Global real estate plummeted following news of the inability of China real estate giant Evergrande to repay its bank debts. Experts believe the company’s bankruptcy could have profound consequences for the global economy.
to the Report Crypto Potito, financial market activists, are closely following the situation of the company and what is happening in China; An issue that has been making headlines in recent weeks.
Following the 10% drop in the value of Overgrand shares, global markets fell and the bitcoin market situation turned red with an 8% drop in price. But are the bad days over?
What is the matter?
Overgrand has become one of China’s real estate giants in recent years. The company has so far completed 1,300 construction projects in more than 280 cities in China and owns one of the country’s largest football teams, Guangzhou.
The company has raised $ 300 billion in loans for its projects from 171 commercial banks and 121 other financial institutions. Last year, the Chinese government introduced new rules to control the debt of large companies operating in the real estate industry, forcing Evergrande to sell its units at significant discounts.
Evergrand did this to make sure he had enough money to keep his business alive. The company is now struggling to repay the interest on the loans it received, and it is unclear whether the Chinese government will take action to rescue the real estate giant.
Why is the fate of the overground important for the world economy?
China is the second largest economy in the world and Overgrand is one of the largest companies operating in this country. If we want to explain the impact and possible consequences of the overground debt crisis on the world economy, we must examine the complex implications of micro and macro economics.
There are several reasons why these problems are serious and should be properly addressed. Many people pre-purchase overgrown property before it is built, and if the company goes bankrupt, they may lose the money they deposited to register as a pre-seller.
Overgrand has an international supply chain and trades with many companies around the world, including construction, design and raw material suppliers. If Evergrande fails to pay its debts, these companies run the risk of losing part of their capital.
The third is the impact of this on the state of China’s economy. Mattie Bekink of The Economist Intelligence Unit says about the impact of the overground situation on the Chinese economy:
[این اتفاق] It will have far-reaching financial consequences. Overgrand is said to owe 171 commercial banks and 121 other financial institutions.
One of the main concerns related to this incident is the “credit crisis”. The credit crunch refers to a situation in which access to bank loans has become more difficult and interest rates have risen. If Overgrand fails to repay its debts, banks and institutions that have lent to the company may be forced to reduce lending and raise interest rates, which could be bad news for other companies. Some of these companies rely on bank loans to grow their business, and in some cases it is not possible to operate without a loan.
The Impact of the Overground Debt Crisis on Global Markets
Overgrand has lost more than 80 percent of its stock value in the past six months, and yesterday the company’s stock price fell 10 percent.
The Hang Seng Index, which measures fluctuations in the stock value of large Chinese companies, experienced its biggest drop since late July (July) with a 3% decline yesterday. This shows that the fear in the real estate market has gone beyond the fall in the value of overgrown stocks.
In addition, global markets fell in the hours before yesterday’s reopening. The S&P 500, Dow Jones (NASDAQ) and Nasdaq (NASDAQ) futures index also fell 1%.
What happens to Bitcoin?
Investing in Bitcoin has its own risks. The different nature and erratic behavior of the market, which is often not so unpredictable, has made Bitcoin one of the most dangerous assets available. Some investors are looking for more profit by accepting these risks, however, it seems unlikely that these investors will keep their bitcoins during the upcoming financial crisis.
Another thing to keep in mind is that whenever the financial markets as a whole are in turmoil, the bitcoin market is also shaky.
Therefore, it is likely that the market will remain in a state of uncertainty until concerns about the state of the overgrowth are resolved.
This is true not only of Bitcoin, but also of other high-risk assets. These are the first assets to be sold when economic conditions are volatile and the dollar is appreciating.
Bitcoin is known as an independent asset because it is fundamentally different from traditional assets. However, during the recent collapse of Bitcoin, it did not act as an independent asset, as institutional investors entered the digital currency market and took a significant portion of it.