Evergrande’s collapse would Crash China’s economy.

Evergrande’s collapse would Crash China’s economy.
The real estate developer Evergrande once binged on debt. Now the music has stopped, investors are panicking and experts are warning of an imminent failure.
Every once in a while a company grows so big and messy that governments fear what would happen to the broader economy if it were to fail. In China, Evergrande, a sprawling real estate developer, is that company.

Evergrande has the distinction of being the world’s most debt-saddled property developer and has been on life support for months. A steady drumbeat of bad news in recent weeks has accelerated what many experts warn is inevitable: failure.

The ratings firms like Fitch, Moody’s and S&P have said that Evergrande is running out of cash and time. Evergrande is faced with more than $300 billion in debt, hundreds of unfinished residential buildings and angry suppliers who have shut down construction sites. The company has started to pay overdue bills by handing over unfinished properties, and it has even asked employees to lend it money.
Observers are watching to see if Chinese regulators make good on their pledge to clean up the country’s corporate sector by letting “debt bombs” like Evergrande collapse.
How would Evergrande’s failure affect China’s economy?
A campaign by the central bank to tame property debt and reduce the banking sector’s exposure to troubled developers should mean that an Evergrande failure would have less of an impact on China’s financial system.

The reality may be more complicated.

Panic from investors and home buyers could spill over into the property market and hit prices, affecting household wealth and confidence. It could also shake global financial markets and make it harder for other Chinese companies to continue to finance their businesses with foreign investment.