Michael Pettis on What Evergrande Means for China’s Macro Economy
Odd Lots
Bloomberg
4.5 • 2K Ratings
🗓️ 11 October 2021
⏱️ 54 minutes
🧾️ Download transcript
Summary
The implosion of Evergrande continues. And nobody knows exactly how the losses will be distributed. What will be the impact on creditors or people who have put down payments on homes that haven't been built yet? And what will the ripple effects be on other credits? In addition to the financial fallout, there's also a macro angle. Real estate is extremely important to the Chinese economy for all kinds of reasons. And what happens in China has effects on all of its trading partners. To explain what comes next, we spoke with Peking University Finance Professor and Senior Carnegie Fellow Michael Pettis.
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Transcript
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| 0:00.0 | Adlots is brought to you by Apollo. When it comes to building and financing stronger businesses, |
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| 0:30.0 | Hello and welcome to another episode of the Adlots podcast. I'm Joe Weissenthal. |
| 1:00.2 | And I'm Tracy Alloway. So Tracy, we've been talking about China, a fair amount, |
| 1:06.8 | obviously, on the podcast. We did that great episode on Evergrande with Travis Lundy. |
| 1:13.6 | We've been talking about how some of the reforms fit in with the broader vision with Isabella |
| 1:19.3 | Weber, some of the tech and other industrial policy changes with Dan Wong. But it still feels like |
| 1:27.1 | we haven't quite, like, I guess I would say put all of the macro pieces together. |
| 1:32.2 | No, I don't think we've connected the dots between all of those different developments and talked |
| 1:39.3 | about their actual impact on the economy. And I mean, I don't know, to me, the big question |
| 1:45.7 | around all of this, you know, what's happening in the property market right now with Evergrande |
| 1:50.4 | and what's been happening with the tech crackdowns and various other crackdowns. To me, |
| 1:55.4 | it's just the timing. Why decide to do all of this right after a global pandemic when you could |
| 2:03.3 | argue that economic recovery might be relatively fragile. And again, we're sort of seeing the |
| 2:09.6 | impact in the property sector now. So China introduced this three red lines policy last year |
| 2:16.1 | in order, presumably, to strengthen its real estate market. And fast forward a year later, |
| 2:22.8 | it seems like that's actually caused quite a lot of tensions. So yeah, I don't know. To me, |
| 2:29.0 | it's still sort of a mystery. Yeah, and there are some interesting things to like even take |
| 2:34.8 | Evergrande for example, and obviously there are the sort of like initial effects like on, |
| 2:41.3 | okay, who is going to be left holding the bag for the losses? And I think that's still TBD, |
| 2:46.0 | right? Like we don't really know how the sort of like economic losses will be distributed |
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