The Evergrande Dilemma and Beijing’s Credibility
Rhodium Group Director Logan Wright writes on the Evergrande dilemma and China's credibility for the Center for Strategic and International Studies.
The time to be most concerned about China’s financial stability is when Beijing’s credibility is changing, when investors cannot be sure what assets Beijing is willing to guarantee its support, and when previously protected assets and industries are subjected to new policy-related uncertainties. This was one of the key findings of the CSIS report Credit and Credibility, released in late 2018, and one reason to argue that the current situation in China’s property sector and with its largest developer Evergrande is so meaningful for China’s economy and its future growth trajectory. Markets are now concerned that Beijing will finally be successful in its attempts to rein in China’s property sector after a decade of half-measures. And they are taking that threat to China’s economy more seriously because of the series of policy-led interventions into other industries over the past few months.
Logan Wright is adjunct fellow (non-resident) in the Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington, D.C., and director of China markets research at the Rhodium Group.