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Beijing struggles to defuse anger over China's P2P lending crisis

reuters.com

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Re: Beijing struggles to defuse anger over China's P2P lending crisis

#71

Post by ummonk »

varsitywork wrote: post #48
SuoDuanDao wrote: post #24

Earlier quoted context omitted.

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

> in a country with a bias towards savings that's a myth that keeps being persisted, much like their consistent 6-7% gdp growth every year. if you read the article, it mentions that 'He and his family had invested 7 million yuan - their life savings'. "The Myth Of China's 'Excess Savings' Is Weighed Down By Excessive Debt. Bank balances offset against enormous, rapidly rising, bad debts, a property bubble out of all…

How does anything you said indicate that Chinese having a bias towards savings is a myth?

Investing money in bitcoin, stocks, real estate bubbles, etc. is still saving (not consumption). Might be bad savings, but it's still savings.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#72

Post by ummonk »

stephengillie wrote: post #29
rb808 wrote: post #21

Earlier quoted context omitted.

Its fascinating to think about the knowledge of investors in China. How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty and communism) Combined with Chinese people all saving too much and not spending on consumption - there is a huge pool of money just floating around going into every possible asset. Its a bad combination th…

> How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty ...) Many study Finance for this education. At least in America, Europe, Africa, Japan, Korea, etc.

Don't know about the other regions/coutnries (I imagine it is the same), but only a miniscule fraction of Americans have studied Finance.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#73

Post by cm2187 »

opportune wrote: post #68
vfulco2 wrote: post #4

There is a huge structural issue when investors of all asset classes believe the central government will bail them out. It happens to a vastly lesser degree elsewhere. We saw the folly of it in the US in 2008.

It is still happening with home prices in many, many countries. Too many older people with too much of their net worth tied up in their homes. Essentially governments in many countries discovered, perhaps on accident, that pumping up the prices of homes was an easy way to fund the retirements of much of the older generation without explicitly raising taxes. The bubble essentially cannot pop because too many people wo…

You don’t name the UK but I can’t help thinking that this the poster child of what you are describing.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#74

Post by ummonk »

bilbo0s wrote: post #12
vfulco2 wrote: post #4

There is a huge structural issue when investors of all asset classes believe the central government will bail them out. It happens to a vastly lesser degree elsewhere. We saw the folly of it in the US in 2008.

I don't know if the structural issue was people believing the US government would bail them out. The issue was probably more that we actually bailed them out. I can't really blame rich and powerful bankers for thinking we were gonna do something that we normally do for them. Stop bailing them out, and they'll stop believing they're gonna be bailed out.

I don't really think keeping the financial system (which is an integral part of an economy) functioning is the same as keeping an asset bubble afloat.

The US gov. certainly didn't stop the real estate bubble from bursting. It merely stepped in to recapitalize banks, and got its money back with interest in the process of keeping the financial system from falling apart. At the time, everyone was gearing up to make a run on the banks to get their money out first.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#75

Post by cm2187 »

maxxxxx wrote: post #23
koboll wrote: post #16

Earlier quoted context omitted.

If we're in a position where the options are a bailout or the catastrophic collapse of the world economy, we've already failed. This is why regulation is necessary.

"bailout or the catastrophic collapse of the world " In 2008 this is what the bankers told us but are these really the only options? I have my doubts.

I worked for one of the large banks that got out of this crisis pretty much unscattered. The Friday before TARP was introduced, which ended the succession of large banks collapses in the aftermath of Lehman, we were told internally that we didn’t think we could last more than a couple of weeks in the current market. And if we only had a couple of weeks left, most of the other (weaker) institutions had much less.

Like for the cuban crisis, I think it is easy to forget how close we got to the brink. We have already witnessed a complete collapse of the banking system in 1929, in a world that was much less inter-dependent than it was in 2008. It is survivable but it is ugly.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#76

Post by _8j50 »

SuoDuanDao wrote: post #24
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

Why do you think that perspective does not apply to americans? I don't eat at proper restaurants much but when I ate fast food,the busiest ones also had more people flocking to them(chick-fil-a for example). Not many people line up to eat at a no-name off brand chain that just opened,and I see those pop up and go out of business a lot.

It's not a cultural thing but how one is brought up. Upper class or rural chinese might have a different approach just as americans from different walks of life and from different states might view it differently.

Same goes for investing, those who plan for long term gains have a different perspective than those who want 'buy low. Sell high.' For short term profits.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#78

Post by jalk »

sremani wrote: post #30
SuoDuanDao wrote: post #24

Earlier quoted context omitted.

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the re…

>> always goes to busy restaurants on the assumption that a lot of customers means they have good food. It is actually good heuristic, I would just modify it ever slightly.. lot of customers means that they will not serve "stale" or yesterday's food.

When traveling abroad, pick the restaurants where the are lots of locals as opposed to the ones filled with other tourist

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#79

Post by baybal2 »

seanmcdirmid wrote: post #18
21 wrote: post #14

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jp...

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

>or at least the landing must be soft.

The state, has valid legal pretext and a joker in the sleeve: the special interpretation of article 149 of property law. Not a single municipality in China ever honoured the textualist interpretation of the law, in all and every case ever going to court over article 149, the outcome was that the state can't deny the automatic lease extensions, but it leaves municipality the privilege to set conditions.

And yes, Shenzhen municipality was very very happy to resell property sold on 15 and 20 year leases. And people who were previous lease holders were royally fucked because they paid for property with 15 and 20 years leases as much as for a 70 to 50 years lease.

Re: Beijing struggles to defuse anger over China's P2P lending crisis

#80

Post by adventured »

seanmcdirmid wrote: post #55
cm2187 wrote: post #54

Earlier quoted context omitted.

Actually the europeans are following a similar logic. Try to cushion the pain, amortize it over a long period, hope the problem goes away by itself. You end up 10 years after the financial crisis with an unhealthy banking sector, high unemployment, etc. So it doesn't have to crash but you basically end up having to live with the problem instead of fixing it. The US approach of taking the pain upfront and starting cle…

I think the Japanese perfected that approach with their lost decade.

Japan would be thrilled with just a lost decade. It's a 25 year blackhole of destruction and counting.

Before adjusting for inflation, their GDP is at 1994 levels in USD terms. If you adjust for inflation, it's a brutal rollback.

Not only did they stagnate on economic output, they accumulated extreme amounts of debt, heavily debased the Yen, saw their savings rate drop to near zero, and lost their demographics age wise.

They have to perpetually destroy their economy via currency debasement until the national debt is effectively defaulted on to a high enough degree that they regain economic breathing room. The net result of that is vast wealth lost, and a gradual adjustment down in relative terms for their economic standing vs other nations (they've fallen from a top five GDP per capita nation, to number ~20; most likely that down trend will continue at least until they're between Spain and Taiwan in rank).

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