Evergrande: Chinese Property Giant May Lead to Global Economic Crisis

Chinese property giant Evergrande’s looming collapse is an alert to global economic crisis.

The Chinese real estate faced its biggest crisis in September 202, reaching nearly $50 trillion, total credit to businesses and households scrambles up to 287% of GDP compared to 178% a decade ago.

Families tended to transfer their savings to buying real estate rather than investing them in stock markets or placing them as deposits in state-run banks.

Fitch downgraded the credit rating to “C” from “CC”, the default long-term issuer foreign exchange rating (IDRs) of Chinese homebuilder, China’s Evergrande Group, and its subsidiaries, Hengda Real Estate Group Co., Ltd and Tianji Holding Limited.

Fitch confirmed the top unsecured ratings of Evergrande and Tianji at “C,” with a redemption rating of “RR6,” as well as the unsecured and secured Tianji banknotes issued by Scenery Journey Limited at “C,” with a redemption rating of “RR6”.

The default could spread the infection to other sectors, such as the bond market and the banking sector. It may also lead to job losses and faltering projects in the real estate sector, which supports a fifth or so of GDP

Since the company’s founding in 1996 by Hui Ka Yan, it has since accumulated more than $300 billion in debt, making it the world’s most indebted developer.

“As Evergrande teeters on the edge of default, collapse would have grave consequences for hundreds of thousands of property buyers and retail customers,” said CNBC Senior Correspondent Emily Tan.