ANOTHER LEHMAN'S BROTHERS...? The case of Evergrande, China "A banking failure triggered by the collapse of major property developers was the single most likely scenario that could lead to a hard landing in China". The world's most indebted property developer has been scrambling to pay its suppliers and warned investors twice in as many weeks that it could default on its debts. A few days ago, Evergrande said its property sales will likely continue to drop significantly in the coming months after declining for months, making its cash flow situation even direr. The Chinese developer is so huge that the fallout from a potential failure could hurt not only the Chinese economy (the real estate in China contributes more than 30% of the national income), but spread to markets beyond. Evergrande's collapse would be the biggest test that China's financial system has faced in years. 2. Banks have also responded to its deteriorating cash flow. Some in Hong Kong, including HSBC and Standard Chartered, have declined to extend new loans to buyers of two uncompleted Evergrande residential projects, said Reuters. Rating agencies have repeatedly downgraded the firm, citing its liquidity problems. Evergrande's problems intensified last year when China introduced rules to rein in the borrowing costs of developers. Those measures place a cap on debt in relation to a firm's cash flows, assets, and capital levels. 3. Its share price plunged nearly 80% so far this year, and trading of its bonds was repeatedly halted by Chinese stock exchanges in the past weeks. Evergrande is everywhere. Its main business is in real estate, and it's China's second-largest property developer by sales. Evergrande owns more than 1,300 real estate projects in over 280 cities in China. Its property services management arm is involved in nearly 2,800 projects across more than 310 cities in China. 4. The company has seven units dabbling in a wide range of industries, including electric vehicles, health-care services, consumer products, video, and television production units, and even a theme park. The firm says it has 200,000 employees but indirectly creates more than 3.8 million jobs every year, according to its website. Evergrande's shares and bonds are included in indexes and funds across Asia. The pool of affected parties includes banks, suppliers, home-buyers, and investors. Evergrande warned this week its escalating troubles could lead to broader default risks. 5. It said that if it can't repay its debt, it may lead to a situation of "cross-default" where a default triggered in one situation may spread to other obligations, leading to broader contagion. In fact, sentiment is already spreading to Asia high yield bonds. Yields on Asian offshore bonds, dominated by property firms, have spiked to an average of 13%, according to TS Lombard. That also means offshore investors are at the losing end, the research firm said in a note last week. "The company's guarantee to deliver all pre-sold projects is likely to lead to overseas stakeholders seeing little, if anything, from the ultimate sale of a developer's assets in the event of a bailout," said TS Lombard. Question: It is said that it is going to be another Lehman's brothers bubble burst. How and what do you think of the repercussions in terms of macro-economic impact?