The second largest property developer in China (Evergrande) may go bankrupt.
I am not a specialist in Chinese markets in general and property developers in particular, nor do I know how the communist party makes decisions. My best bet is that, if trouble gets serious, the Chinese government will take over the company, put founders and managers in jail for mismanagement, and put in enough money to paper over the problem. The Chinese economy (in nominal terms) in 2020 was about the same size as the US economy in 2008, and Evergrande liabilities are less than half Lehman liabilities.
Nonetheless, some people compare the problem to Lehman in 2018 ("Evergrande teeters on the edge of collapse. Will China step in to avoid a ‘Lehman moment’? Globe and Mail Sep 21):
"While an Evergrande collapse would cause immediate misery among Chinese homeowners and workers, the fear is that, as losses ripple out to the company’s lenders and bondholders, China’s entire real estate market could stumble – similar to how the collapse of Lehman Brothers sparked the slide of the U.S. housing market in 2008, sending the American economy into recession."
Correct? Not at all.
So we already established that the comparison is an exaggeration. The sentence in bold above (my choice) is misleading. US housing market started "sliding" before Lehman went bankrupt, and the US economy has been in a recession since December 2007.
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