While it’s impossible to know for sure what would happen if Beijing allows Evergrande’s downward spiral to continue unabated, China watchers are gaming out worst-case scenarios as they contemplate how much pain the Communist Party is willing to tolerate. Pressure to intervene is growing as signs of financial contagion increase.
USAGOLD note: Whether or not the Evergrande meltdown can be contained is an open question. Consensus, as our snippet indicates, has it that the Xi government will not allow a Chinese Lehman moment, but that might be the optimistic view. China has also been very vocal of late about what it sees as capitalist transgressions within its borders that need to be discouraged. Too, there is no guarantee that a collapse of this scale can be contained within China’s borders.