Are investors shifting from China to India? – The Hindu Businessline

(This column first appeared in The Hindu Businessline on October 6, 2021)

  • The scale of operations and leverage of Chinese real estate giant Evergrande — 1,300 projects across 280 cities, 200,000 employees, debt amounting to $305 billion, money owed to over 170 banks — shocked financial markets in September, making many compare this crisis to the Lehman debacle. What is even more surprising is the Chinese government’s implicit nod to allow the real estate giant to sink. While there was some turbulence in global financial markets on concerns about a contagion risk, it was short-lived. Holders of Evergrande’s offshore bonds seem resigned to write off a large part of the $20 billion owed to them with the company already defaulting on two interest payments over the last two weeks. The Chinese government’s reluctance to bail out the real estate player seems to be part of a larger game plan. Not only is it trying to curb speculation and excessive leverage in the economy, it also seems to sending a signal to foreign investors to stay away from China. Data show that China has been among the largest recipients of FPI flows over the past year; which is partly responsible for pushing up asset prices there. Foreign investors, disenchanted with the regulatory uncertainty in China, seem to be diverting funds to India, the other Asian economy with similar prospects. This is borne out by the surge in FPI as well as PE and VC flows into India in recent months…

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