Evergrande’s debt crisis is ‘manageable’ and is not a Lehman-level event, says hedge fund billionaire Ray Dalio

ray dalio
  • The $305 billion debt crisis facing Chinese property developer is a “manageable” situation, said Ray Dalio.
  • In Tuesday’s interview, he said Evergrande’s crisis isn’t same as the 2008 collapse of Lehman Brothers.
  • Evergrande is likely to miss an interest payment on its debt this week.
  • See more stories on Insider’s business page.

The $300 billion of debt that’s pushing Chinese property developer Evergrande towards a potential collapse is not equivalent to the 2008 breakdown of US investment bank Lehman Brothers and the situation is “manageable,” hedge fund heavyweight Ray Dalio said Tuesday on CNBC.

The “Lehman moment produced pervasive structural damage through the system that wasn’t rectified until the Treasury came across in terms of its borrowing and then the Fed came across with quantitative easing, but this is not that kind of a shake-up type of thing,” said Dalio in an interview during his attendance as a speaker at the Greenwich Economic Forum in Connecticut.

Evergrande, China’s second-largest real estate developer, with $305 billion in liabilities is the most indebted company in the world. The company has indicated it’s unlikely to meet an interest payment due Thursday and that it could default on its debts. Global stock markets sold off Monday on fears Evergrande’s predicament will hurt China’s economic growth and ripple through or travel beyond its financial system.

There’s been talk in the markets recalling the demise of Lehman Brothers that prompted the 2008 global financial crisis.

“$300 billion is what they owe and this is all manageable,” says Dalio, founder of Bridgewater Associates, about Evergrande.

It’s still unclear how the Chinese government may respond to the Evergrande crisis but some analysts have said they expect Beijing to enact partial restructuring of Evergrande to stabilize markets and limit a wider impact.

Dalio said the “basic economics” for all countries is that if a troubled debt situation is in its respective currency, deals can be worked out to resolve problems. “We’ve seen it happen over and over again, and it’s a good thing that lenders get stung or that the borrowers get stung. That’s how the system works,” he said.