What does Evergrande’s liquidation mean for other property developers in China?

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The liquidators could propose a new debt restructuring plan if it is determined that the Guangzhou-based firm has enough assets or if a white knight investor emerges. They could also refer suspected misconduct by directors to Hong Kong prosecutors.

The process, however, could be complicated, and face cross-jurisdictional issues as most of the developer’s assets are located in mainland China, said experts. 

It is not clear whether the Hong Kong court order could be enforced onshore, Dr Wu told CNA’s Asia Now on Monday. 

“Hong Kong and mainland China are two different jurisdictions, so this will be a challenge,” he said. 

“If there’s no court in mainland China that actually recognises this Hong Kong court case, then perhaps there are limited things that the provisional liquidator in Hong Kong can do. 

“(Even) if there is a court in mainland China that actually does recognise this court case, I think this will still be a long, drawn-out process.”

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Manager of lending firm arrested for stealing customers’ money

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PUBLISHED : 31 Jan 2024 at 12:47

Manager of lending firm arrested for stealing customers' money
Police arrest Anurak, the handcuffed manager of a lending firm in Buri Ram, for using documents of customers to steal money from their loan accounts. (Photo: Surachai Piragsa)

BURI RAM: The manager of a lending company has been arrested for stealing almost 200,000 baht from its customers’ accounts.

The manager allegedly used the documents of three customers to change their personal data, allowing him to obtain cash cards that were then used to withdraw money from the victims’ loan accounts.

Investigators from Provincial Police Region 3 and local police, armed with an arrest warrant issued by the Buri Ram Provincial Court, arrested a man identified only as Anurak, 32, the manager of a lending firm in Muang district on Wednesday, police said. 

The arrest came after three people who were customers of the lending company filed a complaint with police at Muang police station that someone had used their names to apply for cash cards that were used to withdraw money they transferred to the company for loan repayments. This caused their outstanding debt balances to be inaccurate.

Almost 200,000 baht had been withdrawn from their loan accounts in December last year despite the fact that they had no cash cards to withdraw the money.  

Following a police investigation, officers sought court approval to arrest Mr Anurak, who worked as the manager of the lending firm where the victims received loans.

Police said that on seeing the arrest warrant, Mr Anurak admitted to having withdrawn money from his customers’ loan accounts. Police searched his room and seized clothes he wore when going to withdraw cash from ATM booths, as captured in footage from closed-circuit television cameras.

A mobile phone and a pickup truck were also seized from him, but the cash cards he obtained under the victims’ names were not found. He claimed he had thrown them away and could not remember where.

During questionining, he said he had worked at the lending company since it was established. He later found a way to steal money from customers’ loan accounts by using the personal documents submitted to the firm. He had used those documents to change the customers’ mobile phone numbers and other personal data before applying for cash cards on the victims’ behalf.  He then used the cards to withdraw money. He claimed he was motivated by informal debts that he was unable to pay.

Police charged him with theft and illegally using others’ electronic cards to cause damage to other people.

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China Evergrande liquidation is no Lehman moment – Asia Times

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On Monday, many investors couldn’t help but wonder if the liquidation order China Evergrande Group received from a Hong Kong court was a “Lehman moment.”

Not quite. More likely, the milestone here is of a very different nature: a move that catalyzes Beijing to get serious about ending its property crisis once and for all.

It matters that neither markets in Shanghai nor Hong Kong tanked on the news. At the same time, that hardly means Chinese leader Xi Jinping’s Communist Party is out of the woods with global investors.

Staving off a deeper selloff in mainland stocks requires bold, urgent and transparent action by Xi’s government to treat the underlying cracks in Asia’s biggest economy, not just the symptoms. In recent days, the People’s Bank of China moved to address the latter concerns. It’s lowering the reserve requirement ratio (RRR) by 50 basis points, effective February 5.

This “quite unprecedented” step should “free up around 1 trillion yuan (US$140 billion) in liquidity, which will be put toward supporting new loan growth,” says economist Carlos Casanova at Union Bancaire Privée.

The PBOC’s “haste in announcing the cut denotes urgency on behalf of policymakers, following an extraordinary rout in Chinese equities in January,” Casanova adds.

It’s far more important, though, that Xi’s team pivots immediately from prioritizing security to economic upgrades. Over the last two years, Xi’s team has ricocheted from pledge to pledge to devise a strategy to take toxic assets off property developers’ balance sheets and sharply reduce their ranks.

One possibility about which investors have long buzzed is Beijing adopting a Resolution Trust Company-like model the US used to address the savings and loan crisis of the 1980s. That could avoid a Japan-like lost decade as a sector that can generate as much as a quarter of China’s GDP gets a new lease on life.

Doing so would afford Xi’s reform team an opportunity to confound the naysayers and reinvigorate China Inc. It would make good on Xi’s pledges to prioritize the quality of growth over the quantity. And it would change the narrative of China repeating the mistakes Japan made in the 1990s amid its bad loan crisis.

Since March, Xi has entrusted the cleanup to his new premier, Li Qiang. The overarching goal has been for financial institutions to try their hand at repairing balance sheets themselves without giant public bailouts that might create fresh “moral hazards.”

Yet a lack of quantifiable progress in addressing the crisis caused trillions of dollars of capital to flee Chinese stocks in 2023. Chinese stocks have lost over $6 trillion in the last three years.

Green is down and red is up on China’s stock market ticker boards. Photo: Asia Times Files / AFP

Monday’s court ruling was handed down by Judge Linda Chan following a June 2022 lawsuit by an investor in an Evergrande unit. Repeatedly, Chan delayed proceedings to afford Evergrande time to cement a restructuring deal. In her ruling, Chan cited a “lack of progress on the part of the company putting forward a viable restructuring proposal” along with Evergrande’s “insolvency.”

Chan told a packed courtroom “I consider that it is appropriate for the court to make a winding-up order against the company, and I so order a winding-up order.”

The next step is for the court to settle on a liquidator to manage Evergrande and then to figure out how to divvy up the developer’s interests, most of them in the mainland. As of now, its roughly 1.74 trillion yuan ($242 billion) of assets are exceeded by 2.39 trillion yuan ($333 billion) of liabilities.

Questions abound in terms of what all this means for bondholders. An obvious one is what pushback the Hong Kong ruling might receive from Beijing. Many investors have a hard time believing that the court would have acted without alerting Beijing ahead of time. The perception for now is that the court had Beijing’s tacit blessing.

Still, it’s unclear how China will proceed. Since so many Evergrande projects are operated locally by mainland units, it’s unclear how far Hong Kong’s jurisdiction extends into Xi’s economy. And it’s not as if construction projects entailing the completion of homes and flats are about to stop on a dime.

In fact, Beijing would be wise to provide the liquidity needed to allow other developers to finish what they have sold. Doing so could have a positive effect on domestic confidence, both for businesses and households, and support GDP.

Of course, all this, analyst Ken Cheung Kin Tai at Mizuho Bank explains in a note, could spook investors worried about China’s property sector more than it comforts them. Indeed, this Evergrande liquidation “milestone” might be a price-clearing event that further shakes investor confidence with a bottom that has yet to be found for property and asset values.

The silver lining, though, from the Evergrande “shock” is how Monday’s events signal Xi’s economic team is rolling up its sleeves to end China’s dueling debt crises.

The property meltdown is the immediate pressure point as other giant developers like Country Garden Holdings hit a wall. At times in 2023, Allianz, Apollo Asset Management, Banque Lombard Odier, BlackRock, Deutsche Bank, Fidelity, HSBC, JPMorgan Chase, NinetyOne UK and a who’s-who of other global institutions had Country Garden exposure.

The last thing Xi wants in 2024, with US elections looming, is for China to be blamed for Lehman-ing a global economy already on edge.

As analyst Rosealea Yao at Gavekal Dragonomics notes, Xi’s reformers “have not yet abandoned the aim to reduce the economy’s reliance on property over the long term, meaning some aggressive stimulus options are still off the table.”

The pros and cons of this balancing act are playing out in real-time. In 2023, for example, Beijing mulled rollbacks of other housing purchase restrictions in first-tier cities. The strategy: do enough to stabilize property sales without incentivizing bad behavior.

China’s property market is a drag on the economy. Image: Screengrab / CNBC

One oft-cited risk here is avoiding Japan’s lost-decade troubles. Too often, China, like Japan, “fails to get the most from its immense investments,” says economist Richard Katz, author of “The Contest for Japan’s Economic Future.”

A big factor, Katz says, is the continued dominance of state-owned enterprises. Compared to private companies, SOEs get about only half as much output for every yuan they invest.

“In the 1990s,” Katz says, “Beijing greatly reduced the role of SOEs, but they’ve rebounded under Xi. Worse yet, to prop up economic demand in the face of weak consumer income, China keeps pouring money into infrastructure whether or not it is still needed.”

Katz says that “while much is marvelous, like the cell phone towers one sees all over rural mountaintops, an increasing share resembles Japan’s famous ‘bridges to nowhere.’ The same goes for all the money poured into new housing, much of it financed with debt, still vacant, and bought by citizens hoping to gain from a price hike – as in Japan’s 1980s property bubble.”

The upshot, Katz says, is that “back in 1995, China could increase its GDP by 1% if it hiked its stock of capital by 2%. Now, to get the same 1% expansion of GDP, it has to hike its capital stock by 6%. Consequently, just to maintain the same rate of GDP growth, it has to devote ever-larger shares of annual GDP to investment.” This, Katz adds, “is unsustainable and is a big factor in why China is in such trouble today.”

Another vital step is diversifying growth engines. Since March, Premier Li has been focused on creating deeper and more trusted capital markets so that households invest in stocks and bonds in addition to property. Li also has been charged with building broader social safety nets to encourage household consumption over savings.

The other gaping crack in China’s financial system is local government finances. Just as Beijing needs to cleanse property developers’ balance sheets, it must devise credible mechanisms to prevent a $9 trillion mountain of local government financing vehicle (LGFV) debt from collapsing.

“LGFVs and local governments are likely to remain under financial pressure as a result of the ongoing weakness in property,” says Jeremy Zook, lead China analyst at Fitch Ratings. “Policy support related to LGFVs is likely to remain targeted to addressing refinancing risks to preserve financial stability. In this baseline, LGFV debt is likely to migrate gradually onto the sovereign balance sheet, as local governments issue refinancing bonds to manage LGFV risks.”

UBP’s Casanova adds that it is safe to assume that policy easing will continue to be “desperately needed to ensure the economic recovery is secured in 2024. However, the onus will be on fiscal. Due to pressures on the foreign exchange front and concerns around the sustainability of LGFV debt, we think that monetary policy support will likely take a background role in 2024” to policy reforms.

The good news, Fitch points out in a recent report, is that recent events have “further increased refinancing pressure on the LGFVs over the long term by widening the duration mismatches because their project durations are typically between three and five years.”

Fitch adds that “transaction costs could also add up if LGFVs issue more frequently with shorter-term bonds to refinance long-term debt, given that 364-day bonds currently account for less than 3% of LGFVs’ outstanding offshore US dollar bonds.”

A big reason foreign investors debate whether China is now “uninvestable” is chronic opacity at the highest levels of government.

It’s a problem that “one knows how” Beijing plans to “rebalance its economy” after all too many “botched rescues,” says economist Nicholas Spiro at Lauressa Advisory. It’s high time, Spiro notes, that China tackles its “deep-seated structural problems” transparently and credibly.

Doing just that could dovetail with expected shifts in global interest rates. Case in point: how rate cuts by the US Federal Reserve versus a stable yuan might increase demand for Chinese debt. 

“With US rates off their peak, we expect foreign inflows into China bonds to continue next year,” Ju Wang, rate strategist at BNP Paribas SA.

Rescue efforts appear to be accelerating in sync with signs of structural reforms. Beijing is moving to limit short selling, officially this time. This week, the China Securities Regulatory Commission said there will be a “complete suspension of the lending of restricted stocks” and that it will limit the “efficiency of securities lending” beginning March 18.

This could mean further limitations on securities lending to come. The measures, the CSRC said, are designed to “create a fairer market order.”

China has big plans to rein in local government debt. Image: Screengrab / CNBC

Meanwhile, state-run Xinhua Finance News reports that Beijing is working to merge three of China’s largest bad debt managers into the sovereign wealth fund China Investment Corp.

It would be its own milestone for financial institutions reform as China Cinda Asset Management, China Orient Asset Management and China Great Wall Asset Management are incorporated into CIC.

Xinhua noted that the transaction would take place in the “near future,” a move akin to how China acted to stabilize bad debt managers in 1999 in the aftermath of the Asian financial crisis.

Yet it is the idea that China is finally serious about fixing its property sector and reining in local government borrowing that’s getting the headlines this week. Xi and Li would be wise to lean into a news cycle that could help change the longer-term narrative toward China doing what it takes to get back on its feet.

Follow William Pesek on X at @WilliamPesek

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Hong Kong court orders Evergrande to liquidate – Asia Times

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Evergrande Group, once the biggest property developer by sales, was ordered by a Hong Kong court to begin its liquidation process, which may take up to five years to complete.

The Shenzhen-based company had tried to buy time to implement its debt-restructuring plan and deliver more apartments to its customers since Top Shine Global, one of its creditors, filed an insolvency case against it in June 2022. It has successfully postponed its liquidation hearing seven times, but not any more on Monday.

Last June, the company said its liability reached 2.39 trillion yuan (US$333 billion). It proposed to sell its assets, including the controlling stake of its electric vehicle unit, but the attempt was unsuccessful.

On Monday, Hong Kong’s High Court ordered Evergrande to be wound up. Edward Middleton and Tiffany Wong of Alvarez & Marsal Asia Ltd were appointed as liquidators of the company. 

“It’s time for the court to say enough is enough,” Justice Linda Chan said in the morning court session on Monday.

Evergrande chief executive Shawn Siu said the company will ensure home building projects will still be delivered despite the liquidation order.

Siu said the ruling will not affect the operations of Evergrande’s onshore and offshore units. 

Derek Lai, a seasoned restructuring partner and vice chair of Deloitte China, said the number of liquidation cases in China has increased in recent years while most companies tried to delay their bankruptcy by proposing their debt-restructuring plans. 

But he added that it’s not easy to implement these plans as the Chinese economy is still recovering. He said the unwinding of Evergrande will make investors lose confidence in other property developers’ restructuring plans. 

Simon Lee, an economist and an honorary fellow at the Asia-Pacific Institute of Business at Chinese University of Hong Kong, said a lot of creditors, including banks, bond investors and suppliers, will have their profitability hurt by Evergrande’s liquidation as they won’t be able to get back a majority of their money. 

He said individual investors who bought Evergrande’s shares will lose all their money while some homebuyers may be unable to receive their properties.

Evergrande’s shares fell 20.8% to 16 HK cents (2.05 US cents) on Monday morning before its trading was suspended. Shares of China Evergrande New Energy Vehicle Group dropped 18.2% to 22.9 HK cents while Evergrande Property Services Group’s shares decreased 2.5% to 39 HK cents. 

Mat Ng, managing director at Grant Thornton, who has more than 30 years of experience in corporate restructuring, said as most of Evergrande’s assets are based in mainland China, it is difficult to execute the liquidation order across the border. 

Besides, he said that Evergrande will have to deal with its onshore creditors before it can calculate its remaining assets and finish the liquidation. He said the whole process could take more than five years. 

Downward spiral

After the media reported Evergrande’s financial difficulties in the second half of 2021, the Chinese government set up a task force to handle the situation. It required the company’s founder Hui Ka-yan, or Xu Jiayin in Mandarin, to sell his personal assets to repay creditors and continue to deliver apartments to homebuyers. 

Also, Evergrande was ordered to sell its assets to maintain its basic operations. After two years, the company failed to push forward its restructuring plan as the valuation of its assets continued to shrink. 

Apart from Evergrande, many other Chinese property developers, such as Country Garden and Sunac China, also lacked cash to repay debt and build their properties while their deteriorating reputation scared homebuyers away, resulting in a downward spiral that they could not break.

They filed their bankruptcy protection cases in the United States last year, in case some overseas courts might order them to liquidate their assets.

Louise Loo, lead economist at Oxford Economics, says in a research report on December 6 that real estate developers in China will have to spend at least four to six years to complete their unfinished residential properties. 

She says it may even take a decade to complete the residential construction in some provinces such as Jiangxi and Hebei, and more than two decades to complete in poor provinces such as Guizhou. 

“The existing excess supply in the market is likely to take at least another four years to unwind, absent a meaningful pickup in demand,” she says, adding that developers’ inventory is far too large for households in China to absorb quickly.

41 property developers 

Beijing’s move to suppress home prices in recent years echoed Chinese President Xi Jinping’s call that “houses are for living, not for speculation.”

Some analysts said Beijing now seems to have fine-tuned its policy and admitted that property is not only about housing issue, but it is also an important part of the Chinese economy as it creates demand for cement, steel and glass. They said if property prices continue to slide, it will be very difficult for the government to boost the economy. 

Earlier this month, Ping An Bank, a major Chinese lender, put 41 firms on a list of developers eligible for its funding support, Bloomberg reported on January 15, citing people familiar with the situation. 

Longfor Group and China Vanke, two financially-healthy property developers, were added to the list while Country Garden and Evergrande were not included. 

Chen Wenjing, director of market research at the China Index Research Institute, said Monday there is a lot of room for local governments to ease their property rules, for example, the down payment ratios and mortgage rates in some cities remain high in many cities.

On January 27, the Guangzhou government relaxed its property purchase rules. It said people can now buy as many properties in the city as they want, if they are buying apartments smaller than 120 square meters each. 

Besides, it said a property that has been leased out should not be counted into the number of properties a homeowner owns. In the past, a person had to pay more property tax and face a higher mortgage rate and a down payment ratio when buying a second or third property.

Property analysts expect Beijing, Shanghai and Shenzhen to ease their rules soon.  

Read: An ambitious campaign to raise Chinese stock prices

Follow Jeff Pao on Twitter at @jeffpao3

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Evergrande: Crisis-hit Chinese property giant ordered to liquidate

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China Evergrande Centre sign in Hong Kong.Getty Images
By Mariko Oi
Business reporter

A court in Hong Kong has ordered the liquidation of debt-laden Chinese property giant Evergrande.

Judge Linda Chan said “enough is enough”, after the troubled developer repeatedly failed to come up with a plan to restructure its debts.

The firm has been the poster child of China’s real estate crisis with more than $300bn (£236bn) of debt.

But it is unclear how far the Hong Kong ruling will hold sway in mainland China.

The property giant, which has been in hot water with its creditors for the last two years, filed a request for another three months’ leeway at 4pm on Friday.

But Judge Chan turned it down, describing the idea as “not even a restructuring proposal, much less a fully formulated proposal”. Instead she ordered the start of the process to unwind Evergrande, appointing liquidators at Alvarez & Marsal Asia to oversee it.

The liquidators said their intention was to “achieve a resolution that minimises further disruption for all stakeholders”.

“Our priority is to see as much of the business as possible retained, restructured, or remain operational,” said Wing Sze Tiffany Wong, one of the managing directors.

The slowburn crisis at Evergrande has sent shockwaves through the investment community, with its potential impact likened to the collapse of Lehman Brothers at the start of the financial crisis.

China’s property sector remains fragile as investors wait to see what approach Beijing will take to the court’s move.

The decision is likely to send further ripples through China’s financial markets at a time when authorities are trying to curb a stock market sell-off.

Evergrande shares fell by more than 20% in Hong Kong after the announcement, before trading was suspended.

The liquidators will look at Evergrande’s overall financial position and identify potential restructuring strategies. That could include seizing and selling off assets, so that the proceeds can be used to repay outstanding debts.

However, Beijing may be reluctant to see work halt on property developments in China, where many ordinary would-be homeowners are waiting for apartments they have already paid for.

Evergrande has come to symbolise the rollercoaster ride of China’s property boom and bust, borrowing heavily to finance the building of forests of tower blocks aimed at housing the millions of migrants moving from rural areas to cities. It ran into trouble, and defaulted on its debts in December 2021.

Evergrande’s chairman, Hui Ka Yan, hit the headlines for his lavish lifestyle, before it was announced last year that he was under investigation for suspected crimes.

Ordinary Chinese property buyers have limited options to demand compensation, but many have taken to social media to express their frustration about developers like Evergrande.

Big investors have turned to the courts, including in Hong Kong, where Evergrande’s shares are listed. The case that resulted in Monday’s ruling was brought in June 2022 by Hong Kong-based Top Shine Global, which said that Evergrande had not honoured an agreement to buy back shares.

Evergrande’s executive director, Shawn Siu, described the decision to appoint liquidators as “regrettable”, but told Chinese media the company would ensure home building projects would be delivered.

The unwinding is likely to take some time and construction is expected to continue in the meantime.

Most of Evergrande’s assets – 90% according to Judge Chan’s ruling – are in mainland China and despite the “one country, two systems” slogan, there are thorny jurisdictional issues.

Ahead of Monday’s ruling, China’s Supreme Court and Hong Kong’s Department of Justice signed an arrangement to mutually recognise and enforce civil and commercial judgements between mainland China and Hong Kong.

But experts are still unsure whether that agreement will have an impact on Evergrande’s liquidation order.

Derek Lai, the global insolvency leader at professional services firm Deloitte said the liquidator would need to “follow the laws of mainland China”, which could make it hard to take full control of Evergrande’s operations there.

Beijing may want to see mainland building projects completed to meet the expectations of Chinese buyers and investors.

The Evergrande Center, developed by China Evergrande Group, under construction in Hefei, China.

Getty Images

Foreign creditors are unlikely to get their money before mainland creditors.

However, even if Judge Chan’s orders are not carried out in China, the decision sends a strong message and gives a clue on what other developers and creditors may face.

She presides over not just Evergrande’s case, but also other defaulted developers such as Sunac China, Jiayuan and Kaisa.

Last May, she also ordered the liquidation of Jiayuan after its lawyers failed to explain why they needed more time to iron out their debt restructuring proposal.

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The Western fight against the tide of history – Asia Times

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Talk of war is getting louder in the West. The German minister of defense proclaimed this month that Germany has to rebuild its army, as did his British colleague.

At the start of the war in Ukraine two years ago, the Western media depicted the Russian military as hopelessly ineffective, outdated, and corrupt. Yet in recent weeks, Russia has become an imminent danger that requires the rearmament of Europe.

On the other side of the world, we see a similar transformation. In 1972, the West signed up for the one-China policy. Last year, high-ranking Western government officials made widely publicized visits to Taiwan in support of “pro-democracy forces.”

Earlier, in 2020, the US Congress passed the Hong Kong Autonomy Act that imposed sanctions on officials and entities in Hong Kong and mainland China that violate “Hong Kong’s autonomy.”

The West, of course, has a 500-year history of involving itself with countries far from its borders. While it no longer has physical control over the world, it still has financial control thanks to the US dollar system and SWIFT, the global clearinghouse for international financial transactions.

The dollar is still the international lingua franca. This explains why everything from oil and gold to Bitcoin is priced in dollars.

The West now is trying to find legal means to confiscate Russia’s $300 billion that is locked up in the dollar system. Doing so will permanently damage the reputation of the West as a neutral custodian of the financial system, and could increase the speed of an already ongoing process of de-dollarization, but the Western political and financial elite has shown that it is willing to bet the farm on subduing Russia.

Demonizing Russia

Turning Russia into an enemy was a remarkable case of reprogramming Western public opinion.

Starting in the 1990s, Russia and the West invested billions in Russian oil exploration and in pipelines to carry gas and oil to a dozen European countries. Low-cost Russian energy is said to have added a trillion dollars to German GDP.

The economic integration of Europe and Russia was a textbook case of a win-win situation – except for the Atlanticists and the guardians of the dollar system on Wall Street.

Hence the expansion of the North Atlantic Treaty Organization, dressed up as the spreading of freedom and democracy, is the modern version of the White Man’s Burden during colonial times.

The Russians drew a red line at Ukraine. They know their history. They lost 20 million people in World War II because Adolf Hitler needed Russian oil after England put an oil blockade on Germany. It is an old imperialistic trick: Cause a provocation and act indignantly if it causes a reaction. NATO expanded, and Russia reacted.

When Ukraine failed to contain the Russian army after its failed summer offensive of 2023, the West rebranded Russia as an aggressor that poses a danger to Europe. Russia went from a third-rate country (in the words of a late US senator “a gas station masquerading as a country”) to an existential danger.

Never mind that Russia has a population that is a quarter of Europe and a GPD the size of Spain; not to mention more Lebensraum than any other country in the world. The population density of Russia is 8.46 people per square kilometer; in Germany and much of Central Europe it is more than 230,000 people per square kilometer.

Germany has forgotten the lessons learned from the 20th century. It now plans to increase its annual military spending and allocated a special €100 billion fund to modernize the German army. Never mind that the poverty rate in Germany is approaching 20% and that nearly 10 million Germans are too poor to eat fully rounded meals even every two days.

The theater of the absurd reached a climax when the “Green” German Foreign Minister Annalena Baerbock proclaimed, “I give the promise to the people in Ukraine, we stand with you, as long as you need us, then I want to deliver. No matter what my German voters think, I want to deliver to the people of Ukraine.”

In lockstep with Germany, the UK also plans to rearm. Last month, British general Sir Patrick Sanders argued that the danger posed by Russia requires Europe to go on a war footing. Never mind that the UK had excess deaths of 5,000 people last winter partly due to the high cost of energy and that 4.2 million children and 2.1 pensioners are living in poverty.

Turning point

When it became clear that both China and India refused to play along with the Western sanctions regime against Russia, the Global South sensed the geopolitical map had changed. Some 20 countries, most of them former European colonies, applied for BRICS membership. When the Nigerien army deposed its francophile president, protesters surrounded the Nigerien parliament and the French Embassy carrying pro-Putin banners.

France threatened to interfere but when Niger’s neighbors Burkino Faso and Mali declared that Western intervention in Niger would be seen as a declaration of war against them too, the French knew the old imperial game was over. France’s legacy of 100 years of (neo) colonial rule over Niger: 30% of French electric power is fueled by Nigerian uranium, while 85% of the people of Niger have no access to electricity.

It is tempting to blame the catastrophic policy of the West on a lack of self-awareness, or the belief that the world sees the West the way the West sees itself. A darker theory doing the rounds on social media is that the West is fomenting conflict with Russia and China to mask the fragile state of the dollar-dominated financial system.

If the dollar system were to collapse under the weight of its massive debt load ($300 trillion and counting), Russia and China would be perfect scapegoats to deflect from decades of irresponsible financial and monetary policy, which has caused wealth inequality not seen since the 19th century. American children inherit a debt of $78.000 at birth, which is their share of the massive $34 trillion US national debt.

World map based on the size of the population rather than geographical area. Image: OurWorldData.org.

Lacking a reverse gear, the Atlantic Alliance has no qualms about throwing millions of people into poverty, encouraging Ukrainians to fight to the last Ukrainian in a battle they can’t win, and waging economic war on China to maintain a unipolar world, even it is means fighting the global majority. The spirit of democracy stops at the water’s edge.

But there is one bright spot.

The Western political and business elite may be morally bankrupt and trying to preserve its hegemony at an enormous cost, but it is not suicidal. History shows that its NATO enforcement arm never gets into direct military confrontation with countries that can defend themselves, especially countries that have nuclear weapons.

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China tightens stock market rules after sell-off

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A Chinese investor looks at screens showing stock market movements.Getty Images
By Mariko Oi
Business reporter

China has tightened its financial industry rules as the government tries to halt a deepening sell-off in the world’s second largest economy.

Nearly $6tn (£4.7tn) has been wiped off Chinese and Hong Kong stocks since their most recent peak three years ago.

The China Securities Regulatory Commission (CSRC) says the measures will create “a fairer market order”.

Under the new rules limits will be put on so-called “short-selling” from Monday.

Short selling is when a trader bets that a share or other asset will fall in value. They borrow the asset and sell it immediately with the aim of buying it back later at a lower price and keeping the difference.

Defenders of short selling say it can play an important part in financial markets, by helping find the true value of an asset.

However, some critics see short selling as a ruthless trading strategy that undermines companies.

The latest announcement by the CSRC comes after a series of informal measures introduced by the regulator over the last year did little to shore up financial markets.

The CSRC said that following “a complete suspension of the lending of restricted stocks”, which takes effect today, further limitations on securities lending will be introduced from 18 March.

Last week, the country’s premier Li Qiang asked authorities to take more “forceful” measures to stabilise share prices.

The sell-off in China’s stock market comes as some investors are concerned that the country’s economy could face a long period of slow economic growth.

Central to China’s economic problems is its property market. For two decades, the sector boomed and accounted for a third of the country’s entire wealth.

But when the government put limits on how much developers could borrow in 2020, they started owing billions which they could not pay back.

When property giant Evergrande defaulted in 2021, after missing a crucial repayment deadline, it triggered the current crisis.

On Monday, the firm was ordered to liquidate by a court in Hong Kong, sending its shares down by more than 20% before trading in them was suspended.

The real estate sector’s troubles have also revealed issues faced by the country’s so-called “shadow banks” which have lent billions of dollar to developers.

The shadow banks operate in a very similar way to traditional banks but are not subject to the same regulations.

In November, Chinese officials launched an investigation into “suspected illegal crimes” at one of the country’s biggest shadow banks, Zhongzhi Enterprise Group, which filed for bankruptcy and earlier this month.

There are also a number of indications that China’s once-booming economy is slowing sharply.

Official figures show the economy expanded by more than 5% in 2023. While that is stronger growth than many other major economies it is much lower than China saw before the pandemic.

Meanwhile, the country’s exports, which have been a major contributor to its growth, fell last year.

At the same time, youth unemployment hit a record high and local government debt has jumped.

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Timeline: China Evergrande’s worsening debt crisis

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A Hong Kong court ordered the liquidation of China Evergrande Group on Monday (Jan 29). Evergrande is the world’s most indebted real estate developer and has been at the centre of an unprecedented liquidity crisis in China’s property sector, which accounts for roughly a quarter of the world’s second-largest economy.Continue Reading