InvestorQ : What could be the negative and positive fallouts of the Evergrande crisis in China?
vaishnavi mhatre made post

What could be the negative and positive fallouts of the Evergrande crisis in China?

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vidhya Laxmi answered.
2 months ago
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Let me talk about the negative fallouts first. If Evergrande fails, it will have larger repercussions. It will hit household income, household assets, realty prices, collateral value and bank loans. This could constrict demand for steel, aluminium, copper etc. Secondly, China is likely to weaken the Yuan as a counter strategy to boost its way out of trouble. That hit most emerging markets including India, who will have to weaken currencies in tandem.

On the positive side, it is likely to open up more opportunities for India pitting itself as an alternative to China. But the immediate fallout will be that the Fed is now likely to hold its horses. The Fed statement looks like an escape route and they clearly want to keep options open should Evergrande crisis worse. That means, tapering of liquidity or even rate hikes may not happen in a hurry. To that extent, world markets and India gain from Evergrande.

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