Evergrande’s Potential Liquidation Poses a Significant Risk of Provoking a Global Crisis
Evergrande’s Restructuring Plan Rejected by Court, Leading to the Demise of the Real Estate Giant
China Evergrande Group faced a critical moment in court as it sought approval for its debt-restructuring plan. Unfortunately, the court’s decision on Monday resulted in the liquidation of the real estate powerhouse. This not only deepens the real estate crisis but also casts a shadow over the world’s second-largest economy.
Evergrande’s value has plummeted by over 90 percent in the past year, posing challenges for a wide range of investors, including banks, property buyers, and fellow real estate companies. Complicating matters further, the Chinese government is grappling with negative inflation, currently around -0.3 percent.
Understanding the magnitude of Evergrande’s debt is essential. The company’s debt surpasses four times the Gross Domestic Product (GDP) of El Salvador and is equivalent to the combined debts of Chile, Romania, and Finland. The fallout extends beyond financial institutions, as Evergrande, a major employer, directly and indirectly affects countless livelihoods. Moreover, the global supply chain is disrupted as the company sourced building materials from various countries.
It’s not just Evergrande that is facing financial trouble. Another major Chinese real estate developer, Country Garden, is also in a dire situation. According to Bloomberg, BlackRock, Allianz, Fidelity, and UBS all have exposure to Country Garden.
The collapse of Evergrande serves as a significant lesson for investors who favored real estate over digital assets such as Bitcoin. As the real estate giant falters, Harvest Global Investment, a leading fund manager based in Hong Kong, is taking a strategic step by applying to launch spot Bitcoin exchange-traded funds (ETFs). This move indicates a growing demand for digital assets in the region.
Despite the recent price correction that caused fear among some investors, Bitcoin whales were busy accumulating more BTC. Around 67 new entities now hold 1,000 BTC or more, marking a 4.50% increase in just two weeks, according to on-chain data.
In conclusion, the liquidation of Evergrande has far-reaching consequences. It not only exacerbates the real estate crisis but also raises concerns about the stability of the global economy. Investors are now shifting their focus towards digital assets like Bitcoin, as evidenced by the growing demand for Bitcoin ETFs. The aftermath of Evergrande’s collapse serves as a valuable lesson for those who underestimated the potential of digital assets in comparison to traditional investments.