In the Anglo-Saxon world it is defined 11th hour development, the development of the last second. Evergrandein fact, he waited until then before sending the $ 83.5 million due for the coupon that expired a month ago to the trustee referring to the dollar-denominated bonds. But it did. Just at the dawn of the last day of the grace period, the 30 days after which foreign bond holders could have issued the default note on the unpaid interest. Ladies and gentlemen, the Chinese Lehman has been averted. The price? Only 83.5 million dollars.
Obviously, this doesn’t solve the basic problem. Evergrande’s indebtedness remains, as it is spillover in progress on a real estate market that in China is experiencing its biggest crisis ever: but the credit event did not happen, the financial contagion has been contained for now. Beijing has avoided its Lehman, New York has not. It seems little but it is not. Because symbols matter, the stigma remains. And Xi Jinping played his cards as a consummate poker player, waiting for the right moment: because the question related to those 83.5 million dollars had been resolved for some time. Chinese institutions were ready with cash in hand, given the ease with which certain rounds of turnover are substantiated on the balance sheets of companies that are only apparently private in a state monopoly regime de facto. But of course it is one thing to pay on any given day, leaving the fingerprints of debt and guilty delay in the background. Another detaching the check to the trustee less than 24 hours after the collapse of the Evergrande stock on the stock market upon returning to trading after a two-week stop in Hong Kong: a thud that reached -14% and caused by the negative outcome of the attempt sale of 50.1% of the Evergrande Property Services package to Hopson Development Holdings for 20.04 billion Hong Kong dollars (2.58 billion dollars). The signal, in this case, remains. And twofold.
On the one hand, a slap in the face to all the newspaper headlines in the world that began the countdown to the official default of Evergrande, at that point only the 24 hours that separated the company from the end of the grace period 30 days, given the lack of income from the sale. On the other hand, humiliating those who thought of using the piloted sinking of the negotiation centered on the rebel Hong Kong as a financial and geopolitical weapon together. Incidentally, on the night between Thursday and yesterday, as the trustee who manages the interests of Evergrande’s foreign bond holders received his due, Joe Biden thundered: The US will defend Taiwan in the event of a China attack. Worst concealment of the pain he was actually suffering had never been shown, at least like this outside.
Beware, however, of the settling jolts. The default appears to have been avoided, but Evergrande’s operations are in fact frozen, so much so that real estate sales at the peak of the season contracted by 97%: between September 1 and October 20, the so-called contracted sales, the key source of liquidity for the sector, recorded an equivalent value of only 3.65 billion yuan (571 million dollars) against the 142 billion yuan collected in the same period last year. In short, a disaster. Which goes to affect a key sector of the Chinese economy, given the 26% weight of construction-real estate on the GDP of the Dragon and impact with the 300 billion debt exposure of Evergrande on the 50 trillion dollar body of the Chinese financial system as a whole. Cheerful securitisations, exposures based solely on leverage, yields at high risk of further explosion: so far, however, all controlled.
Of course, the average spread of Chinese high yield denominated in dollars has reached 17%, the highest in ten years and the consequence is clear: a series of defaults already guaranteed on maturities that concern small manufacturers, unable to move volumes. and political interassamento like Evegrande. Sinic Holdings and Fantasia Holdings, in fact, have already skipped deadlines, entering the area of selective default in the ratings of the rating agencies. The sun, however, has risen just the same. The world did not end in a armageddon. The Chinese Lehman it did not materialize. And, indeed, the whole world breathed a sigh of relief when it was discovered that the slowdown in the Dragon economy – at least, at the official level – was limited to 4.9%.
Like it or not, the locomotive of the world is in Asia. And he is a communist, at least formally and on the basis of nineteenth-century ideological classifications that have come back strongly in fashion in this period of opposition for electoral purposes. From now to the end of the year alone, there are 15 bond maturities on coupons or interests concerning medium-small subjects in the Chinese real estate sector: it started yesterday with 941 million yuan on a Yango Group bond and will end on the 28th. December with the 800 million belonging to one note of Guangxi Construction Engineering Group. According to the concerned alarmism of certain media, there would be the potential risk of one Lehman per day.
Do you know why all this fuss, without a minimum of perspective on what is happening? For two reasons. The first is shown by this graph, which shows how the US GDP for the third quarter has gone from the 6% recorded by the GDPNow of the Atlanta Fed only at the beginning of August to 0.5% recorded on 19 October last. And beware, because the revision came only four days after the previous one, the one that brought the estimated growth of the American economy from 1.3% to 1.2% no later than October 15th. Now we are approaching the area of the official contraction: on October 27th there will be the new update, we’ll see. Not bad as a result: 6% to 0.5% in two and a half months. Given the numbers in discussions and the dynamics, ring any bells, as the British say? Translated: do you ring any dangerously familiar bell?
Second, China officially holds the helm of the world. Like it or not, given the fact that it was the savage globalization greed of the West that offered it to him on a silver platter. And this must be hidden, denied, misrepresented. It is necessary to resort to smoke screens, boastfulness, false flags and ideological paraphernalia of all kinds. But one fact remains: Beijing has the bank in hand. AND the Plenum of the Communist Party scheduled from 8 to 11 November, it will communicate to the world on the basis of which rules of engagement the next years of increasingly clear and frontal opposition will unfold. And not months or quarters, let’s talk about decades.
In short, a new era has begun. And America – understood as the hegemonic role of the dollar – doesn’t want to get over it. At least we, however, from now on try to be serious and realistic. And let’s stop with this Evegrande antics. Why the flesh is elsewhere.
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