#Evergrande: “Kill the Chicken 🐓 , to scare the Monkeys 🙉 🙈 🙊”

Evergrander Debts: ~$300 Billion in liabilities. ~7X in 7 Years

Who's the monkey, you ask? 

There are two mainly

, as commented on Bloomberg TV on September 23, 2021 by Tom Orlik, Bloomberg Economics correspondent—courtesy of whom the, Kill the Chicken, to scare the Monkeys, quote comes from. 

Financial Sector 

Banks have been lending to property developers as if their properties and developments will always keep on going up, creating a huge moral hazard. So China wants to teach them a bit of a lesson.

Property prices in China have become some of the priciest in the world. 

Property Developers

Here more of the same. Property Developers just kept on growing and growing as property prices increased and the value of their land increased, creating this self feeding cycle of ever-increasing property values, leading to ever-larger loans, leading to ever-bigger projects. All this created a hubris among property developers that led many of them to branch out into tangential and vanity projects—sucking cash out of the business.  

Bloomberg reports that in 1998, when China created a nationwide housing market after tightly restricting private sales for decades, only a third of its people lived in towns and cities. Now almost two-thirds do, increasing the urban population by 480 million. The homes they've moved into are modestly sized by developed-world standards, averaging less than 40 square meters (431 square feet) per person. But about 90% of urban residents own those homes, worth more than $50 trillion in total, according to Goldman Sachs. 

…

Evergrande could avoid bankruptcy. 

Most analysts expect a restructuring in which some banks roll over financing, while other creditors receive assets such as properties and land rather than cash as repayment, and bondholders get some but not all of their investment back. The company's humbling may nonetheless mark a turning point in China's economy. 

Developers will still be needed.

The government plans for 10 million people to move to urban areas every year through 2025. But the companies are likely to be smaller, and they won't benefit as much from runaway price rises.

See the whole report on Bloomberg:

Evergrande Debt Crisis Is Financial Stress Test No One Wanted 

https://www.bloomberg.com/news/features/2021-09-22/china-s-evergrande-debt-crisis-is-stress-test-no-one-wanted

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