When a real estate developer is about to go bankrupt and liabilities equivalent to the equivalent of $ 300 billion are affected, memories of the Lehman bankruptcy and the 2007 financial crisis are quickly awakened. Evergrande is the name of the colossus and it comes from China. At the moment it looks like the Chinese financial system has scraped past a disaster again. The enforcement power of the Chinese government seems to be working one more time. Lucky
Why do we have to be interested in this in this country too? China is not only becoming more and more important for us in purely economic terms, it is also shaping the financial markets. The most important topics in the market come almost without exception from China and no longer from the USA. Just think of the problems with the supply chains, the political interventions especially in the technology segment, the economy that seems to have its new engine in China, and of course the pandemic per se.
The big difference is that developments in the USA are mostly predictable and can be prepared from an investor’s point of view. We are often caught on the wrong foot in China. At the moment the system is working in China. The state decides to put the lid on a source of danger, so to speak – and whoosh, the problem is solved.
Will this work in the long term? Not only for investors who are invested in China, but also for all investors, it is essential to keep a close eye on developments in the Middle Kingdom. Because our exchanges are connected to the dominoes from China. The risk of the chain running through and our stones falling is still low. But such a chain reaction should not be underestimated.