Struggling property giant Evergrande has promised it will engage with creditors after it formally defaulted this month. The world’s most indebted property developer has more than $300bn (£224.67bn) worth of liabilities and has been missing payment deadlines on its debt bonds, triggering 30 day grace periods each time.
The Chinese government are now trying to contain the damage from the Evergrande default.
However, Gordon Chang, an expert on US-China affairs, told Express.co.uk: “Evergrande shows that China has an unsustainable model.
“What they did during the 2008 Great financial crisis was they overstimulated their way through it.
“Instead of allowing their markets to adjust, they just poured a lot of money into their economy, building things they didn’t really need, so they were able to avoid the downturn.
“Right now they’re having their 2008. That means they’ve got a problem right now that they can’t get past because they have created so much debt.”
Mr Chang is the author of the book The Coming Collapse of China, in which he tried to predict the fall of the country in 2011.
He later changed the timing of the predicted collapse to the year 2012.
He said that while it is unclear how much debt exists in China, he believes that it’s more than Beijing can handle.
READ MORE: Evergrande to engage with creditors
“Everybody signed onto them and so everybody was responsible.
“What Xi Jinping did by grabbing power from everybody was that he also grabbed accountability.
“He can’t blame anyone else for this. I’m sure he’ll try but it’s not credible.
“Also at the same time, Xi Jinping raised the cost of losing a political struggle in China.
“It used to be that if you lost a political struggle, there would be a graceful exit for you. Xi Jinping basically started jailing people.”
As part of an anti-corruption campaign led by President Xi, thousands of senior officials and politicians were jailed and tried, including former vice minister of state security Sun Lijun
Mr Chang continued: “He right now realises that he has full accountability, he could be blamed for a policy mistake and lose everything.
“These policy mistakes is going to be attributed to him and he could pay the price.”