One of the most heavily traded bonds in the world in 2020 was China Evergrande Group’s 2025 bond. Investors liked the Chinese real estate conglomerate’s debt for several reasons. It was tied to one of the country’s largest companies. And it gave them part of the world’s second largest economy. It also marked a major turning point for China, representing an era of turbocharged growth that would one day overtake the United States. This country will no longer be just a factory for the wealthy world, but will have its own consumer middle class, with beautiful apartments and all the furniture, appliances, and electronics that go into them. Evergrande was building that dream tower by tower, along with business lines like a theme park, bottled water, electric vehicles, health care services, and even a soccer club.
Today, the Evergrande bond trades at $1, and its fate tells the story of an epic crash that affected the entire Chinese population. For decades, real estate has been a surefire way to make money in this country. For homeowners who have bought their first, second, or even third or fourth apartment as prices continue to rise. A real estate company that borrows money to build projects to meet demand. And local governments rely on land sales to provide cash and infrastructure projects to help meet the Chinese government’s ambitious economic growth goals.