<h1 class="ql-align-center">Evergrande Crisis</h1> <h2>Context:</h2> <ul><li>Global markets witnessed a sharp decline due to the financial crisis at Evergrande real-estate company of China.</li></ul> <h2>About:</h2> <ul><li>Evergrande liquidity crisis refers to the ongoing financial situation of Chinese property developer Evergrande Group. It is being compared to Lehman moment (bankruptcy in 2008)</li></ul> <ul><li>The Evergrande Group is China’s second-largest real estate company in terms of total sales and employs over 200,000 employees. Its core business deals with buying land, developing them into houses, restaurants, and so on, and selling them to interested buyers</li></ul> <ul><li class="ql-indent-1">The company uses large amounts of debt from banks and investors as well as short-term loans to fund its business.</li></ul> <ul><li>But the recent Chinese government’s rules for property developers called ‘three red lines” that states how much a property developer can borrow given its financial position as measured by three debt metrics</li></ul> <ul><li class="ql-indent-1">This policy practically cut off Evergrande from taking on any more debt on its balance sheet.</li></ul> <ul><li>Many have called the Evergrande crisis&nbsp;China’s own ‘Lehman moment’&nbsp;where the failure of U.S. bank Lehman Brothers precipitated the 2008 financial crisis</li></ul> <h2 class="ql-align-justify">Impact on India:</h2> <ul><li class="ql-align-justify">India’s buoyant iron ore exports, much of which is headed to China, could also see an impact if the twin crises in China trigger an extended slowdown in the Chinese real estate market.</li></ul> <ul><li class="ql-align-justify">And there could potentially be a sustained impact on global growth prospects, hurting the economic recovery that is underway in markets such as India.</li></ul>