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After failing to convince the court of its restructuring strategy to repay its gigantic debt, China Evergrande Group was ordered into liquidation on Monday, thus exacerbating the real estate crisis in the second-largest economy in the world.
With the company’s valuation down more than 90 percent in the past year, economists forecast a challenging time for Evergrande investors including banks, property buyers, and other real estate companies. Furthermore, the Chinese government is already fighting the impact of negative inflation, which is at about -0.3 percent.
Domino Impact on Global Markets
To put the Evergrande crisis into context, the company’s debt is more than four times larger than El Salvador’s gross domestic product (GDP) and equal to that of Chile, Romania, and Finland. Notably, Evergrande was a major employer in China both directly and indirectly, who have now lost their source of income. Additionally, the company sourced building materials from different countries all over the world, which will also impact various logistics.
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The collapse of Evergrande has been a painful lesson to most investors who had strong convictions on real estate over Bitcoin and other digital assets. With one of Hong Kong-based leading fund managers, Harvest Global Investment, having applied to offer spot Bitcoin exchange-traded funds (ETF), it is safe to assume the demand for digital assets is rising in the region.
Interestingly, on-chain data shows that Bitcoin whales have been accumulating more coins despite the short-term price volatility caused by short-term holders taking profits and recent Bitcoin dumps by Grayscale Investments.