The Chinese government has faced several tests of its economic mettle in recent years. Each time investors could be sure of a muscular response, from the unleashing of credit booms to heavy intervention in financial markets.
But Beijing’s lack of support for Evergrande, the country’s largest real estate developer, is upending such expectations. The heavily-indebted company last week failed to make a scheduled $83.5 million interest payment on one of its $20 billion worth of dollar-denominated bonds.
The shock for investors, particularly those overseas, has been profound. Many had piled into dollar bonds issued by Evergrande and other Chinese property developers, partly for their attractive returns. Bondholders also assumed Beijing would intervene and bail out the company if its debts became unsustainable.
“Sheer panic” says Stephen Jen, chief executive and co-founder of asset management firm Eurizon SLJ Capital, when describing the market reaction out
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