Reuters reported on the 26th (local time) that the crisis of China’s second real estate developer Evergrande Group, which is reportedly going bankrupt due to the debt crisis, is unlikely to spread around the world.
Evergrande currently has $300 billio in debt, and dollar-denominated bonds are on the verge of bankruptcy, with interest not being paid back.
As a result, there are concerns that the crisis will spread to financial markets around the world. In fact, not only the U.S. stock market but also the European stock market fell en masse due to the Hengda shock on the 21st, but also the cryptocurrency plunged.
However, the impact of the global stock market was only a day. This is because Evergrande’s debt amounts to $300 billion, but it accounts for only 0.3% of the total loans in the Chinese banking sector, and some predict that the Chinese financial sector will be able to fully absorb the impact.
“The Chinese financial sector can fully handle Evergrande’s debt,” said Stan Shipley, a bond strategist at Evercore, a New York-based financial firm.
He also said, “Evergrande is a mainly active company in China, so it is not very linked to global finance,” adding, “There is little possibility that the crisis will shake the global financial market.”
In particular, he stressed, “The Chinese banking sector has sufficient liquidity to digest even if Evergrande goes bankrupt.”
He diagnosed that other technical indicators showed little possibility of the crisis spreading to the global financial market.
For example, the “LIBOR-OIS Spread” represents the difference in interest rates between U.S. mortgage loans and unsecured loans, and is one of the indicators that measure tension in the short-term financial market.
A high spread means banks are reluctant to lend to each other because costs have increased.
However, on the 24th, the LIBOR-OIS spread decreased to 3.2bp (1bp is 0.01%) due to the increase in vaccinations and the resumption of the economy in most states in the United States. In April last year, when the epidemic was in full swing, it expanded to 135.21bp.
No abnormalities have been detected in other financial indicators, Reuters said.