Home Economy Evergrande crisis: capitalism with Chinese characteristics

Evergrande crisis: capitalism with Chinese characteristics

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China is discovering that under capitalism, what goes up must come down. The impending collapse of property developer Evergrande, as it struggles with more than $300bn debts, is reminiscent of the subprime mortgage crisis. The Chinese government is facing the same dilemmas as the US over a decade ago, as it stares into the abyss of capitalist crisis.

What is Evergrande?

The past decade of economic growth in China has been fuelled to a large extent by a housing construction boom. Property now makes up around 30% of GDP. For years, property developers, of which Evergrande is only the largest, borrowed unsustainable amounts of money in order to build housing. It was even borrowing from its own employees to keep building.

Another property developer, Fujian Fusheng, deployed a so-called “3691” model: start building new developments in only three months, start selling the properties in only six months (while still being built), finish construction within…

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