Evergrande’s debt crisis is ‘manageable’ and not a Lehman-level event, hedge-fund billionaire Ray Dalio says
- The $305 billion debt crisis facing Evergrande is a “manageable” situation, Ray Dalio said.
- In Tuesday’s interview, he said its crisis wasn’t the same as the 2008 collapse of Lehman Brothers.
- The Chinese property developer is likely to miss an interest payment on its debt this week.
(Markets Insider) – The $300 billion of debt that’s pushing the Chinese property developer Evergrande toward a collapse is not equivalent to the 2008 breakdown of the US investment bank Lehman Brothers, and the situation is “manageable,” the hedge-fund heavyweight Ray Dalio said Tuesday on CNBC.
The “Lehman moment produced pervasive structural damage through the system that wasn’t rectified until the Treasury came across in terms of its borrowing and then the Fed came across with quantitative easing, but this is not that kind of a shake-up type of thing,” Dalio said in an interview during his attendance as a speaker at the Greenwich Economic Forum in Connecticut.
Evergrande, China’s second-largest real-estate developer, with $305 billion in liabilities is the most indebted company in the world. The company has indicated that it’s unlikely to meet an interest payment due Thursday and that it could default on its debts. Global stock markets sold off Monday on fears that Evergrande’s predicament would hurt China’s economic growth and ripple through or travel beyond its financial system.
There’s been talk in the markets recalling the demise of Lehman Brothers that prompted the 2008 global financial crisis.
“Three hundred billion dollars is what they owe and this is all manageable,” Dalio, the founder of Bridgewater Associates, said about Evergrande.
It’s unclear how the Chinese government will respond to the Evergrande crisis, but some analysts have said they expect Beijing to enact partial restructuring of Evergrande to stabilize markets and limit a wider effect.
The “basic economics” for all countries, Dalio said, is that if a troubled debt situation is in its respective currency, deals can be worked out to resolve problems.
“We’ve seen it happen over and over again, and it’s a good thing that lenders get stung or that the borrowers get stung. That’s how the system works,” he said.
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