China Must Deliver Bailout Vaccine to Evergrande’s Financial Pandemic

There are growing fears that China’s Evergrande, a real estate giant, will default on its massive loan: excess of $305 billion. If that happens, expect a financial pandemic which can rattle markets. Today, most leading stock markets gave up huge numbers as investors look for safer assets. But this is just the beginning, especially if China decides not to administer the right vaccine of financial bailout.

• Chinese officials are expected to stem the spillover from liquidity issues at Evergrande, the country’s largest property developer, before it slams the banking system and bleeds into foreign financial centers.
• But strategists also say Beijing needs to act quickly to restructure Evergrande, because markets are becoming nervous and it is hurting sentiment.
• The problems at the property developer could damage China’s economy and from there also dent the world economy.

Shares in Evergrande, which has been scrambling to raise funds to pay its many lenders, suppliers and investors, closed down 10.2% at HK$2.28 on Monday, after earlier plummeting 19% to its weakest level since May 2010.

Regulators have warned that its $305 billion of liabilities could spark broader risks to China’s financial system if its debts are not stabilised. […] A major test comes this week, with Evergrande due to pay $83.5 million in interest relating to its March 2022 bond on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes.

I call on the Chinese government to quickly deliver the right dose of financial vaccine bailout and arrest this evolving financial pandemic which Evergrande is possibly going to spread. Speed is key!

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