- China’s central bank is the strongest in the world and has practically unlimited policy options to prevent contagion. They can inject cash, ask banks and other companies to take over, or soften regulations on leverage. This is a controlled fire started by the regulators themselves, which they are highly unlikely to lose control over.
- China has much more control over their banks and currency than say the U.S. or Europe. And unlike the westerners, China did not unleash massive stimulus and still has a huge boozaka to tap on if needed.
- Xi is preparing for his third term in late 2022. The chaos caused by millions of ordinary Chinese people losing their investments or jobs will not look good. He will need to be known for stability and economic growth.
Thought to do a post on Evergrande given the market carnage, and why I don’t think Evergrande will be a Lehman-like event:
