It’s got to be getting harder for them. There is a growing sense of economic gloom, and of the possibility that black swans and grey rhinos are lying out there in wait, particularly in the finance and property sector. The top news of the week was of the massive wealth management conglomerate Zhongzhi Enterprise Group declaring itself to be “severely insolvent,” with debts amounting to $65 billion, double its assets. “Severely insolvent” sounds like “a little bit pregnant,” but such a financial position can be created only by a massive number of bad decisions and a precipitous change in market conditions. Or, of course, both.
In the property market, Sunac China Holdings announced it had reached agreement on rolling over and reorganizing its huge debts, but the question is whether, with the time thus bought, the company is able to finish its stalled projects and deliver apartments to consumers who have paid their deposits, and also make new sales. The former is going to be easier than the latter. Who is going to buy an apartment in this market? Evergrande went through a similar process a couple of years ago, but the context has changed significantly since then. Anyway, congratulations to Sunac for at the least kicking the can down the road a fair way.
Apocalyptic scenarios are best avoided. This system has too many means to maintain apparent stability in the dynamic soup that is the Chinese economy. But it feels anecdotally and atmospherically as if next year is going to tougher than this year, albeit with some bright spots such as EVs. But even there, Nio was supposed to be the future, and now it is facing problems. Ai-yaaa.
Meanwhile, with one sonar pulse the sense of improvement in Sino-Oz relations evaporated. The world is getting really complicated. But that’s no reason not to enjoy the weekend ahead. Go for it!