Is it China’s Lehman Brothers moment? Unveiling Evergrande debt crisis, financial risks, and regulatory implications

Abstract

ABSTRACT The ongoing Evergrande debt crisis has been widely dubbed as China’s Lehman Brothers moment as the Chinese corporate conglomerate failed to pay interest on its corporate debt worth £228bn. The case of Evergrande reflects the tightly intertwined links between financial markets and the real economy as well as the fragile balance between financial stability and economic growth that policymakers often find difficult to strike. It also exposes the interconnections between financial stability and investor protection and the multifaceted nature of investors both on-shore and off-shore ranging from global banks and asset managers to vulnerable consumers who have spent their lifesaving in pre-sale purchases. The combination of these unique features provides a fruitful ground for exploring the legal and regulatory challenges, in particular with regard to the protection of domestic and offshore financial investors, monitoring risks to financial stability in China and potential spillover effects.