2021 China GDP Growth
Fitch Ratings confirmed in July that China’s Long-Term Foreign-Currency Issuer Default Rating (IDR) stands at a strong ‘A+’ with a Stable Outlook and a 2021 China GDP growth projection of 8.4%. Reasons for the rating cite very strong external finances, a record of strong and resilient macro performance, and overall size of the economy. China had a robust 18.3% year-on-year growth in Q1 2021 amidst recovering from a 6.5% year-over-year growth in Q4 2020 and an overall disappointing GDP growth of 2.3% for the year 2020.
Real Estate Risk
In September Fitch updated their prediction and cut China’s growth forecast to 8.1% due to the Evergrande situation and resulting real estate quake. Earlier in September, it became apparent that the Evergrande group, a multi-billion dollar developer in China, was in deep trouble financially. On Thursday September 24th, Evergrande defaulted on an interest payment of nearly $84 million. The total liabilities of Evergrande are estimated at 300 billion USD. For comparison, Apple has cash reserves of $200 billion, only enough to fill two-thirds of the economic vacuum looming.
Whether the Chinese government bails out Evergrande or not, multiple experts in the field agree that China will find a way to soften the blow to the real estate sector through an organized breakup and restructuring of Evergrande.
