Evergrande brings Chinese economy to a turning point

Evergrande’s debt crisis is a convenient reminder to the world of the various frailties that still run through the Chinese economy.
As the property company stumbles, the crucial question is whether those frailties will drag down the world’s second-largest economy.
Risks have increased, not just of a slowdown but of permanently slower growth. But there are also options that, if skillfully used, would turn the looming crisis aside.
Real estate contributes about 29 per cent of gross domestic product. The sector, in reality is so overbuilt that unsold apartments could accommodate at least 90 million people.
As developer sales slump, they have less money to buy land, therefore, there is a process in the making for squeezing the finances of local governments, which, in turn, are less able to invest in infrastructure.
A property-related chaos in China is particularly dangerous because it would disable an engine that has propelled Chinese growth for at least two decades.
Much of the savings come from high corporate profits that are the mirror image of repressed wages. If Beijing can engineer a rise in those wages, consumer spending will positively respond, helping to re-orientate the economy away from its over-reliance on capital investments.