Long stories short
- The US said it will donate 500 million doses of Pfizer’s Covid vaccine to developing countries from next year.
- A sharp rise in gas prices brought down British energy companies Avro and Green, which served 830,000 customers in all.
- Unidentified individuals tried to assassinate a top aide of Ukraine’s president, a few days before a presidential bill to control the country’s oligarchy will be debated in parliament.
The founder of Evergrande, China’s largest property developer, once attended the politburo’s annual legislative conference, the largest Communist gathering in the world, wearing a slick black suit with a gold-buckled Hermès belt. Xu Jiayin became known as “belt brother”, the poster child for the country’s new “crazy rich”. Now, almost a decade on, he’s fighting to save his conglomerate from a collapse that could shock the world’s markets.
“At the moment,” Xu wrote to his 120,000 employees this week, “our company has encountered an unprecedented and mammoth difficulty.” It was an understatement:
- Evergrande is the world’s most indebted property firm. It has $300 billion in liabilities, the product of an unsustainable business model.
- It borrowed cash to develop properties and sell them years before they were completed to make money from buyers’ deposits. It had a good run: Xu made $10.6 billion and Evergrande grew to own 1,300 building projects in over 280 cities across China.
- But as the country’s housing supply began to outstrip its demand, the firm came to rely on short-term debt at increasingly high interest rates. Xu put up a billion dollars of his own cash to support an Evergrande bond with a 13 per cent coupon in 2018.
- Analysts have predicted Evergrande’s collapse since then, but it’s only when the politburo cracked down on property developers’ leverage last August – limiting how much debt a company can accumulate and requiring greater cash reserves – that its problems became obvious to investors. In response to the new policy, Evergrande cut the prices of its homes to sell them faster and stopped new projects to save cash. One investor said the company is selling off its land at a 70 per cent discount.
The property developer debt crackdown is one of many ways in which Xi Jinping, China’s president, is reshaping the country’s economy. Another show of force this year was against Internet companies and their super-rich owners, including Jack Ma. With property, Xi has the added ambition of improving housing affordability and controlling speculation. He wants “common prosperity”.
It will come at a cost. China’s property sector accounts for up to a quarter of its economy. If Xi’s crackdown on developers continues for long enough, it will become a drag on the entire economy. If the property sector crashes, so will a large part of the financial sector. Both would need government bailouts.
There was hope that the government would step in to support Evergrande before a round of interest payments – $83 million – were due today. It didn’t have to. The company put out a statement on the Shenzhen Stock Exchange yesterday that said the interest payment “has already been resolved through private negotiations”.
It didn’t reveal how much interest would be paid or when. But the statement was enough for Wall Street and European stock markets to bounce back in relief. The company could now use some of Xu’s old luck.
When he was in his twenties, Xu Jiayin worked in a steel mill in southern China and, when he reached his thirties, he found himself at the centre of Deng Xiaoping’s historic Southern Tour that led to a new, bolder round of economic liberalisation in the region. He got into property early, snapped it up cheap, and bribed officials shamelessly to secure his place at the top.
“If we continue to fight, and persevere through this struggle,” Xu wrote in his letter to Evergrande’s employees, “we will walk out of the darkness soon.”
Belonging identity, society, beliefs, countries
Vigil for Sabina Nessa
Sabina Nessa was a 28-year-old teacher who worked at a primary school. She was killed in south London on Friday evening, walking through a park close to her home. Her family and the school at which she worked have been left “inconsolable” and “devastated” at the loss. It’s just six months since the murder of Sarah Everard – also in south London. Terri Harris – a mother who was believed to be pregnant – was also killed this week in Sheffield, together with three children. Harris’s boyfriend has been charged with murder. The UK government released its violence against women and girls strategy in July, but women’s rights groups have voiced their outrage that meaningful action still hasn’t been taken to protect against male violence. A man in his 40s was arrested on suspicion of the murder of Nessa, but has been released under investigation. The local community is holding a vigil at 7pm tomorrow. Reclaim These Streets and Sisters Uncut, two groups that came to national prominence after the murder of Sarah Everard, have joined in their support for the gathering.
New things technology, science, engineering
This is about an old thing. In fact, one that’s 3,500 years old: a clay tablet that bears one of the world’s oldest pieces of literature, the Epic of Gilgamesh. It came from the area that is now Iraq, was stolen from a museum there during the Gulf War, then shipped to the US in 2003, and bought by Hobby Lobby, an arts and crafts retailer, at a Christie’s auction in 2014 for $1.67 million. Oklahoma City-based Hobby Lobby wanted to display the tablet at the Museum of the Bible, which is funded by the chain’s religious founder, in Washington DC. The US Department of Justice finally seized the tablet in July because it entered the country in contravention of the 1990 ban on the import of looted Iraqi artefacts. Finally, today, it will be returned home to Iraq. Hobby Lobby said it didn’t know the tablet’s illegal provenance and is suing Christie’s for hiding its origins. But it’s not the first time that Hobby Lobby has been in such a pickle. In 2010 it bought 13 biblical texts on papyrus and parchment to display at the same museum. They were allegedly stolen by an Oxford University professor.
The 100-year life health, education, living, public poliCY
A study of older women found those who suffered from sexual abuse are more likely to have a form of brain damage linked to dementia, strokes and cognitive decline. In a group of 150 women, 68 per cent reported at least one trauma – with nearly a quarter of those women reporting sexual assault as the trauma. The University of Pittsburgh researchers found the women were more likely to have higher white matter hyperintensities, an early marker for cognitive decline. Even after adjusting for post-traumatic stress and depressive symptoms from the assault, the white matter persisted. Dr Rebecca Thurston, the study’s lead author, said: “Not only do these results underscore the need for greater prevention of sexual assault, but also provide healthcare professionals with another indicator of who may be at most risk for stroke and dementia later in life.” The ONS estimates more than 750,000 adults in England and Wales were victims of sexual assault or attempted sexual assault in the year ending March 2020 – 80 per cent of them women.
Our planet environment, natural resources, geopolitics
The short-term cost of green transition pales against the long-run costs of unmitigated climate change. That’s already the intuition among many, but the European Central Bank (ECB) did the maths. In a stress test that encompassed four million companies and 1,600 banks, the ECB found that a worst-case response to climate change could knock 10 per cent off Europe’s GDP by the end of the century. ECB calculations show the best way to act is to transition in an orderly fashion – early and gradually – and the cost of not acting could already be looming in the rearview mirror: bank losses “would potentially be severe over the next 30 years”. Let’s get a copy over to everyone at the UN General Assembly.
Wealth investment, fairness, prosperity
Ready, Pret, go
Workers are returning to their offices in UK cities – if Pret A Manger’s expansion plans are anything to go by. The impact of the first Covid lockdown on the popular coffee and sandwich chain was devastating. It cut 3,000 jobs, or a third of its workforce. Now that restrictions have eased and offices reopened, it has announced plans to hire 3,000 people and open 200 more shops within the next two years. The chain is facing a new problem: labour shortages. The impact of the pandemic and Brexit immigration rules has caused shortages across the economy, but particularly in the hospitality and catering sectors. Pret said it will increase pay by at least 5 per cent for its cafe workers, which may also be a sign of things to come. If labour shortages persist, wage levels will rise. Good for workers, not necessarily good for firms or the idea of a global, buccaneering, business-friendly Britain. But the redistribution of wealth from capital to labour may be one of Brexit’s useful consequences.
Thanks for reading, and do share this around.
Paul Caruana Galizia
Produced by Phoebe Davis and edited by Xavier Greenwood.
Photographs Metropolitan Police, Getty Images