Investors Fear China’s ‘Lehman Moment’ Is Looming
black box. They don’t have periodic disclosures, it’s a private company, and some investors don’t know what kinds of assets they’re investing in," said Xiaoxi Zhang, an analyst at Gavekal Research. The group’s difficulties, coming on the heels of the financial distress at Chinese property giant Country Garden Holdings, have fueled worries about China’s shadow-banking system and how intertwined it is with the property sector.
“The worry is that a ‘Lehman moment’ beckons, threatening the solvency of China’s financial system," Zhang wrote in a note earlier this week. She added that China’s “regulatory vigilance" meant that would be unlikely. The worries have added to widespread investor concerns about China’s floundering economy and beleaguered housing market.
Prices of many Chinese stocks and corporate bonds have tumbled this month, and Hong Kong’s Hang Seng Index, which is stacked with companies from China, fell into bear-market territory on Friday after declining more than 20% from its recent peak. Economists and research analysts have long debated what could cause China’s equivalent of the 2008 collapse of Wall Street investment bank Lehman Brothers, which sent shock waves across the U.S. and global financial markets and reverberated for years afterward.
Last year’s mortgage revolts in China, and China Evergrande Group’s bond defaults in 2021, also sparked worries about other dominoes toppling across the country’s financial system. China’s property downturn has already caused dozens of developers to default on their debt, and many trusts have unwound their exposure to the sector, according to a report from Nomura. Trust funds in China still had the equivalent of about $155 billion in exposure to the property sector at
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