THE FALLS OF CHINA'S PROPERTY GIANTS

$Evergrande(03333)$

These would have greater than we told effects on economic and financial impacts both domestically and globally.

Some likely impacts include:

1. Financial Instability: If these companies (Example: Evergrande) default on their massive debts, it could lead to a systematic financial crisis within China’s banking and real estate sectors, potentially causing a ripple effect or systematic risk through the global financial system. The last thing we want to see is the Lehman’s Brother’s effect in year 2008. In my opinion, we may see a similar ripple effect coming. However, the reaction of Chinese regulators will be very crucial in determining if they can stir the ship into safety. If not treated with care, the domestic problem may escalate into regional and global financial crisis.

2. Property Market: Property price drops could badly affect their homeowners, possibly leading to a slowdown in consumer spending and a fall in property values. The domestic market consumer sentiments is already sluggish, with the negative news of property market spreading rapidly in the social media, it will further affect the consumer spending leading to a worse than expected results that we can predict.

3. Economic Growth: The real estate sector is a significant driver of China’s economic growth. A crisis in the property market could lead to lower economic growth rates. As traditionally Chinese investors nest their investment majority in the real estate sector, it will be a disaster for traditional Chinese investors to navigate into unfamiliar grounds diverting their investments in domestic equity market that they are less familiar and more volatile, or even worse, diverting in unknown oversea investment that they may find harder to manage.

4. Global Markets: International investors and companies exposed to these property giants may face losses, impacting global markets and investments. Systematic risk may kick in and global fund liquidity may lose it fluidity and result in indescribable domino effects like Lehman’s Brother’s crisis in 2008.

5. Supply Chain Disruptions: These companies are involved in various industries, and their financial troubles could disrupt supply chains for materials and construction projects, impacting various sectors worldwide. For a simple analysis, we shall foresee that the supply chain disruptions to come soon again not forgetting how supply chain disruption had created tremendous consequential effects to USA during the Covid-19 period.

6. Social Unrest: If homeowners or investors suffer significant losses, it could lead to social unrest and protests. In a communist environment, we will expect suppression to resistance during the crisis and it will be unavoidable confrontations between the homeowners or investors that suffer huge losses and expect the government to intervene and protect or hedge their losses that will be highly unlikely to happen.

7. Government Response: The Chinese government’s response to this crisis, such as potential bailouts or regulations, will have widespread consequences. Chinese government will face severe dilemma in deciding to do bailouts or face challenges of not being able to prevent widespread social unrest. If they choose to come out with potential bailouts, they will have to suppress public unrest, this may lead to consequents that the Western world will come in the condemn Chinese government of being totalitarian and that will hamper their progress since opening the economy in 1977.

It is very important to understand that the current situation is dynamics, and the real impacts will be dependent on how the Chines government and international financial institutions will react to the already coming crisis.

TIME WILL TELL WHAT WILL EVENTUALLY HAPPEN.