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China’s Evergrande crisis could inflict pain on the world economy

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A liquidity crisis at a large Chinese property developer has shaken global markets, and strategists say it could send ripples across the global economy.

But they also say the issue will likely be contained by the Chinese government before it wreaks damage in the banking system and it is not expected to lead to a broader global financial contagion.

The critical question for investors is how and when do leaders in Beijing handle the situation, and whether they launch a restructuring of China Evergrande Group as many market pros expect.

Investors have worried that Beijing is likely to let the company fail, wounding stockholders and domestic bondholders. Evergrande faces a debt payment on its offshore bonds this coming Thursday, after it said last week it was facing unprecedented difficulties.

“Everyone was expecting the government would have some kind of resolution given that Evergrande is a systemically important company,” said Jimmy Chang, chief investment…

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