As China’s property crisis plagues its economy and financial system, is a ‘Lehman Moment’ looming?
- China Evergrande Group reported losses of 812 billion yuan (US$112 billion) for 2021 and 2022, while fellow property developer Country Garden is on the verge of a bond default
- A so-called Lehman moment – where one company’s problems become everyone’s problems – is seen as unlikely, but mounting problems are set to test Beijing
Two years after the bond default by one of China’s biggest real estate developers created the first shock waves, Beijing’s promise that everything is under control is becoming increasingly harder to sell to investors.
Its bankruptcy protection application filed in a US court last week also grabbed significant attention on Chinese social media.
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China real estate woes: Evergrande files for bankruptcy protection in New York
How can it comfort hundreds of thousands of people who are making mortgage payments for homes that have not been delivered? How can it appease worried investors who are shunning Chinese equities? How can it turn around a growing number of bearish views about China’s financial system and its economic growth?
Global investors, Chinese homebuyers and economists are now holding their breath to see which domino will be the next to fall, and what tools Beijing can use to prevent its own so-called Lehman moment – a phase drawn from the late 2008 bankruptcy of global investment bank Lehman Brothers to describe the trigger of a systemic risk outbreak.
