Special points to highlight in this issue:
* The Evergrande crisis is not the cause of anything. It is simply one of the most recent of a series of debt-related crises beginning with that of Baoshang Bank in May 2019. These include, most notably, Huarong, HNA, and soon enough by all accounts, Ping An. They reflect the unsustainable underlying debt dynamics that have characterized the Chinese economy for at least a decade.
* There are a number of potential risks and problems associated with Evergrande that tend to be jumbled together. I think it is more helpful to disaggregate these various issues and to think of them separately.
* Among these are the risk of domestic financial contagion, the risk of global financial contagion, the financial distress impact on the economy, and the implications for China’s underlying growth model.
Now read on...
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