Concerns about Evergrande, China’s second-largest property developer, are sending shockwaves through the economy. The company is likely to default soon, and it is not yet clear what impact this will have.,More than a quarter of China’s economy is linked to real estate, so substantial turmoil in the market could impact industrial production, consumer spending, government spending, and overall stability. Ultimately, the central government will determine how much pain the economy will suffer and who will bear it.,Despite the government’s best efforts, COVID cases have continued to spring up around the country, creating lockdown-driven disruption and weighing heavily on consumer sentiment.,The largest new cluster, which was allegedly brought to Fujian by a man who had returned from Singapore 37 days earlier (and spent 21 days in quarantine), has spread to multiple cities, prompting the government to implement travel restrictions and localized lockdowns.,China appears to be sticking to its virus elimination strategy for now, so if additional clusters continue to emerge over the coming months, companies should anticipate substantial operational disruption and continued economic underperformance in Q4.
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