Chinese Turbulence

The next few weeks hopefully promises to bring some resolution and clarity to the property group Evergrande, which has 1300 real estate projects in 280 cities in China and appears to be 'too big to fail.'

Financial and political analysts fret over the future of this high-profile corporate calamity with over $300 billion of debt, $200 billion of which belongs to thousands of innocent Chinese citizens who have deposits on their still-to-be-completed condos and houses.

Substantial Interest and loan payments are now due to lenders from Evergrande or within a grace period of 30 days to avoid default.

Some commentators suggest that this is China's 'Lehman Bros Moment' when over ten years ago, Wall Street and global markets buckled under the weight of speculation, debt, and egregious financial obligations, including collateral damage from Lehman's disorderly collapse.

If Evergrande's problems are as bad as some suggest, it seems probable that global markets will be adversely impacted; that is unless and until the CCP provides massive state intervention to protect Banks and avoid massive dislocation and collateral damage.

As of writing, this Government support has not yet materialized.

Evergrande's shares in HK having closed at $2.53 last Friday. On Monday the 20th, they closed at $2.28, but up from the day's low of $2.06

Elsewhere: Over the past several months, the stifling of any dissent and reshaping the future has been evident from the actions of the CCP vocalized by its leader President XI.

His decrees have been sudden, dramatic, and often baffling.

The CCP has been cracking down on social vices, including TV talent shows, anything effeminate or androgynous like K Pop, and financial excesses of all sorts.

On Aug. 17, Xi Jinping singled out the country's billionaires, calling for “common prosperity,” urging communist party officials to carry out “reasonable adjustments.”

Shortly after, the government restricted video games to 3 hours only at weekends to minors [under 18] in a move that many consider has probably the approval of a majority of citizens, if not those affected.

State Media outlets now often refer to “spiritual opium” that means 'incorrect values,' harmful and immoral behavior that drift away from the merits of 'Socialism,' ranging from distracting technologies to the syllabuses of online tutoring that teach alternative history and provide 'profit for education’ have also now been decreed as unacceptable.

Gambling is now the latest casualty of an increasingly totalitarian CCP. Macau is now the premier target, having overtaken Las Vegas in the 21st century with its 41 casinos of capitalist indulgence including The Venetian with its gondola rides owned by Sands China & Wynn Resorts. The total revenues from Macau casinos are approximately six times that of Las Vegas now.

Gaming operators from around the world, including the USA, Malaysia, and Australia, are invested heavily there.

Any restrictions on this very lucrative entertainment industry could have far-reaching implications for further foreign inward investment into China. The CCP announced a regulatory overhaul [consultancy] that could see a greatly expanded role for Government officials overseeing the industry there.

Shares in gambling companies that have a significant foothold in the territory fell a third last week, losing approximately $18 billion in market value as the consultancy directives were announced from Beijing.