This is not good. If you wanted a trigger for a recession, this could be it.
Standard & Poor’s says that Evergrande will default because it cannot sell new constructions; its business model is now defunct. Behind China’s largest real estate developer are thousands of contractors, many of whom will default as well.
Worse, Evergrande is the tip of the iceberg of a sprawling overleveraged Chinese real estate industry, which is a bubble on the brink of bursting.
All capital access will freeze, creating a cycle of asset liquidations and defaults. The Chinese government is not supporting bailouts, and it may be too late and too big for them to do so.
Top financial analysts see the Chinese economy taking a significant hit.
More on the snowball effect here: The world’s largest Ponzi is bursting – the Evergrande default
