Earlier this month, Fitch Ratings made official what the markets already knew: China’s Evergrande Group and two of its subsidiaries were downgraded to “restricted default.” This followed the grace period expiring on Dec. 6 for some $1.24 billion in overdue interest payments on two chunks of U.S. dollar-denominated debt originally due back on Nov. 6. By and large, this event passed with hardly a mention, let alone any real concern. After all, China’s regulators and central government for the last few months have acknowledged that they would engineer a “marketized default” (their term, not mine) of Evergrande. A likely long, tedious process was already underway before Fitch became the first of the major credit reporters/watchdogs to announce its anticlimactic decree. Whether global markets should be essentially ignoring Evergrande’s unwinding—and that of the broader, bloated Chinese market and financial structure to boot—is another matter. No major economy on the planet has so abused debt …
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