Concerns Mount About China’s Real Estate Market

Evergrande’s Announcement

US stocks declined in trading Monday, as concerns intensified that Beijing will not bail out China Evergrande Group (EGRNF), a Chinese real estate company which warned last week that it cannot pay back its debt. The company has the largest debt position of any publicly traded real estate management or development company. If Evergrande fails it will result in massive losses for investors and bondholders.

Evergrande’s troubles come as investors are growing more concerned about whether stocks will be able to rally after a strong year so far in 2021. With valuations rising and signs emerging that economic recovery in the US may be slowing, investors sent stocks lower Monday.

Oil Prices Fall, Dollar Strengthens

As investors sought out safe havens yesterday, oil prices declined and Treasury yields fell while the dollar gained strength. Bitcoin also traded lower, as did tech and financial stocks. Investors are now looking more critically at the broader property sector and the impact an Evergrande failure will have on the rest of the industry.

Regulators in China are putting pressure on real estate companies including Evergrande to lower their debt exposure as they try to cool off the red-hot real estate market in the country.

Is This China’s Lehman Brothers Moment?

Evergrande has about $300 billion in debt coming due, which is prompting some industry watchers to warn that its collapse could be China’s “Lehman Brothers moment.” In 2008, Lehman Brothers, the Wall Street firm, filed for bankruptcy, which was a big contributor to the global financial crisis.

At the very least, the problems at Evergrande are expected to have a spillover effect in the real estate sector and other parts of China’s economy. Concerns about the company are already having an impact on stock markets across the globe. With a potential collapse of Evergrande, investors are bracing for even more volatility in the coming days.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

TLS 1.2 Encrypted
Equal Housing Lender