From Evergrande's Default to Wall Street's Love of China

Angry Chinese investors occupied a conference room at China Evergrande's headquarters in Shenzhen in July 2021

After months of bad publicity for China Evergrande Group in Chinese social media, and reports of domestic investors' protests in multiple cities in China after Evergrande's non-payment of its wealth management products, finally came Fitch Rating's downgrade of China Evergrande to 'Restricted Default' on December 9. Any investor who counts on timely rating changes to make investment decisions will be disappointed by the slowness of the downgrade.  

In its December 9 statement, Fitch said “The downgrades reflect the non-payment of coupons due 6 November 2021 for Tianji’s USD645 million 13% bonds and USD590 million 13.75% bonds after the grace period lapsed on 6 December. The non-payment is consistent with an ‘RD’ rating, signifying the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a material financial obligation”.

S&P Global said “default looks inevitable for Evergrande” and in the coming days.  Moodys is even slower than Fitch Ratings and has not issued any statement with regard to China Evergrande yet. Such is the speed of issuing rating changes for the  “big 3” global ratings agencies. 

Better late than no action at all. The Fitch downgrade gives creditors a legal tool to force action upon the company by initiating bankruptcy proceedings.

Should Evergrande be liquidated in the event of a formal default, some analyst says creditors are unlikely to be paid much more than 5% of their claims. In that situation, creditors may have to deal with Guangdong government that is controlling China Evergrande Group, which means months if not years of negotiations and possible law suits. So do large creditors want insolvency?  

Mr. Hui Ka Yan made some efforts to pay back China Evergrande's international debt, including selling 2 private jets and mansions in Hong Kong and Los Angeles, along with the sale of subsidiaries. The proceeds from such sales are far from sufficient to cover even the bond interests coming due in December, not to mention those due in the next few months.  

According to Dr. Marco Metzler, a critic of Evergrande and the management its bonds has named five large global financial institutions that he says will be forced to write-off some $23 billion as a result of the Fitch downgrade. “Companies like BlackRock, Ashmore Group, Allianz, HSBC or UBS own the most bonds,” he says.

“It is also striking that although Chinese real estate giants have been in crisis for a long time, those funds bought additional securities even shortly before Evergrande’s insolvency. BlackRock’s portfolio, for example, saw a net addition of 31.3m shares in Evergrande bonds between January and August 2021. The fund holds 1% of its portfolio assets in Evergrande.

“Between January and July, HSBC increased its holdings in Evergrande bonds by a full 40%. The UBS Asian high-yield bond fund reduced its exposure to Evergrande by 0.09 percentage points, but the number of shares rose by 25% in May.

“Allianz Dynamic Asian High Yield Bond also had a higher weighting of Evergrande of 2.56% at the end of July.”

One conclusion is that these financial investors firmly but incorrectly believe that the debt of China Evergrande has implicit guarantee of the Chinese government. They believe the Chinese government will act rationally and not to hurt their image on the international financial bond market. The reality is that Xi's government is no rational government. 

The other conclusion is that these financial investors are either so badly informed or simply ignored the reports of protests of Chinese investors who demanded China Evergrande live up to its promises of financial products, some of which defaulted as early as June, 2021. 

12月19日中国解放军报发表的题为“育才首先要育心”的文章， 居然只字不提习近平。 

解放军报和国防部的文章中多次讲听从党指挥，因为军队听从于党是历年来的老说法。然而此篇文章中所指的党， 按照老规矩不是习近平一个人，而是包括了政治老人，和团派在内的党中央。 但是文章刻意没有讲听从习近平一个人的指挥。

文章开头引用了中国知名古人管仲的语录， “得众而不得其心， 则形同独行者同实”。意思是虽然得以掌控大众但是没有得到他们的心， 就如同孤独一人。这用来描述习近平的行为恐怕是极为贴切的。 

管仲（约公元前723年-公元前645年），周穆王的后代，是春秋时期法家代表人物，中国古代著名的经济学家、哲学家、政治家、军事家，被誉为“法家先驱”，“圣人之师”，“华夏第一相”。

而作为军委主席的习近平， 多年来精心安排亲信， 想尽办法来稳固自己的权利地位。 他多年来筹划准备连任党的总书记和军委主席， 最盼望听到的是全军服从他习近平个人的指挥。 如今军队里面出现了这样不挺习的声音， 真让他坐立不安。 

这在一个每篇文章甚至每个段落必讲习近平英明伟大的年代是极不寻常的。  

在今年8月份的北戴河会议上， 军队内也发出了不同声音。 

静悄悄的北戴河会议传出激烈争吵声

北戴河1号公寓，毛 泽 东 当年在北戴河开会时的住所。

香港南华早报一个已经被删除了的文章提及在8月份刚刚结束的北戴河会议中， 中国外交部和国防部官员们发生了激烈争吵， 双方各不买账。

林彪曾经下榻的北戴河96号别墅

国防部对于外交部的战狼外交手段， 在全世界同时与多个国家交恶表示不满。 称战狼外交激怒了多个国家，而军队无法同时与多国开战。 国防部的官员还把外交部状告到习近平哪里， 扬言不会对于外交部的战狼外交“买单”。 

外交部则称国防部的人看到美国佬怕了。

中国互联网企业再度遭殃，这次轮到了新浪微博。

微博12月14日传出遭中国网信办依法约谈，因屡次发布、传输违法讯息，被重罚
这是中国政府对于互联网上面严厉打压言论，严格审核和控制用户表达自己心情、观点、感言、交流知识和经验的文字， 也是打压新经济的又一范例。

中国国家网信办14日在所属微信公众号“网信中国”上公告，近日依法约谈微博主要负责人、总编辑，因微博屡次发布、传输违法讯息，情节严重，依据《网络安全法》《未成年人保护法》等法律法规，要求立即整改，并对营运新浪微博主体的“北京微梦创科网络科技有限公司”开罚300万元人民币。公告指出，今年1至11月，新浪微博已遭处罚44次，多次是顶格的50万元罚款，累计罚款达1430万元。

中国网信办直接听命于中共中央，控管舆论， 整肃互联网企业， 也是勒令在美国上市的滴滴出行下市的权利部门。 11月19日召开的首届中国网络文明大会上，中国国家主席习近平就写贺信强调“净化网络空间”；在此之前，中国政府在9月发布关于建设“网络空间文明”的指导意见，敦促各级政府强化互联网平台的责任。

仅本月遭到网信办约谈罚款的就有数个互联企业。12月2日，中国网信办以“屡次出现违法内容”为由，对社交媒体平台豆瓣处以150万元的罚款。一周后，工信部责令下架106款手机应用程式，理由是违反《个人信息保护法》等相关法规、侵犯用户数据隐私，豆瓣就是其中之一。




早上消息传出后，上周才在港股二次上市的微博，截至午间休市重挫9.6％，创上市以来新低。随后，新浪微博回应称，微博诚恳接受主管部门批评，将按照主管部门要求，成立整改落实工作小组，着重使用人工和人工智能审查“软色情”，同时打击“同质化恶意营销”作为增加流量的手段。

过去一年，中共中央的领导通过网信办对大型科技平台进行了严厉的监管打击，相关政府机构针对从垄断行为到数据安全实践的问题进行整治。在反复强调党领导一切， 在意识形态凌驾互联网经济的中国，互联网、电商、游戏、教育培训、直播售货等新经济都成为中国共产党严厉管控的目标。 针对这些商业模式的重拳打压的经济影响， 所造成的企业缩小规模、裁员导致工人失业， 已经在社会层面慢慢浮现出来。