INDIA OPPORTUNITY FROM CHINESE CRISIS & ITS REGULATIONS.

 The china crisis of Evergrande will not be managed just by injecting liquidity neither one should expect the same to end with resolving one single company debt repayment. The problem is not solved with Evergrande being able to pay its debt since there are many companies like Evegrande who are going to face significant crises due to Xi Jinping’s attack on the global corporate through its legalized weapons which leads to falling in sales and demand resulting pent up stockpile and no buyers of the same.

Hence the pain is more for the global markets and slow progression will be helpful to avoid a massive setback. It may not be the Lehman brothers but it's the Lehman brothers for China alone.

The cascading effect of the Chinese real estate bubble will continue as sales will drop and prices will fall as foreign buyers are now being scared through the cold war on global corporate.  The Debt-fuelled real estate growth is one reason China’s credit to GDP ratio is 300 percent-plus. The overseas buyers of the Chinese properties are now declining and will keep declining creating more pain for other Chinese developers.  

On the other hand, the Chinese government will now look more aggressively into the huge debt pile of china’s real estate so that to protect the future from such crisis.  Xi Jinping’s attack on the global corporate having business and establishments is now a nightmare for the investors and hence we will find more crisis and less support from global investors for china. Hence we will find many more bursts of such situations where rising debt will bring down the slowdown for the Chinese economy as well it’s a threat for the global banks having intricate business involvement.

This cycle of the bubble will bring down investments in china going forward. If we look at the numbers we find that foreign investors, who own more than $800bn of financial assets in China’s onshore markets, followed by those people who own and trade in the stocks of more than 230 Chinese companies listed on US exchanges and capitalized at more than $2tn. Fresh investments in China are now risky owning to the ongoing cold war on global corporate and now with the real estate bubble on burst. The offshore investors have invested heavily into Chinese onshore stocks and this is the place where outflow will begin with a slowdown due to structural change in the Chinese economic framework and corporate regulations.

The cold war on corporate will spill over in other countries for Chinese companies having an establishment of a business.  In order to safeguard its own economy, China will move ahead with getting control of the asset of companies like Evegrande.  Well if we remember that   Xi Jinping made it very clear that the private sector to align with the party’s political leadership if they want to do business in China.

The correlation between crypto decline and Chinese corporate is at the higher end since Institutional investors in Asia are more exposed to crypto’s than those in the U.S. or Europe. More than 70% of institutional investors in Asia have allocations to digital assets, compared with 56% in Europe and 33% in the U.S. as per a recent study by a global agency. Hence we will find significant outflow from bitcoin and more inflow into the Chinese stock market as the alternative asset class is now declared illegal.

Countries like India are now going to be the key market for investors as an alternative to china.  We find that Indian GDP growth and the 5trillion GDP dream seem achievable and very soon before 2030 as the speed of investments getting diverted towards India will rise.  Digital space will attract significant inflows and we will find a significant number of UNICORNS in India.

If we look at the type of companies that were targeted by china we would find that India is now going to be a major hub of attraction for investment married with low cost of operating and significant demographic advantage. E-commerce, social media, fintech, data, private tutoring, ride-sharing, gaming, and video-streaming platforms and activities. Further to this companies that make extensive use of algorithms, or have large cloud computing capacity, or pool large volumes of customer data have also been targeted.  India is going to pool significant inflows in the form of Private Equity and also in the form of business. New partnerships will come forward to India to set up the business and start expanding its network from India replacing China.

 As I mentioned earlier that offshore investments in Chinese onshore will also find an alternative destination like India going ahead due to rising control and governance.   This will also lead to an increase in the inflow into Indian financial assets.  It is high time that India broadens and widens its onshore financial asset investments instruments to attract inflows coming diverted from china.  Indian commercial real estate might find significant growth in the coming years once the business and establishments shift from China to India.