China’s President Wants to Lower Housing Prices by Crashing Evergrande, Bass Says

The news about Evergrande’s possible bankruptcy, due to overdue debts, is circling across the internet for days now. Kyle Bass, the Hayman Capital founder and one of Wall Street’s most vocal Chinese critics, has shared his opinion on the matter, stating that what President Xi was trying to achieve with Evergrande’s blowup was to lower housing prices. 

Bass Attack!

 

Once it was confirmed that, indeed, one of China’s largest development companies, Evergreen, was into the red, with piled debts and unpaid interest debts, the news shook the world. The company’s possible bankruptcy would disrupt the global economy, for sure, and that’s why one of Wall Street’s biggest China critics has shared his views on the matter. 

Talking about the Chinese toxic economy, the founder of Hayman Capital, Kyle Bass, said that China’s President Xi was actually trying to find ways to lower housing prices, explaining that he thinks that’s why the Chinese leader refused to help Evergrande and actually worked against it.

Bass drew a parallel between China and the US when it comes to problems with housing prices, saying that similar ones were faced in the States. But, compared to the US, with only a $12 trillion debt and $17 trillion GDP when Lehman collapsed, which marked one of the most critical moments in the US economy, China has over $50 trillion worth of debts and only $15 trillion GDP. Add to that the fact that China, which joined the WTO in 2001, was still a newcomer to the capital markets business, and you can see the seriousness of the situation. 

Why the Opinion that President Xi Wants to Sabotage Evergrande?

Bass explains that considering China was on an unsustainable path lower, the President was trying to reign in property prices, even though initially, he had given Evergrande the permission to build all the housing previously. 

Evergrande, meanwhile, went on a credit binge to achieve that, as the central bank continued to print so much money. Now, when the company is at its lowest, President Xi is trying to bring it down for good, by reversing what he had done previously, in his own interest to get himself a third term.