#### (insert your favorite global investment bank’s name) says that Evergrande is not China’s Lehman Moment, screams one headline after another on newswire.
In the medium term, it is far far far worse than Lehman. It is a regime change in the approach of China towards credit moral hazard. Last three decades China has built, some say overbuilt, its economy by evergreening problem loans by shifting them from one entity to another, without forcing real losses on financial system.
The cupboard is full skeletons like Evergrande collected over these three decades and more such walking dead are propped up currently by exuberant liquidity.
If Evergrande really is forced to recognize its losses, it is a regime change.
In the short run the system is well lubricated to avoid overnight collapse. But in medium term dominos will fall, one after another.
China will become uninvestible if this regime change in morale hazard is carried out to its logical conclusion. Does anyone has political appetite to see it through? No one knows. But its now risk number one for me.
In late 2019 China gifted Covid-19 to the world. Now in exactly two years later China is gifting another sustained source of instability to global economy.
Forewarned is forearmed.
Excellent to the point . Now world will recognise Indian importance. Provided our internal issues kept at bay/ in peace.