Chinese real estate giant in crisis: a repeat of 2008?

The crisis at China's second largest real estate group is coming to a head. Evergrande's share prices have dropped by around 80 percent since the start of the year. Investors fear that if the company goes bankrupt it would have a similar impact worldwide as the bankruptcy of Lehman Brothers in 2008. But Europe's press is unanimous that this comparison is flawed.

Open/close all quotes (DE) /

Beijing has the final say

It is quite possible that the solution to the Evergrande debt crisis will still surprise us, says

“The People's Republic is neither a free market economy nor a constitutional state. The communist leadership always has the final say on important economic decisions. So it's quite possible that it will simply pull a solution out of its hat that makes no sense from a purely economic perspective and that won't really be comprehensible to outsiders. ... In the end, China's state and party leadership will probably use the Evergrande crisis to convey to the population that the private sector is not to be trusted - and that only the state and the Communist Party ensure reliability in China.”

La Stampa (IT) /

International funds will be the big losers

La Stampa is also convinced that the Chinese state will come to Evergrande's rescue:

“There is already talk of a deal that will allow other real estate groups to complete Evergrande's construction projects while the government writes off its debts, thus saving the local banks. The losers in this Made-in-China mess will be the big international funds, which will have to kiss goodbye to their investments in the big Chinese bubble. ... But there is no reason to feel sorry for them, because yet again they forgot the 'buyer beware' principle before rushing to invest in highly profitable but very risky securities.”

La Vanguardia (ES) /

The regime's legitimacy is at stake

La Vanguardia analyses the risks for Beijing:

“The regime under Xi Jinping can't afford to put social stability at risk. We should not forget that Chinese authoritarianism legitimises itself to the population by guaranteeing economic growth and social stability, and a crisis of this magnitude could have grave consequences for Beijing. For years, the Chinese have invested in the real estate market, convinced that prices would never fall. If the value of savings invested in property were to shrink, the social discontent would be huge and could have unforeseeable consequences.”