Remain calm, all is well, until it isn’t. With the Chinese markets closed for a holiday the next few days this breaking news story is causing indigestion at the Hang Seng market in Hong Kong:
The breaking news via the South China Morning Post is disturbing as dollar bond holders are getting boned again:
Fantasia, another debt-laden Chinese property developer, defaults on US$205 million bond, as Evergrande crisis rolls on
Fantasia Holdings Group, the Shenzhen-based property developer founded by the niece of a former Chinese vice-president, has failed to repay US$205 million of debt due on Monday.
The default will add to fears about the financial health of the Chinese property sector, as the liquidity crisis at China Evergrande Group – the world’s most indebted property developer – continues to unfold.
“Under the indenture governing the 2021 notes, all outstanding principal amount of the 2021 notes shall be due on 4 October 2021,” Fantasia said in a filing to Hong Kong’s stock exchange late on Monday.
It’s beginning to sound more and more like the entire Chinese property investing market was built on the Trump Casino model. But there is something truly alarming within all of these stories about Evergrande, Fantasia, and whomever is next.
If one reads the current state of mind of the Chinese Communist Party leadership, a more closed society where the domestic needs usurp those of overseas investors is taking hold. To understand this ideal, read the Chinese language papers from the party plus publications like the Global Times, etc.
The idea that the new de facto policy of defaulting on dollar and other foreign currency denominated bonds bodes poorly for the future and the so-called “international trade regimen” that the United States claims to follow and wishes to work with China to solve our nation’s differences. The reality is that the collapse of these speculative instruments are beginning to add up and by defaulting on foreign investors, the realization that nationalization of foreign assets should a geopolitical conflict occur may well reverse fifty years of progress in relations with the West.