Evergrande Fuels Concerns over China's Housing Bubble

The Chinese government worries that Evergrande's debt crisis could pose systemic risks. Reuters
The Chinese government worries that Evergrande's debt crisis could pose systemic risks. Reuters
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Evergrande Fuels Concerns over China's Housing Bubble

The Chinese government worries that Evergrande's debt crisis could pose systemic risks. Reuters
The Chinese government worries that Evergrande's debt crisis could pose systemic risks. Reuters

A state crackdown on China's colossal property market has helped send one of its biggest developers to the brink of collapse, and analysts warn the fallout could lead to the bursting of a bubble that has been building for more than two decades.

China's property market has been a critical part of the economy, as Beijing's promise to improve people's living standards translated into new homes that in turn fueled massive construction.

Hundreds of millions of middle-class Chinese see property as a key family asset and status symbol, said Agence France-Presse.

China's housing scene took off after key 1998 market reforms that boosted the private market from employer-designated homes -- rocketing in a breathtaking building boom on the back of rapid urbanization and wealth accumulation.

But, as prices soared, an anxious Beijing fretted about wealth disparity and the potential for social instability.

The average apartment price was 9.2 times disposable income last year, according to services firm E-House China, pricing many out of the market.

Highly leveraged developers have also prompted fears of financial instability.

Last year, Beijing introduced metrics to cap debt ratios called "three red lines" and tightened scrutiny over crucial funding raised by pre-sale deposits.

The plan was "to reduce the risk of the riskiest", said Dinny McMahon, of consultancy Trivium.

"The idea was that this would be a mechanism to force the most risky developers to pare back their debt levels," he added.

"And those that were less risky -- it gave them scope to continue growing."

At the forefront of that rapid expansion was Evergrande, built by founder Xu Jiayin in 1996 to have a presence in 280 cities and an empire that includes mineral water, wealth products and even a football team.

Now one of the country's largest developers, it is drowning in liabilities of more than $300 billion as it navigates China's new rules.

All eyes are on how the crisis is handled by Beijing, which has so far remained quiet, with lingering fears over consumer confidence and an already weakening property market.

"What starts off as a problem exclusively for Evergrande today could snowball to take in other relatively weak developers tomorrow," added McMahon.

- 'Sustained decline' -
The three red lines show Beijing's long-intended aim to restructure the property market, analysts say, but Evergrande's staggering debts may force the government's hand to shore up the sector.

Evergrande is the most indebted of China's private homebuilders with overwhelming liabilities and wild diversification.

But there have been at least two bond defaults from major developers this year, with others scrambling to raise cash to drive the merry-go-round of debt, land buying and off-plan sales that move China's property market.

Another payment is due this week on a separate bond after Evergrande appeared to miss a payment last week.

A slowing population has also hit property demand.

"The root of Evergrande's troubles... is that residential property demand in China is entering an era of sustained decline," Capital Economics chief Asia economist Mark Williams said in a note.

Sharp price falls will make it harder for developers -- even those with healthier balance sheets -- to finance construction, he added.

If debt-burdened Evergrande is carefully unpacked most of the risk can be ring-fenced, analysts say, with reports the government is already taking over some stalled projects to restart construction.

"If well-managed, extensive fire sale of properties by Evergrande could be prevented," Tommy Wu of Oxford Economics told AFP.

But if it sparked wider problems, Wu said, the government would likely have to ease the three red lines and engineer a softer landing.

- Weaker sales -
Evergrande aside, the finances of most developers have improved over the past year.

Country Garden -- China's largest homebuilder by sales -- posted positive half-year profits in August as sales in smaller cities surged.

"Last summer, eight of the 12 firms to which the red lines were initially applied breached at least one," Capital Economics said in a research note.

"Now only two do –- Evergrande and (Shanghai-based developer) Greenland."

Property sales and prices have weakened in recent months while Evergrande stole headlines, according to data analytics company China Beige Book.

Some local governments have imposed price floor controls to stop the cost of homes nosediving, said Iris Pang, from ING.

If potential homebuyers are spooked and hold onto their cash, sales will be driven down further.

In that case, policymakers are likely to step in, said Jonas Golterman of Capital Economics, pushing down mortgage rates or reducing deposit requirements for homebuyers.

"Our base case is that the real estate market faces a period of uncertainty and perhaps some price falls, but not an outright crash in house prices," he said.

"That said, the downside risks are significant, and this sort of situation is unpredictable."



Iraq Oil Output Exceeds 5 million bpd

Majnoon oil field near the Iraqi city of Basra (Reuters)
Majnoon oil field near the Iraqi city of Basra (Reuters)
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Iraq Oil Output Exceeds 5 million bpd

Majnoon oil field near the Iraqi city of Basra (Reuters)
Majnoon oil field near the Iraqi city of Basra (Reuters)

Iraq produces more than 5 million barrels of oil per day (bpd), Oil Minister Basim Mohammed told state news agency INA on Saturday.

According to Reuters, Iraq is pushing for a higher OPEC production quota as the economic fallout from the Iran war and new investment by oil majors increase pressure on Baghdad to boost output, potentially putting it at odds with the producer group.

The conflict has hit Iraq particularly hard, forcing major export cuts and depriving the state of oil revenue, which accounted for 88% of government income last year.


IMF: Any Slowdown in AI-driven Growth Would be Factor for Central Banks

IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
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IMF: Any Slowdown in AI-driven Growth Would be Factor for Central Banks

IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)
IMF Managing Director Kristalina Georgieva speaks during the Annual Meetings Plenary at the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) at the Queen Sirikit National Convention Center (QSNCC) in Bangkok on October 16, 2026. (Photo by Lillian SUWANRUMPHA / AFP)

Central bankers around the world would need to consider any slowdown in AI-driven growth as they assess steps in their fight against inflation, International Monetary Fund Managing Director Kristalina Georgieva said on Friday.

Georgieva said concerns about dependence on the AI investment boom and high valuations were impacting markets around the world.

"Things are going up and down, and this is likely to continue," she told an audience at IMF headquarters in Washington, adding that the volatility would complicate the job of central banks at a time when risks to price stability had been growing.

A steep rout in technology stocks on Thursday rippled through markets on fears that ⁠the Democrats' victory ⁠in the US midterm elections would increase regulatory scrutiny of AI and slow the data center build-out, sending investors to the safety of bonds.

The political jitters are hitting an AI trade already on shaky footing due to worry about return on massive spending on AI-related infrastructure, with the meltdown spurring margin calls and spooking retail investors and hedge ⁠funds alike.

Georgieva said the AI investment boom was lifting growth in some countries, helping to offset a negative oil-supply shock triggered by the war in the Middle East, but it was also adding to inflationary pressures and financial stability concerns.

The IMF last month flagged significant growth and financial stability risks from a potential ending of the AI investment boom, among other factors, including a prolonged Middle East war. At the time, it warned that a steep drop in AI investment could lead to a sharp fall in asset prices, ultimately cutting global GDP ⁠by 1.1% ⁠by 2028, including a 1.8% drop in US output.

Georgieva did not repeat the downside forecast on Friday, but acknowledged the recent market volatility.

"Should there be a slowdown in the AI-driven growth impulse, it would need to be factored in as central banks assess the necessary steps in the fight against stubborn inflation," she said.

Democrats are planning to unleash a flood of new legislation targeting artificial intelligence systems and data-center development when they take control of the US Congress in January, Reuters reported on Friday, citing congressional aides and advocates.

That would mark a sharp shift from the Republican-led Congress, where lawmakers largely focused on promoting AI development and declined to pass legislation restricting the technology.


World Food Prices Dip in October, but Remain Higher Than a Year Ago

A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
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World Food Prices Dip in October, but Remain Higher Than a Year Ago

A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)
A worker carries loaves of bread for sale at a bakery in the capital city of Cairo, Egypt November 4, 2026. (Reuters)

World food prices edged lower in October as weaker import demand contributed to monthly declines in cereal, dairy and meat prices, but were still nearly 6% higher than a year earlier, the United Nations' Food and Agriculture Organization said on Friday.

The FAO Food Price Index, which tracks monthly changes in international prices for a basket of food commodities, ‌averaged 133.9 points ‌in October, down from a revised ‌135.6 ⁠in September.

The index ⁠was 5.9% higher than a year earlier, but remained 16.4% below its March 2022 peak.

FAO's cereal price index fell 4.5% from September and was 12.6% lower than a year ago, as wheat and maize quotations declined. Wheat prices eased on weak import demand ⁠and improved production prospects, especially in Argentina.

"Expectations of ‌easing constraints on Black ‌Sea export flows added to the downward pressure on prices, ‌although continued disruptions to Black Sea logistics limited the decline," ‌FAO said in a statement.

Maize prices also eased after reaching a three-year high in September, pressured by the US harvest, expectations of ample supplies in South America and renewed ‌prospects of easing tensions in the Black Sea region.

Vegetable oil prices edged up 0.3%, ⁠as ⁠higher soybean and sunflower oil prices more than offset a fall in rapeseed oil prices.

Sugar prices rose 6.6%, their fourth straight monthly increase, to the highest level since December 2024, after rainfall disrupted harvesting in Brazil. They were now 28.8% above a year ago.

The dairy index fell 1.1%, as lower butter and cheese prices linked to ample supplies and subdued demand outweighed gains in milk powder.

The meat index declined 1.2%, while still slightly above its year-earlier level, as ovine and bovine meat prices fell.