House domino falling? — image: Ewan WhiteEvergrande has been scrambling to raise funds to pay its many lenders, suppliers, and investors, with regulators warning that its $305 billion of liabilities could spark broader risks to the country’s financial system if not stabilized.$305 billion in liabilities equivalent to 2% of China’s gross domestic product (GDP)Other worries include the exposure of banks and the determination of regulators to press on with property market reforms despite hints of damaging consequences.This storm is unfolding right in the main part of China’s President Xi Jinping’s new ‘COMMON PROSPERITY’ campaign, which is attempting to correct the issue of widening social inequality access to affordable housing is a key component.China’s President: Xi JinpingThe Chinese government has floated the idea of implementing a nationwide residential property tax to cool the housing market.Despite that, today, Evergrande represents the largest threat to the nation’s economic stability.The company may be allowed to default on some bonds or bank loans, but Beijing probably has the capacity to prevent a total collapse. China’s relatively closed financial system, state-owned banks, and weak rule of law allow the government to stage-manage a restructuring to avoid a systemic meltdown.Evergrande also owes new homes to the many individual buyers who paid in whole or part for homes that aren’t finished yet — and who may have borrowed to fund the purchases.There is no doubt that besides the case of a potential default (despite being highly unlikely and deeply tied with money printing policies), the situation is causing a lot of social unrest and already a certain degree of financial burden: deeper and deeper wounds in the socio-economic tissue of an already fragmented and wealth-unequal society.