Look to Japan for lessons on Evergrande

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Evergrande Real Estate Group updates

Is the saga of Evergrande akin to the collapse of Lehman Brothers in 2008? Or is the rescue of AIG that year a better parallel? Or the 1998 bailout of Long-term Capital Management? 

That is a question being raised by investors as China’s second largest property group struggles under the weight of more than $300bn of debt (including $20bn in dollar-denominated bonds) and a cooling domestic property market.

But for my money there is another historical parallel to ponder: Hokkaido Takushoku, the Japanese regional bank, which imploded 24 years ago, when more than a tenth of its $75bn loan portfolio turned bad.

At first glance, that comparison might seem odd. Evergrande is a property developer not a lender. But what links them is a question that stalked Japan in 1997 and now hangs over Chinese finance: namely,…

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