Beyond Evergrande’s Troubles, a Slowing Chinese Economy – The New York Times

People familiar with Chinese economic policymaking say big companies often carry a lot of collateral on their books, so officials believe lenders won’t get fully burned by a collapse. They also cite the tools Beijing has to unwind debts gradually and limit financial disruptions, such as its control of the banking system.

Letting Evergrande collapse quickly, on the other hand, risks a broad fall in apartment prices or other potentially unforeseeable shocks to the financial system.

Chinese officials have taken short-term measures to shore up confidence. The central bank announced on Wednesday morning, and then again on Thursday, that it had temporarily injected about $18.6 billion in credit markets, part of a broader effort in recent days to make sure that ample cash is available.

Real estate sales were slowing even before the latest difficulties, in part because of Beijing’s cool-down efforts, depriving Evergrande and other property developers of the cash they need to finish other projects. Sales dropped 7.1 percent by value in July and 18.7 percent in August from the same months last year.

Overcapacity in many industrial sectors, coupled with a faltering construction sector, have prompted economists to predict slower growth. On Tuesday, Bank of America lowered its forecast for China’s economic growth next year to 5.3 percent from a previous forecast of 6.2 percent.

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