After the health, economic and social crisis, the financial crisis? This prospect is cause for concern for many players in international finance as all eyes have been turned, for several days, to China, whose economy could experience some upheavals at the end of 2021.
In question ? A real estate giant drowned in debt and threatening to collapse. Dragging part of the Chinese economy in its wake. And thereby global finance?
Evergrande, the Chinese Lehman Brothers?
This name probably means nothing to you. No need to worry about your economic culture, unless you are a specialist in the Chinese business world, it is normal.
Evergrande Real Estate Group is the name of the second largest Chinese real estate developer, created in 1996 when the Middle Kingdom was booming. Its leader, Xu Jiayin, briefly became Asia’s richest man in 2017.
Evergrande is certainly one of the symbols of the real estate frenzy that has affected China since the beginning of the 2000s. The emergence of a gigantic middle class within the population has led to the construction of millions of homes in record time. Currently, the developer directly employs 200,000 people. Including subcontractors, in reality nearly 4 million jobs depend on them.
But now, Evergrande is indebted, even ultra-indebted, with a slate estimated at 260 billion dollars, the equivalent of Portugal’s GDP.
This week, the promoter is expected to settle several important obligations. Except that, on paper, he is insolvent and above all on the verge of bankruptcy. Unless the Chinese state intervenes to avoid a collapse of Evergrande which could have a major impact on its growth rate.
Financial markets on the alert
The delicate situation in China inevitably has consequences for global stock markets. In Hong Kong, the Hang Seng, benchmark index, is down 11.5% since the start of 2021, while Evergrande’s share price has lost nearly 85% over the same period!
In the West, the European and American indices are starting to shiver, this was also the case, on Monday September 20, of the French CAC 40 (-1.74%), the American Dow Jones (-2% at the opening) or more German Dax (-2.3%).
But concretely, are we on the verge of a global financial crisis? Not really, according to experts who believe, as explained Le Figaro this Tuesday morning, that the fall of Evergrande would mainly have consequences for Chinese economic players.
However, it is not to be excluded that these shocks are felt in France, in particular in the banking sector or that of the luxury, both very sensitive to the state of health of the Chinese economy. Moreover, it seems unlikely that Beijing will let the promoter become toxic go bankrupt.
What to do with your investments indexed to the stock market?
While the vast majority of French savings are not indexed to the financial markets, many of them own shares through PEAs, employee savings (PEE, PER, etc.) or life insurance in units of account. All the experts agree that there is no point in panicking in such circumstances. Especially since these investments are generally made over the long term. If you have any doubts or fears regarding the nature of your assets, seek advice from your account manager, who will be able to provide you with information. It should also be noted that transactions made on these accounts (purchase/sale) may be chargeable. Data that should encourage reflection before acting!