysts, a possible failure of the construction company could generate turbulence in the international market. The crisis would mainly affect the emerging countries Brazil, South Africa and Turkey, as they compete for the top of the most vulnerable ranking, considering fiscal, financial and political problems, considering that, as in 2008, a “freeze” of the financial market could occur. international market due to risk aversion - that is, lack of liquidity.
But why could a problem at a Chinese construction company bring down the entire world economy?
Imagine that the collapse affects the entire Chinese construction sector – Evergrande is the largest Chinese real estate company – to the point of causing a cooling of the economy, leading Beijing to reduce imports...
…commodity exporters to the Asian country, such as Brazil, would be in trouble.
In a situation where the Asian giant no longer imports commodities as it used to, countries like Brazil, which has a gigantic fiscal debt and is preparing another “fiscal ride”, in addition to all the political problems that arise with the turmoil between the federal government, STF and National Congress... Doom is near!
Combined with Evergrande’s possible default, we have the following problems:
- 1 - iron ore with a devaluation of more than 49% in the period between June and today;
- 2 - mad cow crisis, which caused cattle futures to plummet by more than 10%;
- 3 - inflation in the United States exceeding GDP and exceeding 5%;
- 4 - the FED's approach to starting tappering, which will reduce the company's asset purchase program and reduce the liquidity of the financial system.
Does the bad news stop here?
The market would like so, however this is not the reality.
Apart from the problems of the Chinese giant and the possible cooling of the Asian financial market, we have the Brazilian jabuticabas: default on Precatório, new Bolsa Família with an impact of R$9.4 billion, IOF and tax reform.
Well, approaching the number of words I have for this article we have that, for now, Evergrande's bonds have plummeted and its shares have accumulated a drop of more than 80% this year, but the contagion to other assets - both inside and outside from China – there is still no exact correlation. Jūrinis Kolagenas su Hialurono rūgštimi melior.lt
Information from international newspapers assures that Beijing has signaled that, until now, it has decided not to help the problems of the giant Evergrande - and this is due to the fact that the biggest concerns lie with companies in the technology sector and the data they store. Even the government itself stated its desire for the construction sector to greatly reduce its debt, when, at the beginning of this year, it established financial metrics to deleverage the sector.
Thus, international investors, with an eye on tappering – the North American government's withdrawal of financial stimulus to the economy with the reduction in the purchase of assets – and the possible cooling of the Chinese economy with the prospect of Evergrande's bankruptcy, provoke a movement of aversion to risk and sell-off of risk positions, especially in countries that “don’t do their homework”.
