Did you know that real estate constitutes a whopping one-third of China’s massive economy? The property sector has been used to drive growth and most household wealth is held in real estate. As a result, for years developers like Evergrande have had access to cheap money, enabling them to become small Empires.
Recognizing that the situation was out of control, President Xi Jinping has used his "common prosperity" to establish new policies to limit the use of property as a financial tool. This latest round of policies has landed China’s second-largest property developer in a world of trouble. Now the world’s most indebted property developer, Evergrande is in debt to the tune of $310 billion and has yet to build over a million flats that have already been paid for.
Dexter Roberts, author of The Myth of Chinese Capitalism and former China bureau chief and Asia News Editor at Bloomberg Businessweek sits down with Fredrik and Leilani to delve into how Evergrande got to this point. Will the government bail the company out to prevent broader economic downturn? Or will Xi Jinping make an example of Evergrande to show that houses are for living in, not for speculation?