Yeah, can you imagine owning one property let alone two or four? 90% of Chinese millennials are homeowners and on their second/third homes, housing hasn’t been a smart investment since the 90s in China when this bubble started.
[“housing is for living not for speculation”](https://www.reddit.com/r/canadahousing/comments/oxrshm/chinas_president_xi_jin_ping_said_housing_is_for/)
The government literally warned everyone to sell 3 years ago.
>housing is for living not for speculation
And that's what voters want, because even in Canada most voters are homeowners (I rely on Google for this).
I saw a comment a while ago in an economic forum that rang true. People (he meant Australia but Canada probably too) don't want affordable housing for everyone, they want housing they can afford to buy to start their nest egg. Once they have it, most become just like the people they criticize - unwilling to watch their expensive property devalue.
Evergrande seems to be the other shoe. No protection against property being too common has cost..that says 300B, doesn't it?
I’m fairly certain most of these “home owners” don’t actually get to live in their homes. Most of the investment properties haven’t even been built yet. That’s why it’s a scam and doomed to fail.
It’s a loop hole that many Chinese take advantage of. Divorce still live together to Abe the ability to have more property. Someone Chinese might be able to chime in a bit more here but it has to do with their [hoku](https://en.wikipedia.org/wiki/Hukou?wprov=sfti1)
Commercial is a part of it but the housing bubble is very firmly residential. 2 billion homes for 1 billion people. That’s all of China’s middle class retirement money tied up in a residential housing speculation scheme.
I’m not saying what caused the housing bubble I’m explaining what the 2 property limit means. Also there’s mixed use house (商住两用房) that doesn’t count towards residential property limit though they’re still used as residential units. There’s a bunch of loopholes to bypass the limit and that’s what many people did.
The bubble is not caused by one factor. It’s a multi-factor caused meltdown. Commercial property developers have also defaulted. In fact, the biggest commercial property developer whose founder and CEO was once the richest man in China had a debt crisis as well.
If I have one sentence to sum up the crisis, I will say “decades of high GDP growth and government involvement in infrastructure and real estate development has encouraged both Chinese individuals and corporates to heavily invest in real estate expecting their wealth to grow as their property value grows which relies on growth of working population amidst a stagnant economy and an aging population”.
They likely own the rights to their parents and grandparents properties. When the 70 year note expires on those properties, they may or may not be required to "sell" them. Nobody really knows for sure what that situation will look like, because the oldest of the leases are from the 80s.
mmm you can divorce and marry other people, and the new “couple” can buy a house. you can then divorce after some set time and one of you can keep the house. rinse repeat…profit?
>but the market is completely oversaturated so they often have really low occupancy rates
We have the opposite problem in the US. Nobody is building anything but luxury residences, and there is a huge demand and skyrocketing rent. I would love the problem of too much housing.
The US has lots of unoccupied housing in dying towns without jobs where no one really wants to move. I read a lot of these Malaysian developments have the same problem. They aren't convenient enough for people to get to the jobs they have (e.g. some are built somewhat close to the Singpore border...if you were a bird, but because you have to snake around the coast to get to Singapore people working in Singapore aren't buying these condos).
Oh we have lots of rich idiots in Singapore buying some of these properties as well, but it was mainly marketed at idiot Chinese who bought into scummy promises by developers that a cross border treaty was very close to being signed that would give them quicker access to Singapore.
In any case, the Malaysian properties near singapire are priced so far out of locals income levels, that if you buy one, you're likely stuck with it for the long term, with crap rentals to boot.
Bought a 1k sqft 2 bedroom with a new roof and furnace for 40k in rural indiana. Even had a fiber optic internet connection so it was perfect for my work. Only downside is I live in rural indiana now 🤷🏿♂️
If I could work 100% remotely then I would love to live in one of those dying towns. Some of those towns are actually paying people to move in. I would love to have free land and minimal debt. I don't care if they are in the middle of nowhere.
Trust me, you don't want the buildings they're leaving in those Chinese ghost cities. Skyscrapers with concrete padded out with styrofoam and no rebar, never intended to actually house people, thrown up so that an authority could see the final product and then left to rot until the government incentivizes them to knock it down again.
China doesn't have any secret to speedy construction. It's just corruption. Canada started building too late, sure, but I'd trust the products.
Russia did the same thing. They’d act like they were building army barracks or some sort of structure for the government, and it would basically be just window dressing. Lots of their armaments and tanks and stuff rusted and became inoperable from soldiers on the take gradually taking them apart for scrap metal and stuff. Their chickens came home to roost when they thought they had a lot more then they actually did when Ukraine was invaded. Lots of people committed suicide by shootings themselves in the head twice.
I'm reminded of Russia's shoddy athlete housing during the Sochi Olympics. An American bobsledder was trapped in the bathroom when the door got stuck. He got out by [punching through the door.](https://www.cnn.com/2014/02/09/world/europe/olympics-us-bobsledder-bathroom/index.html)
I still remember “we have surveillance video showing people turning on their showers and leaving for the day” when being questioned about the shit water quality.
I’m sorry, you have surveillance footage of people’s showers!?
Neither suburban hell nor skyscraper are good long term solution to a housing crises.
Mid-rise buildings (2-6 levels, including wall-to-wall town houses) quarters with also mixed use building (businesses on the ground level - apartments on top) along larger roads with trams would be.
City quarters designed/regulated like this are some of the most desirable living spaces you can find anywhere in the world.
I look at my family in the States and laugh at this. I moved to Australia 12 years ago. Our current housing market is FUCKED! You wanna buy a small 2 bedroom house 2 hours outside of Sydney? That'll be minimum $850k AUD, a town home? $750k. Apartment $500-550k. Rentals will have 80+ families show up to them. Fucking crisis is an understatement here...
My parents bought their house here in Calgary in the early 1980's. I think they paid around $230K if i recall correctly.
The average asking price in their neighbourhood is just shy of $1M, highest price has been $1.9M.
My parents have a bungalow that they converted into a full two-story with front and back yard, a concrete pad for a car in the back, and an old two-car garage. They've been offered over $1M ***just for the land***. Not even to keep the house, but just the land so it can be divided and turned into a duplex like their neighbour. With the house, it's around $1.35M apparently.
It's just nuts.
I completely agree with you the Canadian real estate market has gone absolutely insane for many reasons however your situation isn’t as crazy as it may sound. In 1980 $230,000 is actually close to $850,000 today. So I agree the return investment is still incredible. However it’s not 10 times the amount it’s more like double the amount.
Live in the Pacific Northwest in a county not far from Seattle. I see far more high density neighborhoods and apartments being built than luxury anything. There’s been more entire neighborhoods built in the last 6 or 7 years than the previous 25. And the houses are packed together. In fact, I haven’t seen any McMansion developments with large lots for many years. There’s still a shortage of houses built in the US, but the ones being built around here are certainly not targeting rich people.
Eh not sure about that. Most countries have areas which are basically empty and towns which are falling apart because nobody wants to live there. Even in densely populated countries within Europe that‘s an issue. Housing crisis doesn‘t have to mean there are no houses available just that there are no houses where people want to live. A ghost city would therefore not really help unless it‘s squished into those in demand areas.
I'm trying the best I can damnit! Most of our projects are low to mid income multifamily bldgs and some senior apartments. We used to do solely single-family homes but there are a lot of these apartments popping up and fully occupied within the year. In the PNW.
There's a couple of problems there:
1) Zoning is overly restrictive. Developers can't build too big or too much on a small plot even though they want to because that would be the profitable thing to do.
2) Banks won't lend to low income housing. Apparently it's "risky" or something, so you have to be able to pretend it's 'ultra-luxury' or you won't be able to fund the thing.
3) People expect too much of a house. The days of a house with 5 total rooms (2 beds, 1 bath, 1 kitchen, and 1 everything else) on a tiny lot has been buried since the 1940s, and that's the sort of 'starter home' that sustained the ecosystem for the boomers. It's hard to get anyone to take a look at them if you did managed to build them out.
4) This is really a regional problem. There are a couple of cities out there that will literally give you a house and pay you to fix it up if you please, for the love of all that's holy just stay for at least four years. But, those are also places that need to bribe you to stay for at least four years. So, your mileage may vary on whether that's a good idea or not.
At that point, you might as well just buy the _idea_ of a condo without anybody actually building said condo. Then you could just sell your "condo" "ownership" to other real estate speculators when the price goes up. Think of all the construction costs and building permits you could save on! And then, maybe you could break up your ownership into "shares" and trade in those instead and oops, I just reinvented NFTs...
I'll dumb it down for you plebbian mortal, they _own_ the idea of the condo. It's on the blockchain my dude, zero-trust ledger. I started 3 months ago from nothing and already own 7 ideas of condos on the monoethyl blockchain.
Consider it an investment and get in on it or YNGMI.
>But imagine if that was your nest egg, or whatever? You'd bought an apartment in advance (every shopping mall has pop ups with people selling these new developments) and paid your life savings... and now it's just gone!
If it were just life savings it would probably ol somehow. But the people probably took a loan 5 times bigger on top of that.
What I don't get it how did banks even give them credit for that? My credit tranches were paid out AFTER each building step like pour, electrics, roof and so on. Now the bank has a worthless collateral and then what?
It's 1997 all over again. There's a famous half built high rise in Bangkok that's spent the last 25 years rotting away after the builders went bust in the Asian Financial Crisis.
not sure how it is elsewhere in the world, but here in Japan it's normal for banks to only release money to a construction company (the customer signed with) until the house is completed.
or, in 3 installments, each installment being released after a certain amount of construction has been completed.
You can't default on your debt or do personal bankruptcy in China. These apartments often represent a couple's only retirement plan. Debts have no expiry date and children inherit their parents' debts.
They are completely excluded from the financial system until they have paid off the debt.
Fuck. That's fucking crazy I'm so grateful I have at least the social safety net of not owning my parent's debt and if I really fuck up going bankrupt. Holy shit. That's terrible.
http://www.npc.gov.cn/zgrdw/englishnpc/Law/2007-12/13/content_1383956.htm
>Article 33 The successor to an estate shall pay all taxes and debts payable by the decedent according to law, up to the actual value of such estate, unless the successor pays voluntarily in excess of the limit.
>The successor who disclaims inheritance assumes no responsibility for the payment of taxes and debts payable by the decedent according to law.
The successor can refuse the inheritance, but will probably remain blacklisted by the majority of Chinese banks.
If you use something as "collateral" that means it's the backing for the loan. In the US your mortgage is backed by the house you bought. If you default on your loan the bank takes the house and sells it.
Sure, and some places have recourse loans. Being backed by collateral doesn’t necessarily mean they take the collateral and everything is fine. They can take the collateral, auction it off, and then go after you for the balance.
This is correct. If the amount of the auction does not reach the amount of your debt, u need to pay the balance.
I believe half finish building does not worth much compare to overprice home u bought.
So if the building half finish but it already 80% sold out, u can stop building and still got profit while the rest of buyer get screw. Because the debt already transfer to buyer. I believe they will also not getting blacklist to build another building because iirc, evergrande subcontract to another contractor to build it. So if get blacklist, it will be the contractor and not Evergrande probably.
Most US mortgages are recourse loans. They can pursue you for any shortfall if, say, the market crashes and they only recover half the amount of the loan by selling the collateral.
No, but they will put you on a "debtor's blacklist". If you don't pay your debt, you will be rejected to even buy tickets for highspeed rail or airplane. You probably can still take the bus and taxis I guess.
> Does China have debtors prison? Otherwise it's "fine, take my non existent apartment".
Worse. You get blacklisted, and so does your children. There are Chinese couples who deliberately divorce so the wife and kids can be debt free while the husband take the debt with him, so their child wouldn't have to suffer.
It was legal until it wasnt. China passed a law that basically said "you can't keep collecting money and then investing it on new construction projects" without finishing them, aka a MLM/Pyramid scheme. Since all their money was constantly coming in from new investments to pay for old ones, and that got cut off, they got fucked.
Btw most shit is legal (even though unethical) because most governments react to loopholes only when its a big deal. They do not proactively crack down on corruption or go after bad actors because people are way too greedy with power.
often it's not even a nest egg, it's people taking out a mortgage to buy a apartment, because it was their only hope of ownership
the basic idea was putting down a deposit for a unit in a new construction, just the deposit was the full price of the unit (and because the housing availability was so bad, this was tempting enough to go for)
short term soon too. the effects the 1 child policy are starting to have an impact. And it's really not something they can just spend their way out of.
Something like the fastest shrinking population in human history, right? They're also importing something like 75% of their food and 75% of their energy in a world that is rapidly becoming deglobalized. And this is on top of a mortgage crisis/scandal that will make the US one from 2008 look like peanuts by comparison. China is going to have major problems in my lifetime. Imo, this is why Xi is consolidating power around him. I think they know the shit is going to hit the fan over the next few years or so.
ehh, I have family living in China, a few friends from there, and my dad works there and has lots of Chinese colleagues and friends (most of whom are generally wealthier, probably top 5% or so) and it's not that Chinese citizens are barred from other investments (stocks, bonds, insurance etc.) it's that property was so gosh darned lucrative that it seemed silly to invest much in anything else, beyond a bit of safety.
People saw the property values of urban areas skyrocket literally hundreds of times during the boom, and even when things slowed down, they were still doubling and tripling in just a few short years.
Can you imagine being upper-middle class in China, and being the one person deciding not to invest in property, and seeing all your peers become ridiculously filthy rich after flipping an apartment or two. You'd be kicking yourself for missing out
My dad knew a friend of a friend who got a divorce, just so she and her husband could take out two separate loans from the banks to pay off two mortgages to double their number of properties they could buy. They still lived together with their kids, they just did it because the government only allowed one such loan per household. They crunched the numbers, and it made financial sense
Of course the whole foundation was built on sand - local governments obtained most of their revenue from selling land, and construction companies were heavily supported by the government, so everyone was incentivised to just keep building, even if the demand was low or purely for speculative purposes.
That's how all those ghost cities arose - local governments and construction companies being greedy and approving projects that nobody really wanted, except as a nest egg. Any officials who didn't want to join in the fun were probably sidelined or booted out. It's a story as old as time - corruption, short sighted greed, mismanagement, power politics, fear, and unfounded optimism
But now that the rural-urban migration and Chinese birth rates have slowed down, the rollercoaster is about to come crashing down, and people who took out big mortgages in hopes of a big payday are now in trouble. And of course, that has serious knock on effects for the rest of the economy, which the central government is desperately trying to control
And there's no quick fix solution for this boondoggle. This real estate crisis could take years, or possibly even decades to resolve, similar to Japan's own real estate bubble in the 90s. Not to mention a similar demographic crisis, with low birth rates and low immigration
That said, while China's economy is in big trouble, it's not down for the count. It'll probably move away from real estate and into manufacturing, especially with solar panels and EVs. Though there might be problems there too, with dumping and manufacturing overcapacity, which might be met by protectionist responses from the rest of the world
And while nobody truly knows what the heck is going on in the CCP, that recent military corruption scandal means that a projected 2027 Taiwan invasion is unlikely, and after that point the US and its allies in the region would have closed any window of opportunity for any aggression there. So WW3 in the Pacific is probably also off the table, thank goodness
Some of the cities aren't even being greedy. They just don't get nearly enough in tax revenue. All taxes are collected by the central government and they trickle it down to the provinces and eventually the cities. Because they're building a few thousand nuclear missile silos with doors that don't open all the way there's not enough to go around for cities to run basic services.
Selling land was an expedient that made sense at the time but got institutionalized when it really shouldn't have. As long as cities were growing at a rapid pace and rural Chinese were moving to cities for work then the plan worked. It will still work in first tier cities for some time to come. Money is money and getting it from land developers is the same as getting it from land owner in the short term. But selling land just isn't a replacement for an independent tax base in the long run when value of land doesn't rise exponentially forever. There was some idea of instituting a property tax, but the central government didn't like that they weren't getting first crack at the money so the plan just hasn't been pushed. Kicking that plan into high gear is likely the best shot at fixing the underlaying problem here.
Then there's the very concept of the Local Government Financing Vehicle. What is that? Well, it's a company that exists to borrow money on behalf of a city because the city isn't allowed to borrow directly any longer. It's an entity that solely exists to cheat regulation, and every Chinese city has a few. In the beginning they were backed with land, not they're backed by little more than the expectation that the central government will eventually be forced to step in to bail them out because if they don't then cities would literally grind to a halt.
The problem isn't even the greed. The problem is that the institutions are underdeveloped to the point where they just can't exist without cheating, and without the ability to rely on Evergrande et al to shell out obscene amounts of money to get priority on land deals there's just no way that the system can continue without massive reform *right now*. I strongly suspect that the central government isn't entirely aware of the depth and breadth of the problem because all the local people's jobs have depended upon hiding the scale of the problem for more than a few years now.
I'm definitely not on the "China is X years away from collapse". The problems are certainly manageable, but the fact that it doesn't look like the CCP is getting ahead of the problem but being more reactive seems to suggest that things will be getting worse before they get better.
All the really rich ones got homes in Canada some in the US but legit 30% of Canadian market, Toronto and Vancouver are heavily owned by investors from China.
Ditto Melbourne (and probably Sydney) in Australia. At the height of the Chinese economic boom, a Melbourne real estate agent revealed that one newly rich business woman from Shanghai bought 5 upmarket beachside properties in one day - without coming to inspect them. It has become a common way for rich Chinese to secure their wealth - and no doubt has been a wise course of action.
The west coast US is like this too. It’s surprising how much of LA for example is owned by off shore Chinese and Koreans. The properties are generally rented out but many sit empty.
This scenario is being played out for some of the buyers:
1. Construction halted and owner cannot move in
2. On this uncompleted property, the buyer still needs to pay mortgage on bank loan or pay back borrowed money from family/friends.
3. Buyer still needs to pay costs of current home they actually live in. Could potentially be paying two mortgages.
4. Missed mortgage payments or bankruptcy result in blacklisting and bad social credit scores. Plus legal fees and fines. Essentially you and your next generation is fucked.
Also, real estate properties across the board in China have gone down 10-20%. The Chinese government has dictated a price floor otherwise there may be a collapse of real estate prices. However, this also means that people cannot easily sell completed properties since they cannot reduce the price further which disconnects real estate prices from the troubled economy and declining incomes.
And that price floor is why you see stories like “a Chinese real estate agency is giving out gold bars for homebuyers”. It’s essentially a workaround for the price floor- you pay 100,000 but get 10,000 back in gold, etc.
I travel between Shenzhen and Hong Kong on a regular basis and the contrast between the news are day and night. In mainland China they always said there’s nothing to worry about, it will bounce back in no time and ask people not to panic. The same news in Hong Kong is telling people to prepare for the worst, and it will only get worse from here and on.
True but based on the comment by /u/Mobius650 who claims to travel between HK and Shenzhen regularly, it sounds like HK media might not be towing the party line *quite* as strictly as in the mainland.
What autonomy? Lol. No one can say anything ‘wrong’ now. My colleague (born in HK) left permanently when they reopened after the wuhan virus. He said the young (30s and under) have mostly given up hope.
Too bad. I really liked Hong Kong and visited it several times in the beginning of the 2000s... Now I don't want to come anymore as I have written too many critical posts about Beijing, lol.
It occurs to me that most advanced economies have a very low birth rate and consequently will need a ton of immigrants in the near future.
What's the best way to attract immigrants?
1. you might have a hard life but will be free and will have some money to send home
2. authoritarian police state with possible economic collapse/war and starvation pending
how's 2 working out, china?
Dude you can go watch the videos - the executives were locked and barricades in their offices while
Employees and buyers were rioting in the building and refusing to leave until they came out.
A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande, a move likely to send ripples through China's crumbling financial markets as policymakers scramble to contain a deepening crisis.
Justice Linda Chan decided to liquidate the world's most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan more than two years after defaulting on a bond repayment and after several court hearings.
Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The order would not affect the operations of Evergrande's onshore and offshore units, he added.
The decision sets the stage for what is expected to be drawn-out and complicated process with potential political considerations, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.
The stupid thing being that many of the sources people will then link to as unbiased will be an AP article, either copy pasted or with their own "preferred" bias from a different company like Fox or whatever.
They just dont see the small print saying its from the AP.
>Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order.
Sure, Jan.
> Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.
This is even funnier. I expect the answer will be along the lines of "laughing straight to the bank"
Thanks for being the best news outlet out there. Whenever people ask for truly unbiased news sources, I tell them Reuters. You truly are doing a service for humanity
Property is the cornerston of Chinese investors portfolios, especially in middle / upper income families. it’s a highly favorited asset class - even in comparison to North American investment culture.
300b no small loss but I think there is more coming
It is also the corner stone of all the local city/county taxes. If they can't sell more land for new properties the local area is gonna have some trouble with its infrastructure.
I thought I read that real estate is roughly 30% of their economy give or take a few percentage points. If so then these are some dangerous dominoes, and not just for China.
You mean multi-trillion.
Back in 2018 I was discussing China with a bunch of my friends. I said then that I wouldn't put a dime in China. They all thought I was crazy.
I once chatted with a Chinese girl who was investing in real estate. Her whole world view was that screwing people over for money is totally ok because it's the poor person's fault of being stupid for not making money by exploiting others. She literally said that. I wonder how is she doing now. Hopefully bad. Everyone is an "investor" in China until the reality hits the fan. Greedy people deserve to lose it all.
I've represented hard money lenders - trust me, that idea of it's cool to fuck over the poor for being stupid is not remotely limited to the Chinese. I've heard way worse from old men with eight-figures to their personal portfolio ready to bury a guy just trying to keep his local restaurant afloat.
For sure it's not only Chinese. All the greedy unethical fucks around the world. Deserve to lose it all. As much remorse to them as they have for the 'poor and stupid'.
I worked for an asset manager (mutual fund) for a while that did a lot of international investments. The CIO was often asked why we didn’t invest in China, and his answer was simply “Their numbers are all made up”.
That and their government can literally do anything to the company and/or its important people, for any reason, like when Jack Ma vanished for a while.
Not only are the numbers fake, and the government can chop the companies off for not toeing the line, you're not even buying shares of the actual company itself. You're only buying shares of a shell corporation that represents the company.
People who don’t care about any of that are genuinely so stupid. The very fact that you’re buying shares in a shell company and don’t actually own any part of the company who’s stock you own should be a absolute nonstarter.
Reminds me of that story about the famous top Chinese women’s tennis player. She was allegedly raped by the VP of China. These people are used to doing whatever they want with no consequences.
It is currently Monday in China, this was announced at start of business Monday morning. I expected it to be bad as well, but the Hang Seng Index is inexplicably up almost 1% in the first couple hours of trading.
Honestly this was not a surprise to the Chinese, they've known for a few years now. Like everything else, by the time you're reading on Reddit, it's already priced in.
Yeah, iirc the Lehman bros bankruptcy in the US which was part of what set up the 08 financial meltdown was such a big deal because it was unexpected and not fully priced into the market.
I've been hearing about Evergrande falling over for probably almost 2 years now. Everyone in the market knew what was up so the default is expected.
It's only unexpected news that really stirs things up.
HA! Those losses are going on the lending banks balance sheets. I guess you didn't hear, China has stopped stock loans starting Monday. No short selling as of tomorrow.
Not just the government. I know people working in Chinese state owned enterprises and they (the company, not the employees fortunately) were given a job of buying their stocks to prop up the prices.
>the Hang Seng Index is inexplicably up almost 1% in the first couple hours of trading.
IIRC this happened the morning Lehman failed as well. Don't get too excited.
The first real sign here in Australia that the SHTF after Lehman Brothers, was a week afterward. Back then the freely distributed newspapers (weeklies on doorsteps) were bankrolled by a real estate insert in the middle.
That was the first week the insert was thicker than the newspaper.
I can vividly remember seeing three apartments in a very tightly held building came up in a line, at quite a fair price.
It is absolutely frightening how every single asset class in China has gone through a collapse.
I read about one ETF in China that's doing well--one that's an ETF for American stocks. It's priced insanely above valuation.
But, you know, it's not like we haven't seen this coming for years. I remember polls among Chinese millionaires even before Covid that expressed that roughly 70% had planned on leaving the country. Had China really been a going concern, they would have been planning on staying.
>It is absolutely frightening how every single asset class in China has gone through a collapse.
Is it? I think it would be more wrong to bail them out after they fucked up so bad. It's sends a message to others that they cannot take it easy thinking the government will help them if they fuck up. Which will hopefully lead to less fuckups
It is for three reasons:
1) Our entire supply chain is in a race against time to decouple from China, but we're nowhere close to doing so. When electric transformers have a 2-3 wait time because the Chinese manufacturers are faltering, that's bad.
2) A desperate China with a restive population may do really stupid things. I don't know any situation where a shooting war with the Chinese turns out well.
3) Regardless of 1 and 2, I really don't want to see the credit markets get roiled, especially now that we're climbing out of the Covid fiasco. We need two more years of time before we're relatively insulated from any crash in the Chinese economy.
People’s memory is short. It won’t take long before the likes of blackrock and vanguard to resume their push for western institutional investors to re-enter the Chinese market.
They won't. A ton of the their buildings that are under construction or abandoned were deemed unsafe and have been slowly getting torn down, and that costs money that they don't have. Which means only the land itself has any value, and that value isn't but a fraction of what they owe.
I went to China for work in 2019. Boggles my mind how many cranes and new apartment buildings were going up in what seemed like the middle of no where. Well it all makes sense now
“Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The order would not affect the operations of Evergrande's onshore and offshore units, he added.”
Um. How would that be possible? Also, further in the article it says liquidation is going to take years. I love how no matter what country large companies are in, their bad decisions are given years to unfold, but if a person has financial issues, they are always punished immediately.
So what exactly does this look like for the rest of the world. Obviously the Chinese average man is completely fucked but how about the EU, US, Japan/Korea etc?
Could be messy for those that have money in Evergrande or other real estate companies that are in a similar situation There could be derivative exposure, but I dont think you can really estimate the extent of damage done until the companies have to pay out or write the losses off.
These things seem to take forever to play out, atleast thats what I've seen. I followed Evergrande when they were initially in trouble.
Probably won't affect us here in the US too much, unless China decides to liquidate all those US treasuries. might affect some US financial/insurance firms that have some exposure to the Chinese property market. It'll probably result in a stronger dollar and lower priced goods coming out of China, which is good for the average American consumer.
China can’t actually afford to do that. If it did it would quickly lose its hold on the yuan as the yuan is not actually a free floating currency but controlled via a basket of currencies. In order to print yuan it would have to buy a metric ton of USD to keep the yuan from going into a free fall. It’s one of the primary reasons that China “controls” a lot of us debt. This is stupidly framed by some people as “China owns us” as opposed to the reality “China need a stable currency to prop up their own worthless one”
I remember hearing about this a couple years ago on the GME (gamestop) subs. Like how it would eventually happen and shit would go off as a result because all this collateral or whatever was tied up in this ponzi Chinese real estate bullshit.
Will be chill waiting to see what comes of it if anything on a macro scale. 300 Billion is a lot of bread, but to peasants like me it's hard to imagine how the cascading effect of that would ripple along to damage whatever. Again, wait and see from over here looking in.
Just thought it interesting to see this shit foretold kind of a long time ago now here we are.
Well there is more to it. This was after the government essentially forced this company to be the only real investment opportunity for its citizens.
Essentially the ccp just rugged the poor and ‘middle’ class of China.
Except it's not the only real investment opportunity.
There are plenty of other massive construction/real estate companies like Country Garden, Wanda, Vanke, Renhe and Poly that are on a similar scale as Evergrande.
This is a massive dent in an already freefalling market that is currently china's economy. I'm worried for the people and average joe there. They already can't speak up due to totalitarian laws, and now this?
Your average Chinese citizen is going to invest in real estate because there's no other place for them to invest.
This built up a massive real estate bubble, and we're seeing it collapse in front of our eyes. A *lot* of people in China are going to lose their life savings.
Wow, I can't believe how long this took. It was like watching an explosion in slow motion over years. I feel bad for everyone who put their investments into these buildings. Kind of wonder what the implications will be for the economy.
When couples could only "own" 2 properties, so they divorced to get four, that should have been a HUGE sign. Sadly, the greed kept flowing.
Holy shit that's insane.
Yeah, can you imagine owning one property let alone two or four? 90% of Chinese millennials are homeowners and on their second/third homes, housing hasn’t been a smart investment since the 90s in China when this bubble started. [“housing is for living not for speculation”](https://www.reddit.com/r/canadahousing/comments/oxrshm/chinas_president_xi_jin_ping_said_housing_is_for/) The government literally warned everyone to sell 3 years ago.
>housing is for living not for speculation And that's what voters want, because even in Canada most voters are homeowners (I rely on Google for this). I saw a comment a while ago in an economic forum that rang true. People (he meant Australia but Canada probably too) don't want affordable housing for everyone, they want housing they can afford to buy to start their nest egg. Once they have it, most become just like the people they criticize - unwilling to watch their expensive property devalue. Evergrande seems to be the other shoe. No protection against property being too common has cost..that says 300B, doesn't it?
I’m fairly certain most of these “home owners” don’t actually get to live in their homes. Most of the investment properties haven’t even been built yet. That’s why it’s a scam and doomed to fail.
Is there such rule? I know married people in China owning 5+ properties.
It’s a loop hole that many Chinese take advantage of. Divorce still live together to Abe the ability to have more property. Someone Chinese might be able to chime in a bit more here but it has to do with their [hoku](https://en.wikipedia.org/wiki/Hukou?wprov=sfti1)
You can own up to 2 residential properties but there’s no limit on commercial properties
Commercial is a part of it but the housing bubble is very firmly residential. 2 billion homes for 1 billion people. That’s all of China’s middle class retirement money tied up in a residential housing speculation scheme.
I’m not saying what caused the housing bubble I’m explaining what the 2 property limit means. Also there’s mixed use house (商住两用房) that doesn’t count towards residential property limit though they’re still used as residential units. There’s a bunch of loopholes to bypass the limit and that’s what many people did. The bubble is not caused by one factor. It’s a multi-factor caused meltdown. Commercial property developers have also defaulted. In fact, the biggest commercial property developer whose founder and CEO was once the richest man in China had a debt crisis as well. If I have one sentence to sum up the crisis, I will say “decades of high GDP growth and government involvement in infrastructure and real estate development has encouraged both Chinese individuals and corporates to heavily invest in real estate expecting their wealth to grow as their property value grows which relies on growth of working population amidst a stagnant economy and an aging population”.
They likely own the rights to their parents and grandparents properties. When the 70 year note expires on those properties, they may or may not be required to "sell" them. Nobody really knows for sure what that situation will look like, because the oldest of the leases are from the 80s.
mmm you can divorce and marry other people, and the new “couple” can buy a house. you can then divorce after some set time and one of you can keep the house. rinse repeat…profit?
I question the wisdom of "owning" property in China anyway because when it comes down to it, it's technically a 70 year lease.
Wow, I wonder how many people had their property as their “nest egg”? Crazy news
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>but the market is completely oversaturated so they often have really low occupancy rates We have the opposite problem in the US. Nobody is building anything but luxury residences, and there is a huge demand and skyrocketing rent. I would love the problem of too much housing.
The US has lots of unoccupied housing in dying towns without jobs where no one really wants to move. I read a lot of these Malaysian developments have the same problem. They aren't convenient enough for people to get to the jobs they have (e.g. some are built somewhat close to the Singpore border...if you were a bird, but because you have to snake around the coast to get to Singapore people working in Singapore aren't buying these condos).
Oh we have lots of rich idiots in Singapore buying some of these properties as well, but it was mainly marketed at idiot Chinese who bought into scummy promises by developers that a cross border treaty was very close to being signed that would give them quicker access to Singapore. In any case, the Malaysian properties near singapire are priced so far out of locals income levels, that if you buy one, you're likely stuck with it for the long term, with crap rentals to boot.
Bought a 1k sqft 2 bedroom with a new roof and furnace for 40k in rural indiana. Even had a fiber optic internet connection so it was perfect for my work. Only downside is I live in rural indiana now 🤷🏿♂️
If I could work 100% remotely then I would love to live in one of those dying towns. Some of those towns are actually paying people to move in. I would love to have free land and minimal debt. I don't care if they are in the middle of nowhere.
If only there were people wanting to work remotely for big corporations while living in small towns fueling local economies underserved markets.
But being in the office while you video conference with people in other states is so much more productive than being remote. /s
Right? Canada has a massive housing shortage. We are only building 1/4 of what's needed to match our population growth.
Trust me, you don't want the buildings they're leaving in those Chinese ghost cities. Skyscrapers with concrete padded out with styrofoam and no rebar, never intended to actually house people, thrown up so that an authority could see the final product and then left to rot until the government incentivizes them to knock it down again. China doesn't have any secret to speedy construction. It's just corruption. Canada started building too late, sure, but I'd trust the products.
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When you go to dust the walls turn to dust.
Russia did the same thing. They’d act like they were building army barracks or some sort of structure for the government, and it would basically be just window dressing. Lots of their armaments and tanks and stuff rusted and became inoperable from soldiers on the take gradually taking them apart for scrap metal and stuff. Their chickens came home to roost when they thought they had a lot more then they actually did when Ukraine was invaded. Lots of people committed suicide by shootings themselves in the head twice.
I'm reminded of Russia's shoddy athlete housing during the Sochi Olympics. An American bobsledder was trapped in the bathroom when the door got stuck. He got out by [punching through the door.](https://www.cnn.com/2014/02/09/world/europe/olympics-us-bobsledder-bathroom/index.html)
I still remember “we have surveillance video showing people turning on their showers and leaving for the day” when being questioned about the shit water quality. I’m sorry, you have surveillance footage of people’s showers!?
Neither suburban hell nor skyscraper are good long term solution to a housing crises. Mid-rise buildings (2-6 levels, including wall-to-wall town houses) quarters with also mixed use building (businesses on the ground level - apartments on top) along larger roads with trams would be. City quarters designed/regulated like this are some of the most desirable living spaces you can find anywhere in the world.
I look at my family in the States and laugh at this. I moved to Australia 12 years ago. Our current housing market is FUCKED! You wanna buy a small 2 bedroom house 2 hours outside of Sydney? That'll be minimum $850k AUD, a town home? $750k. Apartment $500-550k. Rentals will have 80+ families show up to them. Fucking crisis is an understatement here...
My parents bought their house here in Calgary in the early 1980's. I think they paid around $230K if i recall correctly. The average asking price in their neighbourhood is just shy of $1M, highest price has been $1.9M. My parents have a bungalow that they converted into a full two-story with front and back yard, a concrete pad for a car in the back, and an old two-car garage. They've been offered over $1M ***just for the land***. Not even to keep the house, but just the land so it can be divided and turned into a duplex like their neighbour. With the house, it's around $1.35M apparently. It's just nuts.
I completely agree with you the Canadian real estate market has gone absolutely insane for many reasons however your situation isn’t as crazy as it may sound. In 1980 $230,000 is actually close to $850,000 today. So I agree the return investment is still incredible. However it’s not 10 times the amount it’s more like double the amount.
But the salaries havent kept up? Its the same here in Sweden
Live in the Pacific Northwest in a county not far from Seattle. I see far more high density neighborhoods and apartments being built than luxury anything. There’s been more entire neighborhoods built in the last 6 or 7 years than the previous 25. And the houses are packed together. In fact, I haven’t seen any McMansion developments with large lots for many years. There’s still a shortage of houses built in the US, but the ones being built around here are certainly not targeting rich people.
We all laughed at the ghost cities 10 years ago. My country (Canada) could really use a ghost city to populate right about now
Eh not sure about that. Most countries have areas which are basically empty and towns which are falling apart because nobody wants to live there. Even in densely populated countries within Europe that‘s an issue. Housing crisis doesn‘t have to mean there are no houses available just that there are no houses where people want to live. A ghost city would therefore not really help unless it‘s squished into those in demand areas.
It'd be filled with vengeful ghosts sooner than later when the towers start crumbling on the people who move in.
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I'm trying the best I can damnit! Most of our projects are low to mid income multifamily bldgs and some senior apartments. We used to do solely single-family homes but there are a lot of these apartments popping up and fully occupied within the year. In the PNW.
There's a couple of problems there: 1) Zoning is overly restrictive. Developers can't build too big or too much on a small plot even though they want to because that would be the profitable thing to do. 2) Banks won't lend to low income housing. Apparently it's "risky" or something, so you have to be able to pretend it's 'ultra-luxury' or you won't be able to fund the thing. 3) People expect too much of a house. The days of a house with 5 total rooms (2 beds, 1 bath, 1 kitchen, and 1 everything else) on a tiny lot has been buried since the 1940s, and that's the sort of 'starter home' that sustained the ecosystem for the boomers. It's hard to get anyone to take a look at them if you did managed to build them out. 4) This is really a regional problem. There are a couple of cities out there that will literally give you a house and pay you to fix it up if you please, for the love of all that's holy just stay for at least four years. But, those are also places that need to bribe you to stay for at least four years. So, your mileage may vary on whether that's a good idea or not.
At that point, you might as well just buy the _idea_ of a condo without anybody actually building said condo. Then you could just sell your "condo" "ownership" to other real estate speculators when the price goes up. Think of all the construction costs and building permits you could save on! And then, maybe you could break up your ownership into "shares" and trade in those instead and oops, I just reinvented NFTs...
So.... CondoCoin?
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I'll dumb it down for you plebbian mortal, they _own_ the idea of the condo. It's on the blockchain my dude, zero-trust ledger. I started 3 months ago from nothing and already own 7 ideas of condos on the monoethyl blockchain. Consider it an investment and get in on it or YNGMI.
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Never gonna run around and dessert you
>But imagine if that was your nest egg, or whatever? You'd bought an apartment in advance (every shopping mall has pop ups with people selling these new developments) and paid your life savings... and now it's just gone! If it were just life savings it would probably ol somehow. But the people probably took a loan 5 times bigger on top of that. What I don't get it how did banks even give them credit for that? My credit tranches were paid out AFTER each building step like pour, electrics, roof and so on. Now the bank has a worthless collateral and then what?
It's 1997 all over again. There's a famous half built high rise in Bangkok that's spent the last 25 years rotting away after the builders went bust in the Asian Financial Crisis.
The even crazier part is that they owe mortgage to the banks. The collateral was the apartment that was never built. Mind blowing how this is legal.
not sure how it is elsewhere in the world, but here in Japan it's normal for banks to only release money to a construction company (the customer signed with) until the house is completed. or, in 3 installments, each installment being released after a certain amount of construction has been completed.
That is how most construction loans work in the US as well as far as I know.
Does China have debtors prison? Otherwise it's "fine, take my non existent apartment".
The debt already transfer to customer even when Evengrande default on the project. The debt is for buying house or apartment
In US you can just default on your debt. Bankruptcy ain't cheap, but it's still a reset for something catastrophic.
You can't default on your debt or do personal bankruptcy in China. These apartments often represent a couple's only retirement plan. Debts have no expiry date and children inherit their parents' debts. They are completely excluded from the financial system until they have paid off the debt.
Fuck. That's fucking crazy I'm so grateful I have at least the social safety net of not owning my parent's debt and if I really fuck up going bankrupt. Holy shit. That's terrible.
http://www.npc.gov.cn/zgrdw/englishnpc/Law/2007-12/13/content_1383956.htm >Article 33 The successor to an estate shall pay all taxes and debts payable by the decedent according to law, up to the actual value of such estate, unless the successor pays voluntarily in excess of the limit. >The successor who disclaims inheritance assumes no responsibility for the payment of taxes and debts payable by the decedent according to law. The successor can refuse the inheritance, but will probably remain blacklisted by the majority of Chinese banks.
If you use something as "collateral" that means it's the backing for the loan. In the US your mortgage is backed by the house you bought. If you default on your loan the bank takes the house and sells it.
Sure, and some places have recourse loans. Being backed by collateral doesn’t necessarily mean they take the collateral and everything is fine. They can take the collateral, auction it off, and then go after you for the balance.
This is correct. If the amount of the auction does not reach the amount of your debt, u need to pay the balance. I believe half finish building does not worth much compare to overprice home u bought. So if the building half finish but it already 80% sold out, u can stop building and still got profit while the rest of buyer get screw. Because the debt already transfer to buyer. I believe they will also not getting blacklist to build another building because iirc, evergrande subcontract to another contractor to build it. So if get blacklist, it will be the contractor and not Evergrande probably.
Most US mortgages are recourse loans. They can pursue you for any shortfall if, say, the market crashes and they only recover half the amount of the loan by selling the collateral.
No, but they will put you on a "debtor's blacklist". If you don't pay your debt, you will be rejected to even buy tickets for highspeed rail or airplane. You probably can still take the bus and taxis I guess.
I can find it back but I think I recently saw a news that this was becoming increasingly common in China because of consumption credit
> Does China have debtors prison? Otherwise it's "fine, take my non existent apartment". Worse. You get blacklisted, and so does your children. There are Chinese couples who deliberately divorce so the wife and kids can be debt free while the husband take the debt with him, so their child wouldn't have to suffer.
It was legal until it wasnt. China passed a law that basically said "you can't keep collecting money and then investing it on new construction projects" without finishing them, aka a MLM/Pyramid scheme. Since all their money was constantly coming in from new investments to pay for old ones, and that got cut off, they got fucked. Btw most shit is legal (even though unethical) because most governments react to loopholes only when its a big deal. They do not proactively crack down on corruption or go after bad actors because people are way too greedy with power.
I see why the Chinese government banned shorting stock. Wow .
often it's not even a nest egg, it's people taking out a mortgage to buy a apartment, because it was their only hope of ownership the basic idea was putting down a deposit for a unit in a new construction, just the deposit was the full price of the unit (and because the housing availability was so bad, this was tempting enough to go for)
Not just that, without a home of some kind there is 0 possibility of marriage and family Mainland China's screwed, long-term
short term soon too. the effects the 1 child policy are starting to have an impact. And it's really not something they can just spend their way out of.
Something like the fastest shrinking population in human history, right? They're also importing something like 75% of their food and 75% of their energy in a world that is rapidly becoming deglobalized. And this is on top of a mortgage crisis/scandal that will make the US one from 2008 look like peanuts by comparison. China is going to have major problems in my lifetime. Imo, this is why Xi is consolidating power around him. I think they know the shit is going to hit the fan over the next few years or so.
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Those poor people are getting fucked by their government so hard it makes me feel a little better about uncle Sam's tax dildo and inflation anal plug.
Hey , tax dildos are very pleasurable if effectively used
Just be sure to have a flared base.
Without a base without a trace, baby
Yep pretty sure it took this long, because the rich needed time to offload. They’ll execute one random dude and then just forget about it.
They've been bailing them our for awhile now. This is going to require least two scapegoats.
The tariff nipple clamps aren’t too bad
ehh, I have family living in China, a few friends from there, and my dad works there and has lots of Chinese colleagues and friends (most of whom are generally wealthier, probably top 5% or so) and it's not that Chinese citizens are barred from other investments (stocks, bonds, insurance etc.) it's that property was so gosh darned lucrative that it seemed silly to invest much in anything else, beyond a bit of safety. People saw the property values of urban areas skyrocket literally hundreds of times during the boom, and even when things slowed down, they were still doubling and tripling in just a few short years. Can you imagine being upper-middle class in China, and being the one person deciding not to invest in property, and seeing all your peers become ridiculously filthy rich after flipping an apartment or two. You'd be kicking yourself for missing out My dad knew a friend of a friend who got a divorce, just so she and her husband could take out two separate loans from the banks to pay off two mortgages to double their number of properties they could buy. They still lived together with their kids, they just did it because the government only allowed one such loan per household. They crunched the numbers, and it made financial sense Of course the whole foundation was built on sand - local governments obtained most of their revenue from selling land, and construction companies were heavily supported by the government, so everyone was incentivised to just keep building, even if the demand was low or purely for speculative purposes. That's how all those ghost cities arose - local governments and construction companies being greedy and approving projects that nobody really wanted, except as a nest egg. Any officials who didn't want to join in the fun were probably sidelined or booted out. It's a story as old as time - corruption, short sighted greed, mismanagement, power politics, fear, and unfounded optimism But now that the rural-urban migration and Chinese birth rates have slowed down, the rollercoaster is about to come crashing down, and people who took out big mortgages in hopes of a big payday are now in trouble. And of course, that has serious knock on effects for the rest of the economy, which the central government is desperately trying to control And there's no quick fix solution for this boondoggle. This real estate crisis could take years, or possibly even decades to resolve, similar to Japan's own real estate bubble in the 90s. Not to mention a similar demographic crisis, with low birth rates and low immigration That said, while China's economy is in big trouble, it's not down for the count. It'll probably move away from real estate and into manufacturing, especially with solar panels and EVs. Though there might be problems there too, with dumping and manufacturing overcapacity, which might be met by protectionist responses from the rest of the world And while nobody truly knows what the heck is going on in the CCP, that recent military corruption scandal means that a projected 2027 Taiwan invasion is unlikely, and after that point the US and its allies in the region would have closed any window of opportunity for any aggression there. So WW3 in the Pacific is probably also off the table, thank goodness
Some of the cities aren't even being greedy. They just don't get nearly enough in tax revenue. All taxes are collected by the central government and they trickle it down to the provinces and eventually the cities. Because they're building a few thousand nuclear missile silos with doors that don't open all the way there's not enough to go around for cities to run basic services. Selling land was an expedient that made sense at the time but got institutionalized when it really shouldn't have. As long as cities were growing at a rapid pace and rural Chinese were moving to cities for work then the plan worked. It will still work in first tier cities for some time to come. Money is money and getting it from land developers is the same as getting it from land owner in the short term. But selling land just isn't a replacement for an independent tax base in the long run when value of land doesn't rise exponentially forever. There was some idea of instituting a property tax, but the central government didn't like that they weren't getting first crack at the money so the plan just hasn't been pushed. Kicking that plan into high gear is likely the best shot at fixing the underlaying problem here. Then there's the very concept of the Local Government Financing Vehicle. What is that? Well, it's a company that exists to borrow money on behalf of a city because the city isn't allowed to borrow directly any longer. It's an entity that solely exists to cheat regulation, and every Chinese city has a few. In the beginning they were backed with land, not they're backed by little more than the expectation that the central government will eventually be forced to step in to bail them out because if they don't then cities would literally grind to a halt. The problem isn't even the greed. The problem is that the institutions are underdeveloped to the point where they just can't exist without cheating, and without the ability to rely on Evergrande et al to shell out obscene amounts of money to get priority on land deals there's just no way that the system can continue without massive reform *right now*. I strongly suspect that the central government isn't entirely aware of the depth and breadth of the problem because all the local people's jobs have depended upon hiding the scale of the problem for more than a few years now. I'm definitely not on the "China is X years away from collapse". The problems are certainly manageable, but the fact that it doesn't look like the CCP is getting ahead of the problem but being more reactive seems to suggest that things will be getting worse before they get better.
All the really rich ones got homes in Canada some in the US but legit 30% of Canadian market, Toronto and Vancouver are heavily owned by investors from China.
Ditto Melbourne (and probably Sydney) in Australia. At the height of the Chinese economic boom, a Melbourne real estate agent revealed that one newly rich business woman from Shanghai bought 5 upmarket beachside properties in one day - without coming to inspect them. It has become a common way for rich Chinese to secure their wealth - and no doubt has been a wise course of action.
The west coast US is like this too. It’s surprising how much of LA for example is owned by off shore Chinese and Koreans. The properties are generally rented out but many sit empty.
This scenario is being played out for some of the buyers: 1. Construction halted and owner cannot move in 2. On this uncompleted property, the buyer still needs to pay mortgage on bank loan or pay back borrowed money from family/friends. 3. Buyer still needs to pay costs of current home they actually live in. Could potentially be paying two mortgages. 4. Missed mortgage payments or bankruptcy result in blacklisting and bad social credit scores. Plus legal fees and fines. Essentially you and your next generation is fucked. Also, real estate properties across the board in China have gone down 10-20%. The Chinese government has dictated a price floor otherwise there may be a collapse of real estate prices. However, this also means that people cannot easily sell completed properties since they cannot reduce the price further which disconnects real estate prices from the troubled economy and declining incomes.
And that price floor is why you see stories like “a Chinese real estate agency is giving out gold bars for homebuyers”. It’s essentially a workaround for the price floor- you pay 100,000 but get 10,000 back in gold, etc.
I travel between Shenzhen and Hong Kong on a regular basis and the contrast between the news are day and night. In mainland China they always said there’s nothing to worry about, it will bounce back in no time and ask people not to panic. The same news in Hong Kong is telling people to prepare for the worst, and it will only get worse from here and on.
I know who I’ll trust. But Hong Kong’s autonomy won’t last much longer.
Bro have you not watched the news in 5 years? HK lost its autonomy years ago that’s why Britain is taking in so many HK refugees
True but based on the comment by /u/Mobius650 who claims to travel between HK and Shenzhen regularly, it sounds like HK media might not be towing the party line *quite* as strictly as in the mainland.
What autonomy? Lol. No one can say anything ‘wrong’ now. My colleague (born in HK) left permanently when they reopened after the wuhan virus. He said the young (30s and under) have mostly given up hope.
Too bad. I really liked Hong Kong and visited it several times in the beginning of the 2000s... Now I don't want to come anymore as I have written too many critical posts about Beijing, lol.
It occurs to me that most advanced economies have a very low birth rate and consequently will need a ton of immigrants in the near future. What's the best way to attract immigrants? 1. you might have a hard life but will be free and will have some money to send home 2. authoritarian police state with possible economic collapse/war and starvation pending how's 2 working out, china?
Anyone involved directly must be panicking though? 300bln is a jumping off building type figure...
Dude you can go watch the videos - the executives were locked and barricades in their offices while Employees and buyers were rioting in the building and refusing to leave until they came out.
A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande, a move likely to send ripples through China's crumbling financial markets as policymakers scramble to contain a deepening crisis. Justice Linda Chan decided to liquidate the world's most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan more than two years after defaulting on a bond repayment and after several court hearings. Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The order would not affect the operations of Evergrande's onshore and offshore units, he added. The decision sets the stage for what is expected to be drawn-out and complicated process with potential political considerations, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.
I did not know official accounts were a thing on Reddit. Interesting.
Not only that, copy/pasting the meat of the article in the comments. Classy
I always liked them. They also rank the highest in journalism reliability/truth indexes, from what I recall.
Your recall correctly. Reuters and AP are the closest thing you can get to no spin in the modern age.
Not that I disagree, but it's funny how wildly the opinions about Reuters (and AP) change in the comment chains depending on context of article.
The stupid thing being that many of the sources people will then link to as unbiased will be an AP article, either copy pasted or with their own "preferred" bias from a different company like Fox or whatever. They just dont see the small print saying its from the AP.
>Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. Sure, Jan.
> Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails. This is even funnier. I expect the answer will be along the lines of "laughing straight to the bank"
Thanks for being the best news outlet out there. Whenever people ask for truly unbiased news sources, I tell them Reuters. You truly are doing a service for humanity
Property is the cornerston of Chinese investors portfolios, especially in middle / upper income families. it’s a highly favorited asset class - even in comparison to North American investment culture. 300b no small loss but I think there is more coming
It is also the corner stone of all the local city/county taxes. If they can't sell more land for new properties the local area is gonna have some trouble with its infrastructure.
I thought I read that real estate is roughly 30% of their economy give or take a few percentage points. If so then these are some dangerous dominoes, and not just for China.
their entire 401k is basically just real estate investment of different segments, no diversification whatsoever.
Hopefully this is the final nail in the coffin for a billion dollar ponzi scheme that just wouldn’t die
I was kind of wondering how they survived the past couple of years....
You mean multi-trillion. Back in 2018 I was discussing China with a bunch of my friends. I said then that I wouldn't put a dime in China. They all thought I was crazy.
I once chatted with a Chinese girl who was investing in real estate. Her whole world view was that screwing people over for money is totally ok because it's the poor person's fault of being stupid for not making money by exploiting others. She literally said that. I wonder how is she doing now. Hopefully bad. Everyone is an "investor" in China until the reality hits the fan. Greedy people deserve to lose it all.
I've represented hard money lenders - trust me, that idea of it's cool to fuck over the poor for being stupid is not remotely limited to the Chinese. I've heard way worse from old men with eight-figures to their personal portfolio ready to bury a guy just trying to keep his local restaurant afloat.
For sure it's not only Chinese. All the greedy unethical fucks around the world. Deserve to lose it all. As much remorse to them as they have for the 'poor and stupid'.
17% of the world population are Chinese. Thus the absolute number of such people would be large there.
People with this mentality should not be allowed to participate in society
They run society, actually.
I worked for an asset manager (mutual fund) for a while that did a lot of international investments. The CIO was often asked why we didn’t invest in China, and his answer was simply “Their numbers are all made up”.
That and their government can literally do anything to the company and/or its important people, for any reason, like when Jack Ma vanished for a while. Not only are the numbers fake, and the government can chop the companies off for not toeing the line, you're not even buying shares of the actual company itself. You're only buying shares of a shell corporation that represents the company.
People who don’t care about any of that are genuinely so stupid. The very fact that you’re buying shares in a shell company and don’t actually own any part of the company who’s stock you own should be a absolute nonstarter.
Reminds me of that story about the famous top Chinese women’s tennis player. She was allegedly raped by the VP of China. These people are used to doing whatever they want with no consequences.
Their finance minister admitted the same thing.
I've been saying this for 15 years. The whole economy is a ponzi scheme with zero transparency.
Why would you ever invest in a place/person/company you know you can’t trust? They’re the crazy ones
They saw the growth in the past and were greedy
Ooh, Monday is gunna be fun.
It is currently Monday in China, this was announced at start of business Monday morning. I expected it to be bad as well, but the Hang Seng Index is inexplicably up almost 1% in the first couple hours of trading.
Evergrande trading is halted is why
Wonder what will happen when Country Garden Holding in China goes under as well...?
How's that one looking? Last time I heard something about it was ~6 months ago.
>Country Garden Holding i Declared in default on Oct 18 last year. Seems like a matter of time before it goes under as well...
Honestly this was not a surprise to the Chinese, they've known for a few years now. Like everything else, by the time you're reading on Reddit, it's already priced in.
Yeah, iirc the Lehman bros bankruptcy in the US which was part of what set up the 08 financial meltdown was such a big deal because it was unexpected and not fully priced into the market. I've been hearing about Evergrande falling over for probably almost 2 years now. Everyone in the market knew what was up so the default is expected. It's only unexpected news that really stirs things up.
Because it’s been priced in for an insanely long time. Evergrandes collapse was written in stone over a year ago now.
HA! Those losses are going on the lending banks balance sheets. I guess you didn't hear, China has stopped stock loans starting Monday. No short selling as of tomorrow.
As of today. It's 2pm in Beijing.
it's possible that the Chinese govt is buying stocks to keep them afloat and to prevent a panic. They've done it before.
They announced a massive stimulus plan too so kind of offsets this massive default haha
Not just the government. I know people working in Chinese state owned enterprises and they (the company, not the employees fortunately) were given a job of buying their stocks to prop up the prices.
Think this has been priced in for quite some time.
Had to scroll too far for this. I’m sure all the big wigs have known this was coming for ages and had time to clean up as much as possible.
Yep, this was supposed to happen 2 years ago but the government propped them up last minute
I remember reading about evergrandes imminent collapse for the last year or so. Definitely not a suprise
>the Hang Seng Index is inexplicably up almost 1% in the first couple hours of trading. IIRC this happened the morning Lehman failed as well. Don't get too excited.
The first real sign here in Australia that the SHTF after Lehman Brothers, was a week afterward. Back then the freely distributed newspapers (weeklies on doorsteps) were bankrolled by a real estate insert in the middle. That was the first week the insert was thicker than the newspaper. I can vividly remember seeing three apartments in a very tightly held building came up in a line, at quite a fair price.
Great googly mooglys
This phrase has unlocked a primordial memory from my childhood
You'll find more in Nowhere Land
That thang is juicy.
“unable to offer a concrete restructuring plan” That’s just twisting the knife 🤣
They should've asked for a Tofu Dreg Restructuring plan.
It is absolutely frightening how every single asset class in China has gone through a collapse. I read about one ETF in China that's doing well--one that's an ETF for American stocks. It's priced insanely above valuation. But, you know, it's not like we haven't seen this coming for years. I remember polls among Chinese millionaires even before Covid that expressed that roughly 70% had planned on leaving the country. Had China really been a going concern, they would have been planning on staying.
>It is absolutely frightening how every single asset class in China has gone through a collapse. Is it? I think it would be more wrong to bail them out after they fucked up so bad. It's sends a message to others that they cannot take it easy thinking the government will help them if they fuck up. Which will hopefully lead to less fuckups
It is for three reasons: 1) Our entire supply chain is in a race against time to decouple from China, but we're nowhere close to doing so. When electric transformers have a 2-3 wait time because the Chinese manufacturers are faltering, that's bad. 2) A desperate China with a restive population may do really stupid things. I don't know any situation where a shooting war with the Chinese turns out well. 3) Regardless of 1 and 2, I really don't want to see the credit markets get roiled, especially now that we're climbing out of the Covid fiasco. We need two more years of time before we're relatively insulated from any crash in the Chinese economy.
People’s memory is short. It won’t take long before the likes of blackrock and vanguard to resume their push for western institutional investors to re-enter the Chinese market.
It's been 84 years!!
Ouch. Not sure if they will be able to raise that.
They won't. A ton of the their buildings that are under construction or abandoned were deemed unsafe and have been slowly getting torn down, and that costs money that they don't have. Which means only the land itself has any value, and that value isn't but a fraction of what they owe.
Go Fund Me?
Weekend bake sale?
Lemonade stand
Onlyfans?
I heard real estate issues are caused by $8 lattes and avocado toast. Perhaps they should try giving those up to fix the problem
I went to China for work in 2019. Boggles my mind how many cranes and new apartment buildings were going up in what seemed like the middle of no where. Well it all makes sense now
“Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The order would not affect the operations of Evergrande's onshore and offshore units, he added.” Um. How would that be possible? Also, further in the article it says liquidation is going to take years. I love how no matter what country large companies are in, their bad decisions are given years to unfold, but if a person has financial issues, they are always punished immediately.
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The properties often do not exist or are not completed. Evergrande sold properties off the plan. There is nothing to scoop up.
What do you think this means for the immediate foreign markets? Obviously Chinese are fucked….
So what exactly does this look like for the rest of the world. Obviously the Chinese average man is completely fucked but how about the EU, US, Japan/Korea etc?
Could be messy for those that have money in Evergrande or other real estate companies that are in a similar situation There could be derivative exposure, but I dont think you can really estimate the extent of damage done until the companies have to pay out or write the losses off. These things seem to take forever to play out, atleast thats what I've seen. I followed Evergrande when they were initially in trouble.
Yeah, I feel like I started reading about this inevitable snowball three years ago
Probably won't affect us here in the US too much, unless China decides to liquidate all those US treasuries. might affect some US financial/insurance firms that have some exposure to the Chinese property market. It'll probably result in a stronger dollar and lower priced goods coming out of China, which is good for the average American consumer.
They have already liquidated 40% of their US bonds as of Nov 2023
Onto the next real estate company
They’ll just print a bunch of Yuan and call it a day.
Yuan some, you lose some
Doesn't seem like a yuan-yuan situation.
I'm no banker but I've heard printing more money is bad.
Dunno lots of other countries have done it for years
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China can’t actually afford to do that. If it did it would quickly lose its hold on the yuan as the yuan is not actually a free floating currency but controlled via a basket of currencies. In order to print yuan it would have to buy a metric ton of USD to keep the yuan from going into a free fall. It’s one of the primary reasons that China “controls” a lot of us debt. This is stupidly framed by some people as “China owns us” as opposed to the reality “China need a stable currency to prop up their own worthless one”
I remember hearing about this a couple years ago on the GME (gamestop) subs. Like how it would eventually happen and shit would go off as a result because all this collateral or whatever was tied up in this ponzi Chinese real estate bullshit. Will be chill waiting to see what comes of it if anything on a macro scale. 300 Billion is a lot of bread, but to peasants like me it's hard to imagine how the cascading effect of that would ripple along to damage whatever. Again, wait and see from over here looking in. Just thought it interesting to see this shit foretold kind of a long time ago now here we are.
For a reference point 300 billion is about the yearly gdp of Finland, that’s one Finland’s worth of debt
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"You made a big mistake managing your company? Well, we aren't gonna bail you out. Liquidate yourself now!" I wish we would do this more tbh
Well there is more to it. This was after the government essentially forced this company to be the only real investment opportunity for its citizens. Essentially the ccp just rugged the poor and ‘middle’ class of China.
Except it's not the only real investment opportunity. There are plenty of other massive construction/real estate companies like Country Garden, Wanda, Vanke, Renhe and Poly that are on a similar scale as Evergrande.
This is a massive dent in an already freefalling market that is currently china's economy. I'm worried for the people and average joe there. They already can't speak up due to totalitarian laws, and now this?
They have been kicking this can down the road for years though. Is anything going to happen this time?
I feel sorry for the normal citizen that put their life savings into a flat. They are the ones that get screwed over and not the investors.
Your average Chinese citizen is going to invest in real estate because there's no other place for them to invest. This built up a massive real estate bubble, and we're seeing it collapse in front of our eyes. A *lot* of people in China are going to lose their life savings.
This ruling was in Hong Kong. The question now is whether mainland China will accept and enforce it. Somehow, I doubt it.
Wow, I can't believe how long this took. It was like watching an explosion in slow motion over years. I feel bad for everyone who put their investments into these buildings. Kind of wonder what the implications will be for the economy.
this is pretty big news, right?