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- China’s public debt already stands at 270 percent of GDP, and non-performing loans have hit $466.9 billion. In addition to existing economic challenges, real estate giant Evergrande Group has signaled that it may default on payments owed to creditors.
- China’s second largest developer has been facing a liquidity crisis, as its onshore bond trading has been suspended. Without access to funding, Evergrande will find it impossible to pay suppliers, finish projects, or raise income, making default more likely—an eventuality which could send ripples through the entire Chinese economy.
- Evergrande made $110 billion in sales last year and has $355 billion in assets. In June, it failed to pay some commercial paper and the government froze a $20 million bank account. The company now owes total liabilities of $305 billion, making it the most indebted real estate developer in the world. It is also the largest issuer of dollar junk bonds in Asia. Evergrande owes money to 128 banks and over 121 non-banking institutions. Consequently, the company’s stock price has dropped by 90 percent over the past 14 months, while its bonds were trading at 60 to 70 percent below par.
- Evergrande accounts for 4 percent of total Chinese real estate high-yield debt. The company’s debt is of such significant size that it may pose systemic risk to China’s banking system. Late or defaulted payments by Evergrande could cause a chain reaction of defaults across institutions. An Evergrande sell-off could drive down prices, crashing over-leveraged developers. Authorities worry that this threatens to destabilize the entire real estate sector, which comprises about 30 percent of the Chinese economy.
- Additionally, Evergrande has implications for the labor market. The company employs 200,000 people regularly and 3.8 million per year, on a project basis. After 18 months of sporadic COVID-19 lockdowns, China needs more, not fewer, jobs.
- The U.S. Justice Department sent ripples through the cryptocurrency world in November when it announced it had seized nearly 70,000 Bitcoins from a person the agency would identify only as “Individual X.”
- According to a Justice Department complaint, the digital wallet holding the Bitcoins belonged to a hacker who stole them from the operator of the Silk Road, a notorious black market website that acted as a giant online bazaar for drugs and other criminal activity. The federal government took down the Silk Road and arrested its owner—who is now serving life in prison—in 2013.
- Now, new clues point to who may have owned the stash, which today is worth more than $3 billion.
- According to recent court filings in the forfeiture case, the proceedings are related to a criminal case involving two corrupt federal agents: Shaun Bridges, who worked for the Secret Service; and Carl Mark Force IV, formerly of the Drug Enforcement Administration. Both men were investigators in a case involving Silk Road, a notorious online drug bazaar, but both went to prison for conducting crime sprees of their own involving extortion and robbery.