In this note we evaluate Beijing’s options in managing the Evergrande debt crisis and the property sector as a whole, and the implications of those choices for the property market, financial stability, and future economic growth. Follow the money, not the institutions involved. Most assistance for Evergrande and its creditors will need to come from financial institutions, at Beijing’s explicit instructions. State-owned enterprises (SOEs) and local government financing vehicles (LGFVs) are constrained by their own debt burdens and cannot play a significant role in any workout on their own. But there are clear tradeoffs for Beijing between minimizing the cost of a debt restructuring and adding to the financial pressure other developers will face in the near future.
