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Struggling property giant Evergrande has promised it will engage with creditors after it formally defaulted this month. The world’s most indebted property developer has more than $300bn (£224.67bn) worth of liabilities and has been missing payment deadlines on its debt bonds, triggering 30 day grace periods each time.
The Chinese government are now trying to contain the damage from the Evergrande default.
However, Gordon Chang, an expert on US-China affairs, told Express.co.uk: “Evergrande shows that China has an unsustainable model.
“What they did during the 2008 Great financial crisis was they overstimulated their way through it.
“Instead of allowing their markets to adjust, they just poured a lot of money into their economy, building things they didn’t really need, so they were able to avoid the downturn.
“Right now they’re having their 2008. That means they’ve got a problem right now that they can’t get past because they have created so much debt.”
Mr Chang is the author of the book The Coming Collapse of China, in which he tried to predict the fall of the country in 2011.
He later changed the timing of the predicted collapse to the year 2012.
He said that while it is unclear how much debt exists in China, he believes that it’s more than Beijing can handle.
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He added: “Eventually, they’re going to have to face a regime ending crisis.
«They can delay it like they delayed 2008, but they can’t get past it.”
Mr Chang also warned that this debt crisis trigger the end of President Xi Jinping’s reign in power.
“He inherited a political system where no general secretary go too much credit or too much blame because decisions were shared across the politburo standing committee.
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“Everybody signed onto them and so everybody was responsible.
“What Xi Jinping did by grabbing power from everybody was that he also grabbed accountability.
“He can’t blame anyone else for this. I’m sure he’ll try but it’s not credible.
Al mismo tiempo, Xi Jinping tiene más posibilidades de desperdiciar un combate político en China.
«Anteriormente, si perdía una lucha política, habría una salida elegante para usted. Xi Jinping necesariamente encarcelaba a las personas».
A partir de una cruzada anticorrupción liderada por el presidente Xi, miles de altos funcionarios y políticos han sido encarcelados y juzgados, y agregó al exviceministro de Seguridad del Estado Sun Lijun.
Chang continuó: «Se da cuenta en este momento de que tiene toda la responsabilidad, es posible que lo culpen por un error de política y lo pierda todo.
«Estos errores políticos se le van a atribuir a él y puede que pague el precio».