China: a crisis greater than that of Evergrande would be in gestation

Investing.COM - The problems of the Chinese real estate giant Evergrande (HK: 3333) has taken a preponderant place on the international scene while investors wondered if a lack of payment would sound the start of a new financial crisis.

The suspense remains for the moment since the company has a period of 30 days to pay its deadlines.At the same time the Chinese authorities began to take measures to overcome the contagion of the economic fabric.

However, a new crisis hides behind that of Evergrandeet to which we do not pay attention.

A large -scale energy crisis

GQG Partners, a leading fund manager who reduced his exhibition to China, said that current electricity shortages in China are more worrying than the debt crisis faced by the real estate giant Evergrande.

The investment fund is worried about the repercussions of these energy problems on the economy of the country and the world."We are much more concerned with the Chinese energy crisis than by the problem of Evergrande because it has serious implications".

Indeed, the effects of the energy crisis in China could affect global supply chains and further disrupt the supply of consumer goods, triggering an increase in inflation.

The world supply chains have already been put to the test due to the COVVI-19 pandemic and the disturbances of maritime transport which limited the supply of various goods, from clothes to semiconductors.

China is experiencing a large number of electric cuts due to a shortage of coal, objectives to reduce more strict emissions and increased electricity demand among industrialists.

Moreover, certain factories, including those that produce for Apple (Nasdaq: AAPPL) and Tesla (Nasdaq: TSLA), were forced to close in order to limit their energy consumption.

Chinese President Xi Jinping announced last September that China was aimed at reaching the peak of carbon emissions by 2030 and becoming carbon neutral by 2060.This announcement kicked off national and local plans aimed at reducing the production of coal and other carbon content.

In response, Goldman Sachs (NYSE: GS) and other economists have gone down their growth forecasts for China since the energy shortage heavily strikes the manufacturing sector of the country.

The Evergrande crisis would not be as serious as you think

Compared to the energy crisis, the debt crisis of the Chinese real estate developer Evergrande will probably be "very well contained".

GQG Partners believes that Evergrande problems are not critical and can be easily sponge."The vast majority of the debt is interior, and I think it can be distributed between smaller entities and absorbed by others...We have already seen this kind of film and, obviously, the authorities adapt perfectly to the management of this problem ".

A crisis in China, but opportunities elsewhere

GQG Partners said it started to reduce its exposure to China in its action fund for emerging markets in early 2021.Meanwhile, the fund has increased its participations in other emerging economies such as India, Brazil and Russia where economic growth has resumed.

The fund explains that investors remain obsessed with China and forget the other opportunities."We think we focus a little too much on the aspects of growth in China while other markets seem to straighten...And this is where we will find opportunities ".

The main positions of the emerging market funds include the largest semiconductor manufacturer in the world, Taiwan Semiconductor Manufacturing CO or TSMC (SA: TSMC34), the Indian Computer Service Companyinfosys (NS: Infy) and the South Korean companySamsung Electronics (KS: 005930).