For those of you who are not already aware this has the potential to be far more than a run of the mill corporate bankruptcy. Evergrande employs over 200,000 people directly while also providing work for as many as 4 million subcontractors who work to erect thousands of buildings for the company every year.
Beyond just job losses, the company is also holding deposits for 1.5 million properties that may not be delivered to regular Chinese citizens who were just looking for a home or an investment property.
Now loosing a home is terrible in ANY country, but perhaps nowhere more so than in China. The value of these properties compared to the incomes of people buying them is astronomical, and it often takes multiple family generations to save up for a deposit.
Because of this, real estate has become basically the only thing that most people invest in, and over a million people losing that investment will have massive knock on economic impacts beyond just putting people out on the streets (as is that wasn’t bad enough already)
Despite these social issues and the apparent threat to the national and global economy the Chinese government has said that they are not prepared to bail out the company.
Why? Well politics… but there are a few things that you need to understand about this crisis as we watch it play out in real time.
The first is how this collapse actually started in what looked like an otherwise very healthy company?
The second is how bad could this get if the government does not step in?
And the third is, Will this all be contained? Or could this leak out and cause an economic collapse in countries outside of China?
#Evergrande #ChineseEconomy #HowMoneyWorks
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