Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

China's property sector suffered an additional beating this week as Kaiser Group made a desperate

plea for help. Other Chinese property developers began to shake and the US Federal Reserve

sent its first direct warning about potential global contagion.

So first up, the Federal Reserve released their semi-annual report on financial stability

this Monday.

And in it the Fed pointed specifically to the crisis at Evergrand, China's most indebted

developer, warning that China's ongoing property woes could elevate financial stresses

in China which could further strain global financial markets and negatively affect

the United States.

Evergrand, as we know, sparked fears of contagion back in September,

when they warned that they might default on debts of more than $300 billion.

Since then, we've seen that several other large Chinese property developers are also in trouble,

and as we'll discuss in a moment, the panic seems

to be spreading to the less leverage developers too. The Federal Reserve warned that given

the size of China's economy and financial system and its global ties, financial stresses

in China could strain global financial markets through a deterioration of

risk sentiment pose risks to global economic growth and affect the United States.

Now this is quite a change for the Fed, as Jerome Powell said back in September, that the debt

problems of Evergrands seem particular

to China and that there's not a lot of direct United States exposure.

A big deadline for Evergrand occurs today when the grace period ends for three dollar

...