How Evergrande fits into our asset allocation outlook

You don’t have to believe that Evergrande’s troubles are the start of a financial crisis in China to think that the risky assets most sensitive to developments there will struggle in the next few years. Even an orderly restructuring of the developer, plus policymakers quickly doing enough to limit distress across the financial system – still the most likely outcome in our view – would probably not prevent much more weakness in construction activity. And in the meantime, other, unrelated, headwinds seem to be building.
Oliver Jones Senior Markets Economist
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