The collapse of Chinese giant Evergrande could start a chain reaction that leads to a disastrous “lost decade” for Australia.
But rather than a Lehman Brothers-style financial contagion, Evergrande’s default instead marks a major structural adjustment to the Chinese economy, experts say. It is likely to lead to a restructuring that will see foreign investors hit hard but domestic lenders, customers and suppliers protected to a degree.last financial year.
Rather than a “dead stop”, he predicts a longer-term fall in demand for Australian commodities to fuel the construction industry will be partially taken up by the need for some of the same materials in green energy technologies. “We know that because Chinese policymakers are doing only just enough to keep it going without it turning into a major economic accident. The fact they’ve let Evergrande go under is the ultimate evidence they want it to go under – they want all of their Evergrandes to go under, because they want to stop overbuilding in the economy.”
“Chinese authorities probably won’t allow it to default on its debt to domestic Chinese borrowers, and I think they’ll try to protect customers and suppliers,” he said.
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