{"id":105610,"date":"2021-10-05T10:00:00","date_gmt":"2021-10-05T14:00:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=105610"},"modified":"2022-11-21T09:48:10","modified_gmt":"2022-11-21T14:48:10","slug":"should-you-care-about-chinas-evergrande","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/","title":{"rendered":"Should You Care About China\u2019s Evergrande?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks.<br><br>Evergrande is one of the largest real estate development companies in the world, and it\u2019s been a major beneficiary of China\u2019s property boom of the past decade.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">China built its wealth on an export-led model. But following the 2008 meltdown, its leaders tweaked policy to favor domestic investment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Well, that had its benefits. China\u2019s destiny became less tied to the appetite of Western consumers. Today, China has some of the best infrastructure in the world, at least in its developed coastal areas.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-speculative-property-market\"><strong>Speculative Property Market<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">But there were excesses and China\u2019s leadership started to get uncomfortable with what was starting to look more like a property bubble with each passing day.<br><br>China passed new rules attempting to manage the bubble and dissuade borrowing. That, in turn, put pressure on Evergrande\u2019s businesses, which&nbsp; brings us to today.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The company owes more than $300 billion and isn\u2019t able to meet its interest payments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Painful Memories<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Great Recession wasn\u2019t all that long ago. We remember all too well what happens when the property sector goes bust and takes down the banking system with it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Things started getting rocky in the U.S. by the end of 2007, but it wasn\u2019t until Lehman Brothers failed in September of 2008 that the wheels fell off. That\u2019s when the stock market went into convulsions and the entire banking system came close to imploding.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Federal Reserve and the Treasury stepped in to stop the bleeding. But even then, the damage was done. We had the deepest recession in decades, and it took years to put things back together.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In my opinion, I don\u2019t see China facing a \u201cLehman Brothers moment,\u201d per se.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>China\u2019s Options<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">In my view, China can backstop its banks and prevent widespread failures. That\u2019s not hard to do in a controlled, top-down economy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Evergrande, in my opinion, might be allowed to fail with the Chinese government stepping in to make sure it doesn\u2019t take down the financial system.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That said, we don\u2019t need to see a Lehman-style meltdown for things to get nasty.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Beijing knows that China\u2019s corporate sector has too much debt. But deleveraging is hard. If you borrow a dollar (or yuan) to spend today, it\u2019s a dollar that you won\u2019t spend tomorrow, unless you also borrow more tomorrow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Reducing debt, or even slowing its growth, means that you\u2019re draining demand out of the system. Less debt means fewer new construction projects, which means fewer construction jobs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">China is the world\u2019s biggest consumer of most industrial commodities, particularly those tied to construction, such as copper. China gobbled up 54% of all copper mined and sold last year.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A serious slowdown in China\u2019s domestic investment means a major reduction in global demand for commodities, which&nbsp; means slower growth in Latin America, Southeast Asia and even developed exporters, including Australia and Canada.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Takeawa<\/strong>y<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">And what about all of those Chinese consumers? As an example, in any given year, Starbucks earns about 20% of its revenues from China, and Apple takes in about 17%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Do you think a hard landing in China won\u2019t have a massive influence on sales and earnings growth for these companies?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">China has a serious problem on its hands. And a problem for China is a problem for the rest of the world.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&#8212;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Originally Posted on October 5, 2021 &#8211; <a href=\"https:\/\/investing.interactiveadvisors.com\/2021\/10\/should-you-care-about-chinas-evergrande\">Should You Care About China\u2019s Evergrande?<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This&nbsp;<a href=\"https:\/\/moneyandmarkets.com\/should-you-care-about-chinas-evergrande\/\">post<\/a>&nbsp;first appeared on September 28 on the Money &amp; Markets&nbsp;<a href=\"https:\/\/moneyandmarkets.com\/\">blog<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Disclosure<br><br>This piece is provided as educational information only and is not intended to provide investment or other advice. This material is&nbsp; not to be construed as a recommendation or solicitation to buy or sell any security, financial product, instrument, or to participate&nbsp; in any particular trading strategy.<\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>This article is not intended as tax advice and is provided for educational and information purposes.&nbsp; Interactive Advisors does not provide tax advice. &nbsp; All references to tax matters or information provided here are for illustrative purposes only and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties.&nbsp; Investors seeking tax advice should consult an independent tax advisor.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development companies in the world.<\/p>\n","protected":false},"author":20,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[4,21,16,17,18,6,8,9,1031,26,3],"tags":[10366],"contributors-categories":[13605],"class_list":["post-105610","post","type-post","status-publish","format-standard","category-asia","category-commodities","category-forex","category-futures","category-macro","category-north-america","category-region","category-securities","category-south-america","category-text-articles","category-traders-insight","tag-evergrande","contributors-categories-interactive-advisors"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Should You Care About China\u2019s Evergrande?<\/title>\n<meta name=\"description\" content=\"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/105610\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Should You Care About China\u2019s Evergrande? | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development companies in the world.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2021-10-05T14:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-11-21T14:48:10+00:00\" \/>\n<meta name=\"author\" content=\"Charles Sizemore\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Charles Sizemore\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\n\t    \"@context\": \"https:\\\/\\\/schema.org\",\n\t    \"@graph\": [\n\t        {\n\t            \"@type\": \"NewsArticle\",\n\t            \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/#article\",\n\t            \"isPartOf\": {\n\t                \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/\"\n\t            },\n\t            \"author\": {\n\t                \"name\": \"Charles Sizemore\",\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/person\\\/d85c59af542575147e6573f7508dcb6d\"\n\t            },\n\t            \"headline\": \"Should You Care About China\u2019s Evergrande?\",\n\t            \"datePublished\": \"2021-10-05T14:00:00+00:00\",\n\t            \"dateModified\": \"2022-11-21T14:48:10+00:00\",\n\t            \"mainEntityOfPage\": {\n\t                \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/\"\n\t            },\n\t            \"wordCount\": 731,\n\t            \"publisher\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\"\n\t            },\n\t            \"keywords\": [\n\t                \"Evergrande\"\n\t            ],\n\t            \"articleSection\": [\n\t                \"Asia Pacific\",\n\t                \"Commodities\",\n\t                \"Forex\",\n\t                \"Futures\",\n\t                \"Macro\",\n\t                \"North America\",\n\t                \"Region\",\n\t                \"Securities\",\n\t                \"South America\",\n\t                \"Text Articles\",\n\t                \"Traders' Insight\"\n\t            ],\n\t            \"inLanguage\": \"en-US\"\n\t        },\n\t        {\n\t            \"@type\": \"WebPage\",\n\t            \"@id\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/\",\n\t            \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/\",\n\t            \"name\": \"Should You Care About China\u2019s Evergrande? | IBKR Campus US\",\n\t            \"isPartOf\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#website\"\n\t            },\n\t            \"datePublished\": \"2021-10-05T14:00:00+00:00\",\n\t            \"dateModified\": \"2022-11-21T14:48:10+00:00\",\n\t            \"description\": \"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development companies in the world.\",\n\t            \"inLanguage\": \"en-US\",\n\t            \"potentialAction\": [\n\t                {\n\t                    \"@type\": \"ReadAction\",\n\t                    \"target\": [\n\t                        \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/traders-insight\\\/securities\\\/macro\\\/should-you-care-about-chinas-evergrande\\\/\"\n\t                    ]\n\t                }\n\t            ]\n\t        },\n\t        {\n\t            \"@type\": \"WebSite\",\n\t            \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#website\",\n\t            \"url\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/\",\n\t            \"name\": \"IBKR Campus US\",\n\t            \"description\": \"Financial Education from Interactive Brokers\",\n\t            \"publisher\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\"\n\t            },\n\t            \"potentialAction\": [\n\t                {\n\t                    \"@type\": \"SearchAction\",\n\t                    \"target\": {\n\t                        \"@type\": \"EntryPoint\",\n\t                        \"urlTemplate\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/?s={search_term_string}\"\n\t                    },\n\t                    \"query-input\": {\n\t                        \"@type\": \"PropertyValueSpecification\",\n\t                        \"valueRequired\": true,\n\t                        \"valueName\": \"search_term_string\"\n\t                    }\n\t                }\n\t            ],\n\t            \"inLanguage\": \"en-US\"\n\t        },\n\t        {\n\t            \"@type\": \"Organization\",\n\t            \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#organization\",\n\t            \"name\": \"Interactive Brokers\",\n\t            \"alternateName\": \"IBKR\",\n\t            \"url\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/\",\n\t            \"logo\": {\n\t                \"@type\": \"ImageObject\",\n\t                \"inLanguage\": \"en-US\",\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/logo\\\/image\\\/\",\n\t                \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/05\\\/ibkr-campus-logo.jpg\",\n\t                \"contentUrl\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2024\\\/05\\\/ibkr-campus-logo.jpg\",\n\t                \"width\": 669,\n\t                \"height\": 669,\n\t                \"caption\": \"Interactive Brokers\"\n\t            },\n\t            \"image\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/logo\\\/image\\\/\"\n\t            },\n\t            \"publishingPrinciples\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/about-ibkr-campus\\\/\",\n\t            \"ethicsPolicy\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/cyber-security-notice\\\/\"\n\t        },\n\t        {\n\t            \"@type\": \"Person\",\n\t            \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/#\\\/schema\\\/person\\\/d85c59af542575147e6573f7508dcb6d\",\n\t            \"name\": \"Charles Sizemore\",\n\t            \"description\": \"Charles Sizemore manages the Strategic Growth Allocation and Long Term GARP portfolios offered by Interactive Advisors, an online investing marketplace and a division of Interactive Brokers Group. He is also the Chief Investment Officer of Sizemore Capital Management, a registered investment advisor.\",\n\t            \"url\": \"https:\\\/\\\/www.interactivebrokers.com\\\/campus\\\/author\\\/charles-sizemore\\\/\"\n\t        }\n\t    ]\n\t}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Should You Care About China\u2019s Evergrande?","description":"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development...","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/105610\/","og_locale":"en_US","og_type":"article","og_title":"Should You Care About China\u2019s Evergrande? | IBKR Campus US","og_description":"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development companies in the world.","og_url":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/","og_site_name":"IBKR Campus US","article_published_time":"2021-10-05T14:00:00+00:00","article_modified_time":"2022-11-21T14:48:10+00:00","author":"Charles Sizemore","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Charles Sizemore","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"NewsArticle","@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/#article","isPartOf":{"@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/"},"author":{"name":"Charles Sizemore","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/person\/d85c59af542575147e6573f7508dcb6d"},"headline":"Should You Care About China\u2019s Evergrande?","datePublished":"2021-10-05T14:00:00+00:00","dateModified":"2022-11-21T14:48:10+00:00","mainEntityOfPage":{"@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/"},"wordCount":731,"publisher":{"@id":"https:\/\/ibkrcampus.com\/campus\/#organization"},"keywords":["Evergrande"],"articleSection":["Asia Pacific","Commodities","Forex","Futures","Macro","North America","Region","Securities","South America","Text Articles","Traders' Insight"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/","url":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/","name":"Should You Care About China\u2019s Evergrande? | IBKR Campus US","isPartOf":{"@id":"https:\/\/ibkrcampus.com\/campus\/#website"},"datePublished":"2021-10-05T14:00:00+00:00","dateModified":"2022-11-21T14:48:10+00:00","description":"Most of us had never heard of Evergrande until it showed up in the headlines in recent weeks. Evergrande is one of the largest real estate development companies in the world.","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/should-you-care-about-chinas-evergrande\/"]}]},{"@type":"WebSite","@id":"https:\/\/ibkrcampus.com\/campus\/#website","url":"https:\/\/ibkrcampus.com\/campus\/","name":"IBKR Campus US","description":"Financial Education from Interactive Brokers","publisher":{"@id":"https:\/\/ibkrcampus.com\/campus\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/ibkrcampus.com\/campus\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/ibkrcampus.com\/campus\/#organization","name":"Interactive Brokers","alternateName":"IBKR","url":"https:\/\/ibkrcampus.com\/campus\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/logo\/image\/","url":"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/ibkr-campus-logo.jpg","contentUrl":"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/ibkr-campus-logo.jpg","width":669,"height":669,"caption":"Interactive Brokers"},"image":{"@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/logo\/image\/"},"publishingPrinciples":"https:\/\/www.interactivebrokers.com\/campus\/about-ibkr-campus\/","ethicsPolicy":"https:\/\/www.interactivebrokers.com\/campus\/cyber-security-notice\/"},{"@type":"Person","@id":"https:\/\/ibkrcampus.com\/campus\/#\/schema\/person\/d85c59af542575147e6573f7508dcb6d","name":"Charles Sizemore","description":"Charles Sizemore manages the Strategic Growth Allocation and Long Term GARP portfolios offered by Interactive Advisors, an online investing marketplace and a division of Interactive Brokers Group. He is also the Chief Investment Officer of Sizemore Capital Management, a registered investment advisor.","url":"https:\/\/www.interactivebrokers.com\/campus\/author\/charles-sizemore\/"}]}},"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/105610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/comments?post=105610"}],"version-history":[{"count":0,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/105610\/revisions"}],"wp:attachment":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/media?parent=105610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/categories?post=105610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/tags?post=105610"},{"taxonomy":"contributors-categories","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/contributors-categories?post=105610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}