I am curious just how badly the liquidation is going to go. Chinas in uncharted territory with a controlled economy and a major disaster. Things are already not great but I’m not sure if this will...
I am curious just how badly the liquidation is going to go. Chinas in uncharted territory with a controlled economy and a major disaster. Things are already not great but I’m not sure if this will escalate things or is just another issue on the pile
Local governments lease land to developers for 75 years and rely on the collected funds to pay for social services (taxes are collected centrally and some is distributed back to local governments,...
Local governments lease land to developers for 75 years and rely on the collected funds to pay for social services (taxes are collected centrally and some is distributed back to local governments, but land payments are collected locally and have become a critical source of income).
I wonder what will happen if some of these local governments go bust because they haven't received money? Obviously they'll be able to reclaim the land but considering the whole developer crisis, I don't think there'll be a rush of companies wanting to lease it out...
Not to mention all the workers salaries and people who have been paying mortgage payments on homes that will never be finished. Government censors will be working overtime this week!
The Chinese real estate market has already effectively collapsed with billions of dollars of losses, cancelled construction, and various financial bag holders. China also had a sort of shadow...
Exemplary
The Chinese real estate market has already effectively collapsed with billions of dollars of losses, cancelled construction, and various financial bag holders.
China also had a sort of shadow financial market backed by these developers, and once the real estate market cooled, it created liquidity issues for a larger portion of the economy.
Chinese officials have tried to put a floor under falling real estate sales in recent weeks but so far to little effect. Country Garden failed to make a payment on nearly $200 billion of debt on Tuesday and still has more than 400,000 apartments that it sold but has not finished building.
Evergrande ramped up an industry practice of raising money by selling apartments before they were built. It also turned to employees, telling them to invest in short-term loans or lose out on bonuses. And it persuaded people who had already bought Evergrande apartments to buy investment products offering huge returns. Mr. Meng and his parents were promised 8 and 9 percent interest on their investments. They made money on two of them in 2021, but by the next year, interest payments had stopped altogether.
The intensive borrowing in China fed excesses in other sectors: Insurers bought hotels, and an entertainment company bought a Hollywood studio. All the economic activity made it easy for the government to ignore the bubble that was building because companies, including Evergrande, were helping local governments — first by buying land and then by building complexes that contributed to economic growth that got local politicians promoted.
Trust firms like Citic are arms of China’s so-called shadow banking system that sell investment products to companies and wealthy individuals. They face few requirements to publicly disclose information about their operations and as a group manage $3 trillion in assets.
Property developers had relied on trust firms to extend loans and invest in businesses that regulators considered too risky for traditional banks. The trusts turned the loans into investment products they then sold to Chinese companies and wealthy individuals, promising lucrative returns.
For the stock market likely not. It reacted already when ever Grande failed to pay it's first credit payment back when the whole news story broke. Most stocks dipped by a couple percent for a few...
For the stock market likely not. It reacted already when ever Grande failed to pay it's first credit payment back when the whole news story broke. Most stocks dipped by a couple percent for a few days so I think at this point anyone who could get out has gotten out.
I am curious just how badly the liquidation is going to go. Chinas in uncharted territory with a controlled economy and a major disaster. Things are already not great but I’m not sure if this will escalate things or is just another issue on the pile
Local governments lease land to developers for 75 years and rely on the collected funds to pay for social services (taxes are collected centrally and some is distributed back to local governments, but land payments are collected locally and have become a critical source of income).
I wonder what will happen if some of these local governments go bust because they haven't received money? Obviously they'll be able to reclaim the land but considering the whole developer crisis, I don't think there'll be a rush of companies wanting to lease it out...
Not to mention all the workers salaries and people who have been paying mortgage payments on homes that will never be finished. Government censors will be working overtime this week!
I haven't been paying attention to this...is this the start of that supposedly imminent crash of the entire Chinese real estate market?
The Chinese real estate market has already effectively collapsed with billions of dollars of losses, cancelled construction, and various financial bag holders.
China also had a sort of shadow financial market backed by these developers, and once the real estate market cooled, it created liquidity issues for a larger portion of the economy.
Here are a couple articles:
China Bet It All on Real Estate. Now Its Economy Is Paying the Price.
How China’s Property Crisis Blew Up Bets That Couldn’t Lose
Most analysts think investors have already priced in Evergrande's liquidation. They've been a zombie company for awhile now.
This seems to have some similarities to the Leeman Brothers collapse of 2008, is it that bad/could this have the same global consequences?
For the stock market likely not. It reacted already when ever Grande failed to pay it's first credit payment back when the whole news story broke. Most stocks dipped by a couple percent for a few days so I think at this point anyone who could get out has gotten out.