The Evergrande crisis, which has emerged from the real estate sector and increased its potential to spread, needs to be looked at from a multidimensional perspective. This crisis, which is mostly caused by debt, cash and liquidity problems, has the potential to create by following the path of the company, sector, general economy, financial system, and can be associated with recent economic history in many ways. The possible contractors of this crisis are banks, home buyers, investors and suppliers. Now, since the real estate sector is largely related to the financial system, the real estate crisis plus the banking crisis is a factor that increases the risk of a hard landing in the economy. If we consider the integration impact of China in terms of investment, it may not only be the Chinese crisis but also the regional crisis. Evergrande’s “too big to fail” situation raises the possibility of supportive measures from the government or the Central bank.
We see the PBOC injecting short-term cash into the financial system. This is a step up both from periodic quarter-end funding needs, but more importantly to relieve Evegrande’s cash crunch from the debt crisis. The Central Bank injected net CNY 90 billion (USD 13.9 billion) of funds through 7-day and 14-day reverse repo deals this morning, the highest level since February. Authorities added more than CNY 10 billion short-term liquidity to the banking system in one day for the first time this month.
The real estate market crisis disturbs the banks through the credit mechanism. Banks are less willing to lend when distress about loan returns increases. This is largely due to the shortage of collateral. At the same time, stress increases on the part of the economic actors in terms of cash situation. Because, a major economy stakeholder, who has difficulty in repaying their debts, accumulates risks in terms of the general condition of goods and service providers. After all, imagine that overdue checks trigger a cyclical debt crisis in an industry that doesn’t do business in cash. We can talk about a wide range from raw material suppliers to finished goods suppliers, from financial creditors to investors.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı