Thinking through how we could be wrong on Evergrande

If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s economy. The latter is probably the bigger risk for the global recovery. In view of the wider interest, we are also sending this Global Economics Update to clients of our Emerging Markets Service.
Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.
Simon MacAdam Senior Global Economist
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Shortages skew inflation risks to the upside

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What an Evergrande collapse would mean for the world

We think that the ‘China’s Lehman moment’ narrative is wide of the mark. On its own, a managed default or even messy collapse of Evergrande would have little global impact beyond some market turbulence. Even if it were the first of many property developers to go bust in China, we suspect it would take a policy misstep for this to cause a sharp slowdown in its economy. In a hard-landing scenario, several emerging markets are vulnerable. But in general, the global impact of swings in Chinese demand is often overstated.

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What has driven periods of higher inflation in the past?

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