Contagion: China Evergrande Group’s Collapse and its impact on Belt and Road Stock Indices


The Evergrande Group is a giant: a company that has liabilities proportional to 2% of China’s overall GDP. While there is evidence that Evergrande’s collapse harmed China and its surrounding economies, this thesis analyzes Evergrande’s default within the context of China’s central foreign policy: the Belt and Road Initiative. Through four selected event dates, a difference in means and medians test and standard panel regression is conducted to analyze differences in impacts for Belt and Road and non-Belt and Road participating countries’ stock indices. This paper’s hypothesis implies that Belt and Road countries would see comparatively more negative impacts on their stock indices. Empirical analysis reveals that events before and after Evergrande’s September 2021 warning were statistically different for both Belt and Road and non-Belt and Road groups, with Fitch Ratings’ declaration of Evergrande’s default being the most detrimental. On the other hand, warnings the year prior to Evergrande’s widespread media coverage in September 2020 opposed the hypothesis, seeing non-Belt and Road countries being more negatively affected. Further findings suggest, however, that Belt and Road countries relative to non-Belt and Road countries showcase comparatively worse stock return performance across the majority of the events, fortifying the hypothesis that Belt and Road countries were more negatively impacted by Evergrande’s default relative to non-Belt and Road countries

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