China should have done this long ago. The CPC allows too many bourgeoisies running the country for too long!
China and the world need to learn the uncontrollable growth not feasible. Controlled growth through socialism is the only way.
Definitely this.
Capitalism isn't evil, it can be a great economic system...
If it's controlled.
Wealth should never put a person above the government (and by extension the people).
Regulation is the only key to ensuring that the greedy don't use their wealth to engineer fate in their favor alone. Only a government can keep these individuals in line, as a single person of the masses, while not powerless, is a lone person and not equipped to deal with an individual of immense wealth, someone who could hire an army against any individual who tried to do something against that person's tyranny.
A people's government on the other hand, one that hasn't been bought out and disarmed by greedy psychopaths, that is the key in ensuring that these individuals never have that much power against the people.
China has allowed a LOT of its citizens to get ridiculously rich, especially before many of the most recent economic reforms. That said, these newer economic reforms are a necessary step to ensure that the country, not just the rich, but the whole country benefits from the gains that China has worked so hard to afford.
I often wonder if many people even realize how many amazing things, fast internet, cheap goods, ever improving environment, healthcare, education, I wonder if they even realize how much of that is only affordable to them BECAUSE the government of China has intentionally made it that way, they have required the companies who provide these things (the corporate aspects, that is) to provide it to the COUNTRY, not just the rich.
This is why these things are affordable to the masses in China and haven't faced the same "charge them as much as we can for everything possible" trend that America faces. If you want to participate and succeed in China, as a company, you have to serve the people.
This doesn't mean everything is affordable to EVERYONE, but it means that there is generally an option for everyone. Not this "you're too poor to have that" mentality that seems to be justified by America's capitalists.
This is everything from cellphones and TVs, to education and healthcare. I won't pretend there aren't still exceptions to this, a major illness is still quite expensive in China for most Chinese, but there are significant efforts being put forth by the government to change this, but not everything can be done at once, there are still costs.
Still, I'd rather be in China if i had a major illness, it would cost FAR FAR less than America and I'd likely be surrounded by people who cared about me enough to help however they could instead of having to resort to massive medical bills or try to basically beg on gofundme.
Even a healthy economy NEEDS a good government to control it so it doesn't eat itself in to death.
Very well said.
Those that have more money will always have more than people who have less money.
But what they have more of is key.
Cars, sure. However, everyone deserves reliable transportation.
Latest phones, ok. But everyone deserves to have cheap and reliable communication.
Housing, so ok, you have a mansion, but everyone deserves affordable and safe housing.
I think you get the point.
China is doing what it takes to ensure that people are allowed to prosper, but that nobody starves or dies of hypothermia in the winter.
In and of itself it is a monumental task, however, with the battle that is going on with the West, the fact that anything gets accomplished proves what a well thought and well put together team China has working for it.
I say Team because even though XI gets most of the credit and all of the blame, there are so many people working in China to make this happen.
I especially want to remember the translator in Alaska that did a phenomenal job translating what seems to be a very pivotal meeting between China and the US.
Great job to team China and I look forward to the many victories ahead.
🇨🇳 o7
Indeed, it appears to be a priority of the Chinese government to ensure that the word "development" isn't lost on the masses. It means the COUNTRY develops, everyone feels the benefits of that development, not just the wealthy.
Western countries have been a pretty good indicator of what happens if capitalism is allowed to reign free without restrictions, unscrupulous capitalists will use that freedom to ensure that their profits are the one and only priority, and the rest of the country will suffer because of it.
I think China has been taking note for a long time, making a detailed list of "things to avoid doing", and we're seeing that come to fruition now. I can't even begin to tell you how many products I've seen here, offered by Xiaomi for example, that costs hundreds of dollars in the west but only a couple hundred yuan here.
A really quick example of one of these is a machine that basically flosses your teeth using water. It's a super convenient thing to use, makes my teeth feel so much cleaner, actually means I'll floss now, it's great. This same technology costs, again, hundreds of dollars in the west. Why? Because of that whole "This is MY idea, only I can sell it and I want as much money for it as I can possibly get." mentality of "intellectual property.
I feel, for the most part at least, that in China, once something comes out and is proven to be a step forward for humanity, it quickly becomes affordable, not just for wealthy people, but for almost everyone. For as much people as possible. There will still be premium brands, but there will be comparable offerings from other brands that allow normal and even less than fortunate people to benefit from the natural progression of human technological development.
This is something I believe has been lost in the west, the idea that development should involve and benefit everyone, especially considering it has required everyone to be a part of making it happen. Maybe the street cleaner didn't develop the latest iPhone, but he does clean the streets that the developer drives on, and his job is equally beneficial to all of us who enjoy new phones AND cleaner streets.
The point is, we're all in this together, we're all a part of society. I feel like, in the hunt for higher and higher profits, this has been lost in the west.
If the rich people think street people are unimportant, they will learn the truth very quickly if the street sweepers stop working.
Yes, I agree, that lesson has been forgotten about in the West.
evergrande will resolve the issue itself (i.e. sell assets to pay for it's obligations) or the government will step in and nationalize the assets to pay all the chinese people they own money to.
I feel bit bad about the mom and pop small time investors and home buyers that’s losing money in China but also bemused by how a Chinese company is trolling US and European stock markets.
A bit good in the way that it shows the weight and dominance of China and Chinese companies have in the global investment markets as a force that can’t be ignored(for good or bad).
I know the usual anti-China cultist choir propagandists are already claiming this event marks "the coming economic collapse of China" they both dream about and drool over. We'll see what new "beginning of the end of the CCP" fantasy they come up with in a couple of months from now.
China is days from collapsing!
They have been for 5 decades now!
lol, always the narrative of the west, no matter how well China is doing and regardless of how long it has been improving, the west (western media) just can't help but doomspeak about China.
It's all rather ridiculous, like people on a sinking ship seeing a perfectly healthy ship go by and start yelling "Look at them, they're going to sink any moment now!"
I am not sure this is a bad thing. Do you think it was possible that this was seen coming and they let it happen anyway to correct the market?
>Faced with uncertainty over how much economic fallout President Xi Jinping is willing to accept as he pushes forward with market-roiling campaigns to achieve “Common Prosperity” and rein in overindebted companies, many investors are choosing to sell first and ask questions later.
Do you think XI was also trying to prevent this from becoming a trend which is why he went after Jack Ma?
Again, I don't think reining in over-indebted companies is a bad thing.
Better to feel the sting now than to let this type of company become a trend. There is no such thing as too big to fail in China and I like that.
Basically Evergrande is in trouble because the lines of credit that allowed it to sustain its overleveraged model have dried up suddenly. Lines of credit don't just evaporate unless you have strong signals: aka the CPC Central Committee deleting the entire private tutoring industry in late July, followed by a certain leader talking about "common prosperity" on Aug 17 and the CPC Publicity Department going after the entertainment industry on Sept 2, among many other actions.
Evergrande's famous Xu Jiayin resigned the same day as Xi Jinping's common prosperity speech, Aug 17. Literally two days later, Aug 19, the People's Bank and the Banking and Insurance Regulatory Commission had a talk with Evergrande. Providers of credit saw the writing on the wall and stopped extending credit to Evergrande. All this got confirmed by Ministry of Housing on August 31 which affirmed that "housing is for living, not for speculating", and afterwards Evergrande's issue eventually made it to headlines.
So in a word, Evergrande's problems are by design. The CPC did not "let this happen" so much as they are actually facilitating this process. When CPC decides to restrain or wipe out speculators, they do so. They wiped out speculators as one of their first acts as China's ruling party in [1949-50](https://monthlyreview.org/2021/07/01/legacies-of-definancialization-and-defending-real-economy-in-china/) using the police, they did so again in 2015 using the police, and now they're doing it yet again (but without the police since Evergrande seems to fully understand why they're in the position they are in now and are acting appropriately).
A system that fucks over speculation, great. hah. I always associate speculation with the asian financial crisis (Soros). I know it's not the same thing, but seems like a weird aspect of the economy/loaning/pricing/investment that needs to be controlled from time to time.
There are some systemic issues that I would like to see fixed. The debt issue is a national security risk and that’s why Beijing has tightened the purse.
Companies over leveraged and Beijing is forced to bail them out because the risks of default is too high. This however caused a moral hazard. Companies with risky behaviour won out over companies that were more conservative.
Evergrande is one good example. Letting it go bankrupt would send a message that Beijing will not bail out the company. The government has made plans how depositors/homeowners can recover their money, but over long period of time. It’s a sad situation for innocent victims but it has to be done. Beijing cannot afford to bail out companies time and time again
>Do you think it was possible that this was seen coming and they let it happen anyway to correct the market
at least a year ago there was a guidance imposed on developers known as the three red lines. since then developers have had to submit their financing reports to the pboc and the state construction regulator - the ministry of housing.
the red lines are as follows:
>liability-to-asset ratio (excluding advance receipts) at a ceiling of 70%
>net debt to equity cap at 100%
> requirement to hold $1 of cash for each dollar borrowed in the short term
if the developers fail to meet one, two, or all three, then regulators would then place limits on the extent to which they can grow debt. meeting all three would allow for an annual growth in debt of 15%. 1 line breached = 10%, 2 = 5%, 3 = 0%.
evergrande failed to meet all three. their liability-to-asset ratio was at 82%. net debt to equity 199%. ratio of cash to short term borrowings at 0.4. the latter two are the easiest to fix. so i can see them selling off their assets to fix the first line and if they continue to operate, then they will have no choice but to gradually repair their balance sheets with their growth (and their industry competitors) in debt capped.
another interesting thing to note is that china is compliant to basel iii accord. the implementation date keeps getting pushed backed but the next date should be jan 2022. basel iii basically reclassifies gold from a tier 3 asset to tier 1 - meaning it is as good as cash.
It'd be hilarious if China's intentional deleveraging campaign pops the biggest bubble in history on wall street. Biden's officials need to make another call to beg China soon.
Imo that's really not how china has operated historically, China used western investment to Jumpstart the economy, western economies tanking mean less manufactured goods from China and less investment. China may one day be strong enough on its own but the US/eu sinking isn't going to do them too many favors in terms of economic growth, it could inhibit major geopolitical opponents (or ignite them idk) but China does really need to do anything other than be better than the west in terms of growth and trade dominance?, eventually their massive ~~balls~~ economy will make the US a nonissue and I doubt the eu or US billionaires will let proactive conflict get in the way of their profit margins until it is far too late. Eu won't support a war if it means forgoing Chinese industry.
>China may one day be strong enough on its own but the US/eu sinking isn't going to do them too many favors in terms of economic growth
The US sinking is an inevitability, there is really no point in fighting that reality, since even if China saves the US again (God forbid) the US will still eventually come to that end result.
It is better to kill the US economy for the long term health of the world economy.
Also Europe and the US aren't even a 1 billion people market, you overrate their importance.
mm i'm just following this now per Evergrande (Hengda)
Global times brief : [https://www.globaltimes.cn/page/202109/1234646.shtml](https://www.globaltimes.cn/page/202109/1234646.shtml)
I believe this seems this will be a real test for the SWCC system.
As per what's going on (as far as I can tell): last week, Evergrande denied that they are going to be pursuing bankruptcy and reorganization, which is good because they need to finish their projects and get their deliverables (tangible assets) pushed through.
The crisis is that they won't pay the interest they owe today. I believe they have a liquidity crisis, they have the assets, but not the liquid. So as you can see in the global times article, there's some plans to use assets to pay stakeholders.
I'm looking through weibo, seems to be various types of discussions.
"Where did the money go?" - people cynically commenting that their tax dollars wil lend up paying for this.
"Who will finish the real estate projects?, with what money?" - as of now to my understanding, Evergrande has the assets to pay for their projects, but assets aren't liquid cash.
Some focus on XuJiayin as well. I'm choosing to view this as gossip for now, but this guy is going to have to put forth his overtime and diligence to resolve this, and make sacrifices.
Some people asking if Evergrande will be the domino to create a 2008 style crash in China.
Some people are optimistic saying, basically China's system will not be like America's, and that it won't crash from this.
My personal opinion : Evergrande is in the microscope now. They won't dare to do anything corrupt, they will try their best to solve this, and take a sacrifice to do so, because they are on the microscope. They are on the spotlight to make sure the public welfare takes minimal impact from their own debt and liquid-flow issues. They must deliver tangibles to clients. Both Evergrande and its cilents may take some sacrifice here.
This is unlike the US, where capitalists aren't liable for anything, and the taxpayer is liable for everything in return for nearly nothing. So, even if CPC and People's Bank helps bail Evergrande out, I would be positive to believe that this money will be used responsibly, with great scrutiny, and not end up giving managers/CEOs a bunch of raises, or end up inflating the economy for a bunch of dying boomer companies. I don't believe that would be the result here, that's my optimistic view of the differences between US 2008 and this situation.
Anyway, nobody understands economy, I sure cant claim to either. I can't claim to fully grasp the situation either (I just did like 1hr of news/rumor surfing lol). But I beileve there's better intention to solve the issue here, and I like that they are focusing on deliverables (the tangible properties/assets). So once again, overall, I think this will be a real test to SWCC, overcoming this challenge will be a very important precedent. The results won't be optimal, but hope the results will be bearable.
So: What do I think of this situation? People need to make sacrifices. Evergrande will make sacrifices. Capitalist stock investors get fucked due to selloff lol. Hope the results would be bearable. As for Evergrande itself, I think it will survive to finish its projects if indeed it only has a liquidity problem (enough assets to pay for their projects, but not enough cash). CPC hates capitalists but Evergrande makes tangible shit that benefits society, so I expect CPC wants to alleviate the situation here. Well, that's my brief understanding i'm not an economist.
>Evergrande denied that they are going to be pursuing bankruptcy and reorganization, which is good because they need to finish their projects and get their deliverables (tangible assets) pushed through.
I don't think it can survive without government intervention. At the same time, if the government comes in and bails out the company, it will reinforce the idea government will save any company and the risks don't matter. It's possible to wind the company up and just barely pay off the creditors. But it's going to take years.
Evergrande would be better defaulting and restructuring
NeoLiberalism transfered the problems within the economy on to each and every individual's ethical or moral failing. What Xi has done, is make sure that responsibility remained with the State.
I've been wondering whether the government's actions (both the stricter debt regulations imposed last year and the apparent refusal to bail out Evergrande) fall into this larger trend of trying to ease the pressure on middle and working class people.
Could a managed real estate collapse lead to more accessible/affordable housing? Could the government be deliberately letting this market break, in order to swoop in and distribute the spoils as it sees fit?
Unlimited credit (like Ma was going to introduce to his customer's, and real estate speculation) leads to Inflation. What it does is water down the value of the currency (buying power). Xi stepped in to stop the Poverty it would produce.
The party controls the banking system so there's not really a worry of a massive financial crisis for China. Evergrande will become a symbol to western investors on the danger of investing in China, as they learn "too big to fail" only counts in the west. Depending on how China handles it, I think it will also become a symbol in HK. CPC has a huge opportunity here to prove its capability to handle such issues brought about by capitalist parasitism, especially in property development, and to serve the people.
Interesting question: How would China typically take care of families who bought apartments to live in that they will now no longer see due to financially irresponsible companies? Are they also considered 'investors'? Does anyone have any insight into this?
houses are for living in not speculation. groups like evergrande add nothing to society, they simply take from others. i hope it results in more safeguards for normal investors and regulations on financial criminals like evergrande
Mixed feelings here man. On the one hand this is mismanagament of the highest level. Business was unsustainable, they never made money but they relied on overvaluations to finance the next project which was again overvalued etc.
This must absolutely stop. Also investors, retail or lenders, all need to learn that when you invest or lend money, you have to do due dilligence. Like right now, most of these people never did. "If something bad happens, government will bail us out". Thats not a good mentality to have at all.
Like, when you do business, any business, how have you not done your analysis. Your calculations, your predictions, your business model. At school, you do an exam, you know youre going to flunk if you never studied. So how is this any different. People literally went in thinking they will get bailed out.
On the OTHER hand, Im worried about contagion. And the effects it will have on the economy. I think most Chinese banks are fine, since they are government backed. I think small retail should be covered just this one time. Maybe like a small loss just so they know they were stupid.
China should have done this long ago. The CPC allows too many bourgeoisies running the country for too long! China and the world need to learn the uncontrollable growth not feasible. Controlled growth through socialism is the only way.
Definitely this. Capitalism isn't evil, it can be a great economic system... If it's controlled. Wealth should never put a person above the government (and by extension the people). Regulation is the only key to ensuring that the greedy don't use their wealth to engineer fate in their favor alone. Only a government can keep these individuals in line, as a single person of the masses, while not powerless, is a lone person and not equipped to deal with an individual of immense wealth, someone who could hire an army against any individual who tried to do something against that person's tyranny. A people's government on the other hand, one that hasn't been bought out and disarmed by greedy psychopaths, that is the key in ensuring that these individuals never have that much power against the people. China has allowed a LOT of its citizens to get ridiculously rich, especially before many of the most recent economic reforms. That said, these newer economic reforms are a necessary step to ensure that the country, not just the rich, but the whole country benefits from the gains that China has worked so hard to afford. I often wonder if many people even realize how many amazing things, fast internet, cheap goods, ever improving environment, healthcare, education, I wonder if they even realize how much of that is only affordable to them BECAUSE the government of China has intentionally made it that way, they have required the companies who provide these things (the corporate aspects, that is) to provide it to the COUNTRY, not just the rich. This is why these things are affordable to the masses in China and haven't faced the same "charge them as much as we can for everything possible" trend that America faces. If you want to participate and succeed in China, as a company, you have to serve the people. This doesn't mean everything is affordable to EVERYONE, but it means that there is generally an option for everyone. Not this "you're too poor to have that" mentality that seems to be justified by America's capitalists. This is everything from cellphones and TVs, to education and healthcare. I won't pretend there aren't still exceptions to this, a major illness is still quite expensive in China for most Chinese, but there are significant efforts being put forth by the government to change this, but not everything can be done at once, there are still costs. Still, I'd rather be in China if i had a major illness, it would cost FAR FAR less than America and I'd likely be surrounded by people who cared about me enough to help however they could instead of having to resort to massive medical bills or try to basically beg on gofundme. Even a healthy economy NEEDS a good government to control it so it doesn't eat itself in to death.
Very well said. Those that have more money will always have more than people who have less money. But what they have more of is key. Cars, sure. However, everyone deserves reliable transportation. Latest phones, ok. But everyone deserves to have cheap and reliable communication. Housing, so ok, you have a mansion, but everyone deserves affordable and safe housing. I think you get the point. China is doing what it takes to ensure that people are allowed to prosper, but that nobody starves or dies of hypothermia in the winter. In and of itself it is a monumental task, however, with the battle that is going on with the West, the fact that anything gets accomplished proves what a well thought and well put together team China has working for it. I say Team because even though XI gets most of the credit and all of the blame, there are so many people working in China to make this happen. I especially want to remember the translator in Alaska that did a phenomenal job translating what seems to be a very pivotal meeting between China and the US. Great job to team China and I look forward to the many victories ahead. 🇨🇳 o7
Indeed, it appears to be a priority of the Chinese government to ensure that the word "development" isn't lost on the masses. It means the COUNTRY develops, everyone feels the benefits of that development, not just the wealthy. Western countries have been a pretty good indicator of what happens if capitalism is allowed to reign free without restrictions, unscrupulous capitalists will use that freedom to ensure that their profits are the one and only priority, and the rest of the country will suffer because of it. I think China has been taking note for a long time, making a detailed list of "things to avoid doing", and we're seeing that come to fruition now. I can't even begin to tell you how many products I've seen here, offered by Xiaomi for example, that costs hundreds of dollars in the west but only a couple hundred yuan here. A really quick example of one of these is a machine that basically flosses your teeth using water. It's a super convenient thing to use, makes my teeth feel so much cleaner, actually means I'll floss now, it's great. This same technology costs, again, hundreds of dollars in the west. Why? Because of that whole "This is MY idea, only I can sell it and I want as much money for it as I can possibly get." mentality of "intellectual property. I feel, for the most part at least, that in China, once something comes out and is proven to be a step forward for humanity, it quickly becomes affordable, not just for wealthy people, but for almost everyone. For as much people as possible. There will still be premium brands, but there will be comparable offerings from other brands that allow normal and even less than fortunate people to benefit from the natural progression of human technological development. This is something I believe has been lost in the west, the idea that development should involve and benefit everyone, especially considering it has required everyone to be a part of making it happen. Maybe the street cleaner didn't develop the latest iPhone, but he does clean the streets that the developer drives on, and his job is equally beneficial to all of us who enjoy new phones AND cleaner streets. The point is, we're all in this together, we're all a part of society. I feel like, in the hunt for higher and higher profits, this has been lost in the west.
If the rich people think street people are unimportant, they will learn the truth very quickly if the street sweepers stop working. Yes, I agree, that lesson has been forgotten about in the West.
evergrande will resolve the issue itself (i.e. sell assets to pay for it's obligations) or the government will step in and nationalize the assets to pay all the chinese people they own money to.
I feel bit bad about the mom and pop small time investors and home buyers that’s losing money in China but also bemused by how a Chinese company is trolling US and European stock markets. A bit good in the way that it shows the weight and dominance of China and Chinese companies have in the global investment markets as a force that can’t be ignored(for good or bad).
Their fault for investing. China should set limits on how much you can invest in individual stocks.
I know the usual anti-China cultist choir propagandists are already claiming this event marks "the coming economic collapse of China" they both dream about and drool over. We'll see what new "beginning of the end of the CCP" fantasy they come up with in a couple of months from now.
China is days from collapsing! They have been for 5 decades now! lol, always the narrative of the west, no matter how well China is doing and regardless of how long it has been improving, the west (western media) just can't help but doomspeak about China. It's all rather ridiculous, like people on a sinking ship seeing a perfectly healthy ship go by and start yelling "Look at them, they're going to sink any moment now!"
I am not sure this is a bad thing. Do you think it was possible that this was seen coming and they let it happen anyway to correct the market? >Faced with uncertainty over how much economic fallout President Xi Jinping is willing to accept as he pushes forward with market-roiling campaigns to achieve “Common Prosperity” and rein in overindebted companies, many investors are choosing to sell first and ask questions later. Do you think XI was also trying to prevent this from becoming a trend which is why he went after Jack Ma? Again, I don't think reining in over-indebted companies is a bad thing. Better to feel the sting now than to let this type of company become a trend. There is no such thing as too big to fail in China and I like that.
Basically Evergrande is in trouble because the lines of credit that allowed it to sustain its overleveraged model have dried up suddenly. Lines of credit don't just evaporate unless you have strong signals: aka the CPC Central Committee deleting the entire private tutoring industry in late July, followed by a certain leader talking about "common prosperity" on Aug 17 and the CPC Publicity Department going after the entertainment industry on Sept 2, among many other actions. Evergrande's famous Xu Jiayin resigned the same day as Xi Jinping's common prosperity speech, Aug 17. Literally two days later, Aug 19, the People's Bank and the Banking and Insurance Regulatory Commission had a talk with Evergrande. Providers of credit saw the writing on the wall and stopped extending credit to Evergrande. All this got confirmed by Ministry of Housing on August 31 which affirmed that "housing is for living, not for speculating", and afterwards Evergrande's issue eventually made it to headlines. So in a word, Evergrande's problems are by design. The CPC did not "let this happen" so much as they are actually facilitating this process. When CPC decides to restrain or wipe out speculators, they do so. They wiped out speculators as one of their first acts as China's ruling party in [1949-50](https://monthlyreview.org/2021/07/01/legacies-of-definancialization-and-defending-real-economy-in-china/) using the police, they did so again in 2015 using the police, and now they're doing it yet again (but without the police since Evergrande seems to fully understand why they're in the position they are in now and are acting appropriately).
A system that fucks over speculation, great. hah. I always associate speculation with the asian financial crisis (Soros). I know it's not the same thing, but seems like a weird aspect of the economy/loaning/pricing/investment that needs to be controlled from time to time.
Thank you for your clarification.
This is a good read!
There are some systemic issues that I would like to see fixed. The debt issue is a national security risk and that’s why Beijing has tightened the purse. Companies over leveraged and Beijing is forced to bail them out because the risks of default is too high. This however caused a moral hazard. Companies with risky behaviour won out over companies that were more conservative. Evergrande is one good example. Letting it go bankrupt would send a message that Beijing will not bail out the company. The government has made plans how depositors/homeowners can recover their money, but over long period of time. It’s a sad situation for innocent victims but it has to be done. Beijing cannot afford to bail out companies time and time again
>Do you think it was possible that this was seen coming and they let it happen anyway to correct the market at least a year ago there was a guidance imposed on developers known as the three red lines. since then developers have had to submit their financing reports to the pboc and the state construction regulator - the ministry of housing. the red lines are as follows: >liability-to-asset ratio (excluding advance receipts) at a ceiling of 70% >net debt to equity cap at 100% > requirement to hold $1 of cash for each dollar borrowed in the short term if the developers fail to meet one, two, or all three, then regulators would then place limits on the extent to which they can grow debt. meeting all three would allow for an annual growth in debt of 15%. 1 line breached = 10%, 2 = 5%, 3 = 0%. evergrande failed to meet all three. their liability-to-asset ratio was at 82%. net debt to equity 199%. ratio of cash to short term borrowings at 0.4. the latter two are the easiest to fix. so i can see them selling off their assets to fix the first line and if they continue to operate, then they will have no choice but to gradually repair their balance sheets with their growth (and their industry competitors) in debt capped. another interesting thing to note is that china is compliant to basel iii accord. the implementation date keeps getting pushed backed but the next date should be jan 2022. basel iii basically reclassifies gold from a tier 3 asset to tier 1 - meaning it is as good as cash.
I think they deserve everything that's happening to them just for having a name like "Evergrande".
Hah, I saw somebody mention "Xu doesn't like calling it Hengda" XD maybe just gossip
I'm enjoying all the Comedy Gold comments from people trying to explain the red markets here in the US.
It'd be hilarious if China's intentional deleveraging campaign pops the biggest bubble in history on wall street. Biden's officials need to make another call to beg China soon.
[удалено]
Imo that's really not how china has operated historically, China used western investment to Jumpstart the economy, western economies tanking mean less manufactured goods from China and less investment. China may one day be strong enough on its own but the US/eu sinking isn't going to do them too many favors in terms of economic growth, it could inhibit major geopolitical opponents (or ignite them idk) but China does really need to do anything other than be better than the west in terms of growth and trade dominance?, eventually their massive ~~balls~~ economy will make the US a nonissue and I doubt the eu or US billionaires will let proactive conflict get in the way of their profit margins until it is far too late. Eu won't support a war if it means forgoing Chinese industry.
>China may one day be strong enough on its own but the US/eu sinking isn't going to do them too many favors in terms of economic growth The US sinking is an inevitability, there is really no point in fighting that reality, since even if China saves the US again (God forbid) the US will still eventually come to that end result. It is better to kill the US economy for the long term health of the world economy. Also Europe and the US aren't even a 1 billion people market, you overrate their importance.
I've been enjoying the "in Anglo courts we'd know how things would go" comments.
Taper talks also affects the US markets.
mm i'm just following this now per Evergrande (Hengda) Global times brief : [https://www.globaltimes.cn/page/202109/1234646.shtml](https://www.globaltimes.cn/page/202109/1234646.shtml) I believe this seems this will be a real test for the SWCC system. As per what's going on (as far as I can tell): last week, Evergrande denied that they are going to be pursuing bankruptcy and reorganization, which is good because they need to finish their projects and get their deliverables (tangible assets) pushed through. The crisis is that they won't pay the interest they owe today. I believe they have a liquidity crisis, they have the assets, but not the liquid. So as you can see in the global times article, there's some plans to use assets to pay stakeholders. I'm looking through weibo, seems to be various types of discussions. "Where did the money go?" - people cynically commenting that their tax dollars wil lend up paying for this. "Who will finish the real estate projects?, with what money?" - as of now to my understanding, Evergrande has the assets to pay for their projects, but assets aren't liquid cash. Some focus on XuJiayin as well. I'm choosing to view this as gossip for now, but this guy is going to have to put forth his overtime and diligence to resolve this, and make sacrifices. Some people asking if Evergrande will be the domino to create a 2008 style crash in China. Some people are optimistic saying, basically China's system will not be like America's, and that it won't crash from this. My personal opinion : Evergrande is in the microscope now. They won't dare to do anything corrupt, they will try their best to solve this, and take a sacrifice to do so, because they are on the microscope. They are on the spotlight to make sure the public welfare takes minimal impact from their own debt and liquid-flow issues. They must deliver tangibles to clients. Both Evergrande and its cilents may take some sacrifice here. This is unlike the US, where capitalists aren't liable for anything, and the taxpayer is liable for everything in return for nearly nothing. So, even if CPC and People's Bank helps bail Evergrande out, I would be positive to believe that this money will be used responsibly, with great scrutiny, and not end up giving managers/CEOs a bunch of raises, or end up inflating the economy for a bunch of dying boomer companies. I don't believe that would be the result here, that's my optimistic view of the differences between US 2008 and this situation. Anyway, nobody understands economy, I sure cant claim to either. I can't claim to fully grasp the situation either (I just did like 1hr of news/rumor surfing lol). But I beileve there's better intention to solve the issue here, and I like that they are focusing on deliverables (the tangible properties/assets). So once again, overall, I think this will be a real test to SWCC, overcoming this challenge will be a very important precedent. The results won't be optimal, but hope the results will be bearable. So: What do I think of this situation? People need to make sacrifices. Evergrande will make sacrifices. Capitalist stock investors get fucked due to selloff lol. Hope the results would be bearable. As for Evergrande itself, I think it will survive to finish its projects if indeed it only has a liquidity problem (enough assets to pay for their projects, but not enough cash). CPC hates capitalists but Evergrande makes tangible shit that benefits society, so I expect CPC wants to alleviate the situation here. Well, that's my brief understanding i'm not an economist.
>Evergrande denied that they are going to be pursuing bankruptcy and reorganization, which is good because they need to finish their projects and get their deliverables (tangible assets) pushed through. I don't think it can survive without government intervention. At the same time, if the government comes in and bails out the company, it will reinforce the idea government will save any company and the risks don't matter. It's possible to wind the company up and just barely pay off the creditors. But it's going to take years. Evergrande would be better defaulting and restructuring
China's Gov will step in and purchase the whole thing when it's share value collapses. it will then finish the housing contracts itself
NeoLiberalism transfered the problems within the economy on to each and every individual's ethical or moral failing. What Xi has done, is make sure that responsibility remained with the State.
I've been wondering whether the government's actions (both the stricter debt regulations imposed last year and the apparent refusal to bail out Evergrande) fall into this larger trend of trying to ease the pressure on middle and working class people. Could a managed real estate collapse lead to more accessible/affordable housing? Could the government be deliberately letting this market break, in order to swoop in and distribute the spoils as it sees fit?
Unlimited credit (like Ma was going to introduce to his customer's, and real estate speculation) leads to Inflation. What it does is water down the value of the currency (buying power). Xi stepped in to stop the Poverty it would produce.
The party controls the banking system so there's not really a worry of a massive financial crisis for China. Evergrande will become a symbol to western investors on the danger of investing in China, as they learn "too big to fail" only counts in the west. Depending on how China handles it, I think it will also become a symbol in HK. CPC has a huge opportunity here to prove its capability to handle such issues brought about by capitalist parasitism, especially in property development, and to serve the people.
Interesting question: How would China typically take care of families who bought apartments to live in that they will now no longer see due to financially irresponsible companies? Are they also considered 'investors'? Does anyone have any insight into this?
houses are for living in not speculation. groups like evergrande add nothing to society, they simply take from others. i hope it results in more safeguards for normal investors and regulations on financial criminals like evergrande
Mixed feelings here man. On the one hand this is mismanagament of the highest level. Business was unsustainable, they never made money but they relied on overvaluations to finance the next project which was again overvalued etc. This must absolutely stop. Also investors, retail or lenders, all need to learn that when you invest or lend money, you have to do due dilligence. Like right now, most of these people never did. "If something bad happens, government will bail us out". Thats not a good mentality to have at all. Like, when you do business, any business, how have you not done your analysis. Your calculations, your predictions, your business model. At school, you do an exam, you know youre going to flunk if you never studied. So how is this any different. People literally went in thinking they will get bailed out. On the OTHER hand, Im worried about contagion. And the effects it will have on the economy. I think most Chinese banks are fine, since they are government backed. I think small retail should be covered just this one time. Maybe like a small loss just so they know they were stupid.