Posted on 01/29/2024 8:30:02 AM PST by Vermont Lt
A court in Hong Kong has ordered the winding up of Evergrande Group, the world’s most indebted property developer, dealing another blow to investor confidence as China’s ailing real estate sector continues to weigh on its economy.
(Excerpt) Read more at cnn.com ...
Now where did my /sarcasm tag go?
Inside China though, I think we could see a replay of the Great Depression.
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According to Statista their debt to GDP ratio is 82 percent, the US 130 percent.
That gives their Central Bank a lot of tools to paper over the problem.
“….. Current developments
As China’s economic development is increasingly faltering and large amounts of debt have built up in the economy, the government budget will remain under pressure and revenues and expenditures will need to be rebalanced. The most difficult part will be the consolidation of local government finances and state-owned company debt. However, as most of the debt is from domestic lenders, the government has considerable leeway to manage the situatio…..”
https://www.statista.com/topics/11499/government-finances-in-china/#topicOverview
I visited China about six year ago. At the time, it was clear that China's economy was booming. So many people from rural areas were coming to cities or industrial areas to find high paying jobs. There was a huge young consumer society buying all kinds of luxury items.
There was a huge amount of housing being built. But there was something very strange about the housing. The government owned the land and would give like 50 year ground leases to people upon which housing could be built, but there was no clue what would happen when the lease expired.
Most young people had parents and family help them “buy” apartments or housing. Everyone considered housing a “good” solid investment.
There was also a huge demographic bubble problem from the “one-child” policy that was going to create a huge economic problem as older worker retired and stopped contributing to the economy as well as change the kind and amount of housing that they needed.
When I was in China the young workers (one-child-wonders) were referred to as spoiled and self-focused brats. It was assumed when an economic crisis hit, that they would not be able to handle any suffering and be a potential civil rebellion in an economic downturn. An not it looks like the economic crisis may occur.
Considering how much China has purchased property, infrastructure, and businesses in other Asian Countries, Africa, and South America, I wonder the extent to which Chinese problems will spread. I also keep thinking about the tail wagging the dog and the potential for needing a war to divert attention away from internal Chinese problems.
Their data is fake, the actual numbers are closer to between 300% to 500%
Liquidate? Liquidate what?
As few as 4 or 5 Chinese banks hold all the debt and thus all the properties. There is some foreign bond debt but it is trivial compared to the total owed to Chinese banks.
Since the Chinese banks are entities of the CCP, the CCP now owns all the failed Evergrande developments. That is of course why Xi passed the rules that effectively ended real-estate development loans.
The question of who is ext is really irrelevant since there are a host of development companies in exactly the same situation as Evergrande. The banks hold all the bad loans. The CCP controls the banks. The CCP now owns all the failed properties in all the big cities.
The people who made down payments, obtained mortgages and dutifully made payments have lost their wealth and are just screwed
Surely you jest. To make such a comparison indicates gross ignorance
I was trying to explain the Chinese mortgage system to my wife. It is very different than the US system as the borrower has to put up a lot more money, up front…before the asset (home/apartment) is even built.
That money….is all gone. The savings of a couple generations have been destroyed when these things fail.
That is not going to make the rank and file happy.
Time for a cultural revolution, I guess.
It was my belief that there was a situation where persons were highly desirous of purchasing an apartment and put up the down payment and began mortgage payments. The down payment was required but purchasing in advance of construction was done because the specific property was desired. They wanted in early to be in at all.
It has also been reported that people bought two or three such apartments simply because the real estate was considered the best way to invest their savings. Turns out that there was no safe place to place their savings.
Private equity firms started pulling out of China en masse in 2011. Perhaps they saw something bad coming China’s way that stupid government bureaucrats couldn’t see.
Oops.
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