Is this China's Lehman Brothers moment?

Today, Chinese economic policymakers face their own major policy challenge in the form of serious financial trouble at Evergrande, the world’s most indebted property developer. They do so as the country is experiencing a housing and credit market bubble of epic proportions and as the government is cracking down hard on the country’s technology sector. Meanwhile, the rest of the world economy is drowning in debt, and the global economic recovery seems to be losing pace…

The importance to the Chinese economy of an orderly restructuring of Evergrande’s debts cannot be overstated. With property accounting for as much as 28 percent of the Chinese economy, the last thing the country can afford is the loss of confidence in this sector.

Yet that is what would occur if Evergrande were allowed to default on its $300 billion in debt obligations. This would seem to be especially the case if Evergrande left high and dry the 1.5 million Chinese households that have made advanced down payments on housing units that are still to be delivered.

Trending on HotAir Video