Is China about to get a lesson in “Too Big to Fail?” Its second-largest real-estate developer, China Evergrande Group , with 1,300 projects in 280 cities, has some $300 billion in liabilities. Evergrande owes investors as many as 1.6 million unfinished apartments, and as far as financial debt, it owes $88.5 billion to banks and bondholders with $37 billion due within a year. It already missed an $83.5 million coupon payment on Sept. 23 and a $47.5 million payment last Wednesday. Evergrande does have a 30-day grace period, so the clock is ticking toward a default.
Is Evergrande too big? Is there an implicit guarantee for Chinese real-estate investments similar to the foolish U.S. implicit guarantee of Fannie Mae and Freddie Mac debt? No one knows—yet.
