Since coming to power, Chinese President Xi Jinping has had to deal with three overriding priorities. First, a domestic economy that is slowing and increasingly unequal. Second, an adversarial geopolitical environment, resulting largely from Xi’s own quest to change the regional and global status quo. And, most importantly, making sure he secures a third term at the Chinese Communist Party’s key 20th Party Congress next year.

Enter Evergrande and its growing list of missed bond payments. This behemoth, with $US300 billion ($404 billion) in leverage, lies at the centre of a property sector that represents 29 per cent of Chinese gross domestic product and is more than $US5 trillion in debt. Forty-one per cent of the Chinese banking system’s assets are associated with the property sector, and 78 per cent of the invested wealth of urban Chinese is in housing. Given the millions of creditors, shareholders, bondholders and (unbuilt) apartment owners, Evergrande has become a problem for Xi politically, economically and globally.

Financial Times