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China Aoyuan, the Guangzhou-based developer said on Thursday that it had not yet made payment on the $651 million in principal demanded by its unnamed creditor, nor had it reached an agreement to find an alternative settlement.
“At the request of Evergrande Real Estate Group Co., Ltd., the People’s Government of Guangdong Province agreed to send a working group to Evergrande Real Estate Group Co., Ltd. This is a powerful measure to promote enterprise risk management, supervise and effectively strengthen internal control management, and maintain normal operations. We support this,” China’s central bank said.
China’s property prices fell 0.2% in October, the biggest drop since 2015 when China had a recession, at least for investments, as the Shanghai stock market crashed that year while property prices dropped by 5% year on year.
China still announced that in both 2015 and 2016, at the depth of this crash, they had growth of some 6%, but some officials even in China have raised questions regarding the veracity of their GDP data.
Hui Ka Yan (pictured in 2016), the billionaire chairman of Evergrande, has gone so far as to sell even his own personal assets to meet the $300 billion debt obligations of Evergrande, but that seems to have just delayed what now appears to be inevitable.
The first, and still so far the only market reaction to these Friday evening developments, has been this Saturday morning on the bitcoin markets.
It plunged to some surprise by 20% while bitcoin was holding off until that point and eth looked like it might even new all time high.
This Shanghai reaction is most likely due to Evergrande, but bitcoin had began falling somewhat during US trading hours.
Stocks, especially Chinese ones, are under pressure following the delisting of Didi. That led to a sell off on Friday with quite a few US listed Chinese stocks dropping by 8%.
Airline stocks might come under pressure too after Boris Johnson announced new restrictions on Saturday, puzzling investors in regards to the government’s strategy in light of the population being vaccinated.
That announcement has been met with widespread anger on social media, including on conservative outlets like r/ukpolitics, with many questioning just what exactly is their plan if the vaccines are not a way out as those that are double or even triple jabbed are still subject to restrictions.
The market has not however overreacted so far to potential policy changes as the expectations appear to be that any such changes will be very limited in light of the new variant being the mildest so far.
But the bitcoin markets clearly did overreact to Evergrande. You’d expect green normally for these sort of situations for an asset like bitcoin, but initially one maybe has to account for traditional actors that hold bitcoin who might prefer the red narrative rather than flight to safety.
China kicked out miners while this Evergrande story was developing and more recently pressured what generally are known as offshore Chinese exchanges to not serve Chinese citizens.
That could be so that they have no constrains when devaluing if necessary, with authorities there seemingly preparing for an Evergrande like event for some time.
Something that should largely be contained to China where bitcoin will probably keep acting as a flight to safety as they keep finding new loopholes.
And should be contained because the western recession last decade led to China’s take off in 2008, rather than a contraction, with it unclear why the same wouldn’t apply, but in reverse.
Thus we might not see an overreaction in western stocks on Monday, presuming no accidental mistake by either western or Chinese politicians, but whether we get green or red, remains to be seen.