Evergrande, page-4

I think what will matter more than a collapse is what happens to the liabilities. There are quite big problems with moral hazard in the Chinese economy with a lot of debt related to companies or SOEs that can't pay back but who keep surviving thanks to more credit to roll over liabilities. Allowing Evergrande to collapse is not the issue, it's this broader problem with the system. It's worth bearing in mind though that China's home ownership rate is around 90% so I can't see the Cjinese government allowing the market to fall over, but for a long time they have been trying to shift their economy away from a heavy reliance on debt financed construction, but that can mean substantially lower growth and that's politically unpleasant so the incentive for local officials is to take on more debt to invest in construction to meet local growth targets. The bigger question for me is whether the recent regulatory crackdown and pronouncements will see the central party ask local governments to focus on things other than growth, like the quality of growth and social indicators. That will reduce demand for iron ore in the short run but make it more sustainable over the long-term