Global Financial Crash Alert: China Fears Payment Default After Company Mismanagement | City & Business

Global Financial Crash Alert: China Fears Payment Default After Company Mismanagement | City & Business

As Chinese company Evergrande faces economic turmoil, Beijing has now admitted that some companies are poorly managed. Although it tried to allay fears about the country’s financial situation, and therefore the global economy, a statement admitted being concerned about debt defaults. In an article published by state-backed Xinhua, a commentary revealed that real estate companies face the risk of default.

Without naming Evergrande, it was written: “It should be understood that there will be clues whether a property is likely to default on its debts, so the risk of overflow into the financial sector can be predicted. ”
He added that real estate companies were facing default issues due to mismanagement and the inability to adapt their operations to changes in the market.

Evergrande is one of the largest companies in the world and the second largest real estate company in China, but faces the possibility of defaulting on its vast debt.

Indeed, it owes $ 300 billion (£ 221 billion) in debt repayment, which represents 2% of China’s GDP.

Although the Evergrande group managed to pay $ 83.5million (£ 60million) in bond interest payments on Friday, the company missed a separate deadline on September 23 and two more payments on September 29 and October 11. worth up to $ 193 million (£ 140 million).
Although it is a Chinese company, if Evergrande does not repay its debts to financial institutions and banks, it will have dire consequences for the global economy.

If such a large company were to run out of such an amount of money, it could cause a shock wave of fear throughout the global financial network and cause lenders to lose faith in the financial system.

This could lead to a credit crunch similar to the 2008 financial crash, in which businesses struggled to obtain loans due to low confidence in the system.

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“China’s outstanding external debt reaches $ 2.4 trillion in 2020.

“These are the numbers we know about what is making the crisis worse, it’s the hidden debt, the numbers we don’t know like local government borrowing with no transparency there.

“Here’s something you need to know, the state is the biggest borrower in China, local governments depend on book borrowing, which means these numbers aren’t on the books, they’re hidden.

“In 2018, Standard and Poor’s published a report estimating that hidden public debt could exceed $ 4 trillion.

“And that $ 4 trillion bomb now looks like it’s ready to go.

“China tried to clean the house quietly, but the flaws brought the truth. “


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