by Peter Zeihan on January 31, 2024

Evergrande, formerly China’s largest property developer, has just declared bankruptcy and the fallout is going to be massive. Let’s look at how we got to this point and some potential paths forward.

The collapse of Evergrande is a consequence of the Chinese government’s hyper-financialization policy that floods the economy with citizens’ savings to ensure stability…clearly it didn’t work. However, years of this policy have contributed to a massive overbuild of real estate, which is where many Chinese citizens have parked their private savings.

So, the potential for economic turmoil to ensue is quite high. How can China prevent this from happening? They can follow a Western-style bankruptcy procedure, which could stir up a whole slew of problems, or the government could intervene and circumvent the court ruling, which could spark concern internationally and diminish the legal autonomy of Hong Kong.

Regardless of which path is chosen, there will be dire economic consequences and myriad of issues for China’s social stability.

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