"On Friday, The Wall Street Journal reported, citing 'people familiar with the matter', that Evergrande had failed to make its coupon payment on a US-dollar bond," wrote Prof V Anantha Nageswaran. "There is a mixture of hope and opinion that Evergrande would not turn out to be China's 'Lehman moment' for the simple reason that China can simply order its banks to start lending to the real-estate company and all would be well." The sudden bankruptcy of Lehman Brothers on September 15, 2008 in the US led to the subprime crisis and nearly led to a global financial meltdown, wikipedia. "Evergrande is one of China's largest real estate developers," CNN. "Evergrande made its name in residential property -- it boasts that it 'owns more than 1300 projects in more than 280 cities' across China -- but its interests extend far beyond that. Outside housing, the group has invested in electric vehicles, sports and theme parks." "The group has gained infamy for becoming China's most indebted developer, with more than $300 billion worth of liabilities." "China's suppliers wait a long time to get paid by their customers," which is why, "companies increasingly have turned to supply chain financing; instead of waiting to get paid , firms go to a third party that hands over cash sooner", wrote Anjani Trivedi. "But the moment repayment becomes an issue, credit tightens. Cracks quickly appear up and down the supply chain." "Evergrande leaned on vendors and other parts of the supply chain: apartment buyers and customers. It even roped in its employees, who were told to invest in the company's wealth products." "Lehman was a top tier investment bank that went from good to bad during the 2007 subprime mortgage crisis. On the other hand, Evergrande, a well-known presence in Hong Kong's capital markets for years, has always been bad," wrote Shuli Ren. "For almost a decade, calling Evergrande out, questioning the asset quality of its unsold properties and asking if its auditors were asleep." How, and why, did it get away with its shady business? Because, Evergrande founder Hui Ka Yan " was 'woke' in Communist Party terms". "A party member for more than 35 years, the 62-year-old Hui was already speaking of 'common prosperity' in 2018. In 2020, with $465 million in donations, Hui ranked as China's most charitable person for the fourth year in a row." Since 2008, "China has led the debt binge. Private debt held by households and corporations has risen by nearly 100 percentage points to 280%," wrote Ruchir Sharma. "Like its more advanced rivals from the US to Japan, China has created a financial system that is in constant need of government support and stimulus. Policymakers keep economic growth going at any cost, and repeatedly back down from tightening policy at the slightest hint of economic or financial trouble." China President Xi Jinping is in a tight spot. If he "were to depart from the past, by purging debts and letting defaults spike, it could trigger a nervous breakdown in the world's financial system." Could China's loss be India's gain as investors look for safer markets? "Indian technology startups, which are mopping up record inflows of venture capital this year, will gain further as global capital moves away from Chinese tech companies that are weathering a regulatory onslaught, according to multiple founders and investors," Economic Times (ET). "So far this year, the country has already seen 25 new unicorns -- startups valued over $1 billion -- and nearly $20.76 billion has been raised across 583 deals as of August 20, according to data provided by industry tracker Venture Intelligence." So, is India going to take China's place in world trade? Ain't going to happen, said Swaminathan Aiyar. "India has a problem of its political constraints. It is not a low wage country. It is not a country with cheap land." "We are not going to become an export-oriented power house the way China is or the way Vietnam is right now." We won't gain, but if China has a Lehman moment leading to a global "nervous breakdown" will that cause a Minsky Moment in India? So many moments.
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