"From the way metal prices have moved in recent weeks, it looks like the wheels are falling off China's property market," and "Add to that the travails of China Evergrande group, the property developer that's at risk of defaulting on some $300 billion of liabilities, and it makes up a bearish picture for ferrous metals," wrote David Fickling. "In the best of times, ferrous metal consumption tends to decline once an economy moves from its resource-intensive industrial development stage toward a more affluent service economy." "The contract sales of properties sold by Evergrande have been coming down over the last three months, with sales falling from $10.75 billion in June to $5.71 billion in August," wrote Vivek Kaul. $1 equals 6.46 Chinese Yuan, Xe. In 1996, only 29% of Chinese lived in urban areas, by 2018 it was 60%. "Operating on scale, by 2004, Evergrande had become one of the ten largest Chinese real estate developers in a market that had more than 24,000 players." "Evergrande's rise happened primarily because of what E-House calls the Evergrande model of 'three highs and one low' (high debt, high leverage, high turnover and low cost)." Real estate contributes 29% of China's gross domestic product (GDP). Thomas Orik wrote, "For mom-and-pop investors, real estate was the only show in town. Bank deposits, with their below inflation returns, looked unattractive. The roller coaster stock market, lurching between, huge gains and massive losses, was too volatile to act as a store of value." "In fact, Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, had warned in March that if home prices fall, people might suffer losses, leading them to default on their home loans and this would create economic chaos." US markets fell yesterday. "The S&P 500 fell 1.7% to 4,357.73, posting its worst daily performance since May 12," CNBC. "The Dow Jones Industrial average lost 614.41 points, or 1.8%, to 33,970.47 for its biggest one day drop since July 19. The tech-heavy Nasdaq Composite dropped 2.2% to 14,713.90." "Asian stock markets were down on Tuesday (today) amid concerns around Chinese property group Evergrande and the impact on China's financial system. Japan's benchmark Nikkei 225 index was almost 2% lower, while the Hang Seng in Hong Kong dipped by 0.3%," BBC. "That followed similar falls in Europe, with Germany's Dax index losing 2.3%, and the Cac 40 in France down 1.7%." "The offshore yuan wallowed near an almost one-month low on Tuesday while the safe-haven dollar and yen stood tall as investors sought shelter from a potential China Evergrande default," Reuters. Added to economic pressures, China's neighborhood has suddenly become more uncertain. China has been intruding into Indian territory and taking over slice after slice leading to a fierce hand-to-hand fight at Galwan Valley in June 2020, leading to the death of 20 Indian soldiers, wikipedia. "The UK, US and Australia have announced a historic security pact in the Asia-Pacific, in what's seen as an effort to counter China. It will let Australia build nuclear-powered submarines for the first time, using technology provided by the US," BBC. "Tensions between China and Australia have taken a $4 billion toll on the important trading partnership," but "While trade between China and Australia fell by about 5.4 billion Australian dollars ($4 billion)," "that loss had been mostly made up by a 4.4 billion Australian dollar ($3.27 billion) increase with the rest of the world", said Australian Treasurer Josh Feidenberg, CNN. "Taiwan proposed....extra defense spending of T$240 billion ($8.69 billion) over the next five years, including on new missiles," Reuters. Then, there is Afghanistan which shares a 80 km border with Xinjiang province in China. "The US hastily withdrawing its troops....has already had a serious negative impact on the situation in Afghanistan," China's Foreign Minister Wang Yi told US Secretary of State Anthony Blinken, Hindustan Times. Default by Evergrande will not be China's Lehman moment, wikipedia, but it could turn out to be a part of 'lingchi' which means 'death by a thousand cuts', wikipedia. After all, the Chinese invented it.
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