Bloomberg/Sofia Horta e Costa and Kiyuan Wong/12-9-2021
“The comments provide the latest signal that Beijing won’t bail out Evergrande as it strains under more than $300 billion in liabilities. The embattled property developer, which has yet to pay overdue interest on two bonds this week, said on Friday it will ‘actively engage’ with offshore creditors on a debt restructuring.”
USAGOLD note 1: Evergrande defaulted overnight on dollar debt for the first time. It is difficult to say at this juncture to what degree this will affect other businesses in China’s property sector and beyond. Evergrande has stated that there is “no guarantee” it will be able to meet future debt payments, according to a Financial Times report this morning.
USAGOLD note 2: Evergrande’s breakdown and associated problems are likely to generate even stronger demand for gold within China than is already the case. As of the end of the third quarter, the China Gold Association reports a 48.4% surge in overall gold demand over the same period last year – 813.5 tonnes. Gold coin and bar demand rose 50.25% to 214 tonnes, and jewelry demand (which many in China see as a financial investment) rose 54.2% to 529 tonnes. Though the percentage increases reflect the pandemic-induced drop in demand in 2020, the nominal tonnage is still significant and almost 6% higher than 2019 levels.
