If Evergrande defaults, what’s next?
Evergrande seems headed for default
China’s largest property developer is expected to miss some interest payments on domestic loans this week. That could could put further downward pressure on an already depressed housing market.
Some sort of state-guided restructuring process is likely
We think policymakers will act pre-emptively to put Evergrande into a restructuring process, but creditors may have to take losses. This should be sufficient to prevent a systemic financial crisis.
The macro impact appears containable if property sales stabilise
A pickup in infrastructure investment could offset a modest decline in property investment. But the scale of the decline may depend on whether or not property sales stabilise, something policymakers have less control over