Is China Repeating the U.S. in 2008?

China’s government is trying to reduce speculation in their real estate market. This has caused real estate sales to slow this year, which is taking a HUGE bite out of Evergrande’s income and assets as they are the biggest real estate developer and constructor in China. Thus, their warning of potential default on their $300 billion in debt sent shockwaves through global stock markets for a day or two and then last Thursday they were not able to make a $83 million interest payment and thus are now in default.

Not only is this governmental policy hurting companies like Evergrande, it’s also decimating contractors and employees across the country. This is causing and will continue to cause a big slowdown in China’s economy which will reverberate through the rest of the world. Don’t be surprised if GDP growth in our country next year is < 2% or even 1%. This could cause interest rates to remain incredibly low next year and cause the Fed to reduce their tapering and delay increasing the Fed Funds Rate.