Chinese property group Evergrande offered a glimmer of hope yesterday by announcing it had “resolved” interest payments for an onshore bond due this week, days after a debt crisis at the group rippled across global markets.
But the world’s most indebted developer did not say when it would make the payments and, most crucially, failed to shed any further light on an important deadline it faces today for its international bonds.
The developments have only added to uncertainty over the prospects of a default at Evergrande, an event that could spark the biggest debt restructuring in China’s history. Here, FT correspondents break down what China’s biggest debt restructuring could look like.
Short seller Jim Chanos said Evergrande’s crisis could be “far worse” for investors in China than a “Lehman-type situation” because it points to the end of the property-driven growth model in the world’s second-largest economy.
“There’s lots of Evergrandes out there in China — Evergrande just happens to be one of the biggest,” Chanos told the Financial Times in an interview. “But all the developers look like this. The whole Chinese property market is on stilts,” said the founder of New York-based hedge fund Kynikos Associates who is best known for predicting the collapse of energy group Enron.
Read more
Big Read: The crisis at Evergrande exposes the deep flaws in Beijing’s growth strategy. It is the symptom of a much bigger problem.
Lex: Is this a “Lehman moment” for China? Our Lex team assesses the evidence.
Due Diligence asks whether China can control the Evergrande explosion
What are your predictions about the impact of Evergrande’s debt crisis? Let me know what you think at emily.goldberg@ft.com. Thanks for reading FirstFT Asia — Emily
Five more stories in the news
1. More Fed officials see first interest rate rise in 2022 At the end of the Federal Open Market Committee’s two-day meeting Fed officials were evenly split on the likelihood of an interest rate increase in 2022, with nine predicting a move by the end of next year — two more than in June. The predictions came as the central bank prepares to withdraw its enormous stimulus programme as early as November.
2. The latest Aukus fallout Joe Biden has offered an olive branch to French president Emmanuel Macron to soothe tensions that erupted over France’s exclusion from a new trilateral security pact that deprived Paris of a long-planned submarine deal. Meanwhile, China said the Asia-Pacific region needs economic growth and jobs, not gunpowder and submarines.
3. Taiwan follows China with bid to join transpacific trade pact The formal request by Taiwan to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, just a week after China did the same, will force other members of the pact into a delicate political balancing act.
More Taiwan news: An infatuation with Lithuanian fare, including ruta chocolate, is just one sign of a newfound love between Taiwan and central and eastern European countries as China relations cool.
4. US to ‘stand up’ to alleged gas market manipulation in Europe US energy secretary Jennifer Granholm has vowed to support European countries hit by an energy supply crunch blamed by some officials and traders on Russia, and said the US would “stand up” to suppliers accused of manipulating prices. For the latest industry news sign up to our Energy Source newsletter.
5. SoftBank backs Steven Mnuchin’s private equity fund Japan’s SoftBank has followed Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala in backing a new $2.5bn private equity fund set up by the former US Treasury secretary — just eight months after he left office.
Coronavirus digest
South-east Asian countries that failed to administer Covid-19 vaccines fast enough are suffering outbreaks of the disease that are causing a growing regional economic divergence, the Asian Development Bank has warned.
The Serum Institute of India, the world’s largest vaccine maker, plans to invest just over £50m in Oxford BioMedica, one of AstraZeneca’s manufacturers for Covid-19 vaccines.
Joe Biden has urged rich countries to donate more Covid-19 vaccines to poorer parts of the world, as he announced the US will buy another 500m doses of BioNTech/Pfizer’s vaccine to give away.
The end of extra federal unemployment benefits for millions of Americans this month is unlikely to provide a significant boost to the US labour market, according to our analysis.
Thanks to those readers who voted in our latest poll. Eighty-two of you agreed with Joe Biden’s decision to relax the rules for overseas travellers to the US from early November.
The day ahead
Taiwan benchmark interest rate decision Policymakers are expected to leave the country’s interest rate unchanged, remaining at a record low, when they meet today, according to a Reuters poll. (Reuters)
President Joe Biden hosts Quad leaders The US president will host the leaders of the “Quad” countries — Australia, India and Japan — to discuss issues in the Indo-Pacific region. As Indian prime minister Narendra Modi
prepares to travel to Washington India’s health ministry said that Covid vaccine exports would resume next month.
What else we’re reading
Inequality is behind central bank dilemma There is a worry that persistent price shocks get baked into expectations, which will only be reversed by a period of significantly higher short-term rates. That would cause stagflation, creating devastating problems for weaker borrowers, notably in heavily indebted emerging economies, writes Martin Wolf.
Wall Street embraces the ‘forever CEO’ In the past decade, large US banks’ chiefs have rarely stepped down unless forced to do so: Jamie Dimon, Brian Moynihan and James Gorman are among those who have spurned shorter tenures. But this trend can serve as a roadblock in the push towards greater diversity in corporate America.
“When things are going well you don’t want to leave but when things are going poorly you feel you can’t leave” — Lloyd Blankfein, former Goldman Sachs chief executive
The economic impact of limiting abortion access The US debate over abortion typically focuses on politics, ethics and religion — but rarely economics. This week, more than 150 economists and researchers weighed in on how women will be affected if states such as Mississippi and Texas are allowed to put stringent new restrictions on the procedure.
Decarbonising takes thousands of tiny steps Stunts and pious pledges won’t save the planet, writes Brooke Masters. Manufacturers and retailers must rethink their entire design, manufacturing and sales processes. Those that have are finding that change is either expensive or unglamorous — but necessary to cut carbon emissions.
Coping with the chaos that is hybrid working On returning to work after the holidays I have discovered some flaws in my new hybrid working life, writes Emma Jacobs. First, I kept leaving my phone charger at home. Then I absent-mindedly scheduled meetings that meant coming into the office every day. This is part of a Future of the Workplace special report.
Theatre
Pop stars such as Dan Gillespie Sells and Jake Shears are stretching their skills by writing hit musicals for stage and screen. While venturing into musicals is sometimes seen as the over-reach of the star who is never refused — think of Paul Simon’s The Capeman, which opened on Broadway in 1998 to terrible reviews and closed 68 performances later — in recent times it’s become a legitimate path for musicians.
Source: Economy - ft.com
