A hint about the future of Chinese leverage

Via FTAlphaville:

This summer Evergrande, the Shenzen- $144bn real-estate goliath, invested $860m in Faraday Future, an electric car maker aiming to take Tesla’s crown. The investment may have been defensive. Evergrande is diversifying its asset base away from its holdings of real estate; the move may be a hint about the future of China’s hyper-leveraged real estate market.

Evergrande seems to covet all things with four wheels. On Sunday, the company announced an investment of $2.1bn to purchase a 41 per cent interest in Guanghui Group, BMW’s largest dealer in China (according to the documents for a $300m high-yield bond placed last year). Guanghi made $570m in post-tax profits in 2017.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.