China could become the next obstacle to the global economic recovery. George Magnus, an associate at the University of Oxford China Centre, supposes that the current situation in the Chinese property market may lead to a standstill in the world economy.
While all eyes are on economic difficulties caused by the coronavirus pandemic, China may face another serious problem. In the near future, the world’s second largest economy may enter a grave debt crisis. The crisis that is likely to affect both the domestic and global economy could be caused by actions of one Chinese developer. The fact is that the clock is ticking for Evergrande Group to pay back $7.4 billion of bonds coming due next year. The company has previously allowed delays in payments and even suspended trading in its shares. It is on the edge of default that may negatively influence the global economy, markets, and China’s financial system. The local authorities do not interfere in the company’s affairs, just asking its founder Hui Ka Yan to settle the debt issues by himself.
Although Evergrande is suffering grave financial problems, since 2009 its founder has earned more than $7 billion in payouts. According to Bloomberg, Hui Ka Yan “deployed about $3.3 billion to buy company shares, bonds and luxury assets.” He also purchased a mansion, private jet, and a large yacht. “Hui’s luxury assets alone could help cover the more than $400 million in bond coupons,” Bloomberg wrote.
