Market Analysis

Does Evergrande’s $300B debt crisis pose systemic risk to the crypto industry?

As onlookers predict that top Chinese property developer and commercial paper issuer Evergrande will default, some analysts believe the firm poses systemic risks to crypto.

Amid speculation as to whether China’s second-largest property developer, Evergrande Group, will default on its $300 billion in debts, analysts are wondering whether the firm’s collapse could pose contagion risks for the crypto industry.

On Sept. 8, Fitch Ratings asserted it “appears probable” that Evergrande will default on its debts, with the firm having since conceded that it will be unable to sell properties or other assets in its possession quickly enough to service its rapidly mounting debts.

In a Tuesday statement, Evergrande predicts “significant continuing decline in contract sales in September, thereby resulting in the continuous deterioration of cash collection by the Group” and placing “tremendous pressure on the Group’s cash flow and liquidity.” The document added:

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According to anonymous local sources cited by Bloomberg, China’s Ministry of Housing and Urban-Rural Development has informed banks that Evergrande will not be meeting its repayments this coming week. 

The sources claim Evergrande is still exploring whether it can obtain extensions or roll over some of its loans, adding that authorities in Guangdong have rejected a bailout request from the company’s founder.

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