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China mortgage boycott data erased by censors as crisis spreads

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Re: China mortgage boycott data erased by censors as crisis spreads

#161

Post by jollybean »

We saw the same thing happen in Korea and Japan after their post war construction, they moved up the ladder, worked hard, but then when they got a taste of real success there was a huge amount of speculation.

In the late 1980's Japanese real estate was the most valuable in the world, then it collapsed and they have not recovered.

This is a big secular shift for China. All of the previous projections were wrong, just like those indicating Japan would take over the world in the 1980's.

This is where China comes out of 'catch up' mode, and is now finding it's 'reality equilibrium' with the rest of the world.

Re: China mortgage boycott data erased by censors as crisis spreads

#162

Post by JumpCrisscross »

jollybean wrote: post #160
jpgvm wrote: post #155

Earlier quoted context omitted.

It matters because of contagion. As it stands there are individuals at risk of being over-leveraged by having a loan on a asset that doesn't currently exist (but probably will, CCP has a way of compelling such things to happen) or has dropped in value compared to when they bought it (most likely). Developers and construction companies are also in hot water as their business models relied on continually pre-selling ap…

Yeah, dude, the number of 'normal people losing their homes' will create a revolution, and/or, consumer spending will crash, combined with the fact that a 'major component of GDP has crashed' (i.e. construction), that's 'extremely bad'. The US was able to 'rebalance' by propping up some banks - but in reality they saved 'consumers' by taking toxic loan assets of banks balance sheet and absorbing it onto the fed balan…

> taking toxic loan assets of banks balance sheet and absorbing it onto the fed balance sheet

This is not what happened. (The Fed never bought the toxic assets. It bought Treasuries and super-safe nontraditional assets off owners of toxic assets so they had the liquidity to resolve themselves. But the toxic stuff ended up in other places.)

Re: China mortgage boycott data erased by censors as crisis spreads

#163

Post by atwood22 »

jpgvm wrote: post #155
atwood22 wrote: post #151

Earlier quoted context omitted.

How are over-leveraged developers that different from what caused the 2008 global financial crisis? The cause of the GFC was that assets were labeled as safe but were in fact unsafe. So one day everyone woke up and had less money than they thought they had. The same thing can happen from over-leveraged developers. Banks lend money to people to buy real-estate. Everyone expects those units to exist, and if they sudden…

It matters because of contagion. As it stands there are individuals at risk of being over-leveraged by having a loan on a asset that doesn't currently exist (but probably will, CCP has a way of compelling such things to happen) or has dropped in value compared to when they bought it (most likely). Developers and construction companies are also in hot water as their business models relied on continually pre-selling ap…

This doesn't answer the question. China also sells mortgage backed securities and has parts of its financial sector operating with little regulation. Something like 40% of outstanding Chinese loans are tied up in shadow banking activities. It's entirely possible that a failure to pay mortgages leads to contagion, especially because the mortgages aren't even backed by anything in many cases. In some ways, we're already seeing contagion. A lot of these developers are folding due to new regulations on how much debt developers can take on.

Re: China mortgage boycott data erased by censors as crisis spreads

#164

Post by thriftwy »

lazide wrote: post #110
thriftwy wrote: post #83

Earlier quoted context omitted.

I assume they want to have their economy, their real estate market, their developers and their banks mostly intact. But if they don't, forget what I've said.

The Chinese gov't can have that (at some level) without doing a giant rescue of everyone. If they want it to keep growing, sure they can do that, but the problem is they let it keep growing too much already.

Well, if Chinese government has set up this bubble it is its duty to figure out how to pop it safely.

Re: China mortgage boycott data erased by censors as crisis spreads

#165

Post by jpgvm »

jollybean wrote: post #160
jpgvm wrote: post #155

Earlier quoted context omitted.

It matters because of contagion. As it stands there are individuals at risk of being over-leveraged by having a loan on a asset that doesn't currently exist (but probably will, CCP has a way of compelling such things to happen) or has dropped in value compared to when they bought it (most likely). Developers and construction companies are also in hot water as their business models relied on continually pre-selling ap…

Yeah, dude, the number of 'normal people losing their homes' will create a revolution, and/or, consumer spending will crash, combined with the fact that a 'major component of GDP has crashed' (i.e. construction), that's 'extremely bad'. The US was able to 'rebalance' by propping up some banks - but in reality they saved 'consumers' by taking toxic loan assets of banks balance sheet and absorbing it onto the fed balan…

As I said, I will believe it when I see it. Heard the same doomsday stories over and over at this point.

The most likely way this plays out is CCP slowly nationalizes Evergrande and other embattled developers (bond holders and equity investors 100% screwed), sell the unfinished projects to developers that didn't run themselves into the ground for them to be completed. This is already happening.

As much as people want to believe there will be collapse I just see it as incredibly unlikely given both track record and the iron grip that CCP has over the Chinese state banks. Without a failure in the banking sector I just don't see significant enough contagion to cause long-term damage.

Re: China mortgage boycott data erased by censors as crisis spreads

#166

Post by jpgvm »

atwood22 wrote: post #163
jpgvm wrote: post #155

Earlier quoted context omitted.

It matters because of contagion. As it stands there are individuals at risk of being over-leveraged by having a loan on a asset that doesn't currently exist (but probably will, CCP has a way of compelling such things to happen) or has dropped in value compared to when they bought it (most likely). Developers and construction companies are also in hot water as their business models relied on continually pre-selling ap…

This doesn't answer the question. China also sells mortgage backed securities and has parts of its financial sector operating with little regulation. Something like 40% of outstanding Chinese loans are tied up in shadow banking activities. It's entirely possible that a failure to pay mortgages leads to contagion, especially because the mortgages aren't even backed by anything in many cases. In some ways, we're alread…

It does answer the question you just want to look past it. Chinese state-owned commercial banks (SCOBs) account for ~40% of the market alone, another 40% or so is rural banks etc, all of which are under incredibly strict regulation. You can't compare the state of US banking in 2008 to what we currently see in China, they aren't even remotely close in terms of regulation, capital requirements and auditing. Current day US banks probably have less stringent stress tests than SBOCs.

Shadow banking and privatized loans are definitely a risk but they don't represent the same scale of risk as we saw in 2008. It's almost certain they explode but I don't think it's possible that such a small portion of the market can markedly affect the financial stability of the nation as a whole.

Re: China mortgage boycott data erased by censors as crisis spreads

#167

Post by atwood22 »

jpgvm wrote: post #166
atwood22 wrote: post #163

Earlier quoted context omitted.

This doesn't answer the question. China also sells mortgage backed securities and has parts of its financial sector operating with little regulation. Something like 40% of outstanding Chinese loans are tied up in shadow banking activities. It's entirely possible that a failure to pay mortgages leads to contagion, especially because the mortgages aren't even backed by anything in many cases. In some ways, we're alread…

It does answer the question you just want to look past it. Chinese state-owned commercial banks (SCOBs) account for ~40% of the market alone, another 40% or so is rural banks etc, all of which are under incredibly strict regulation. You can't compare the state of US banking in 2008 to what we currently see in China, they aren't even remotely close in terms of regulation, capital requirements and auditing. Current day…

> 40% or so is rural banks etc

Aren’t those the banks that were taken over by gangs and has their funds embezzled? You’re painting way too rosy a picture of the Chinese financial system. It’s taken months to make rural depositors while after having their money stolen. They’re still waiting.

Re: China mortgage boycott data erased by censors as crisis spreads

#168

Post by User23 »

sofixa wrote: post #85
vkou wrote: post #6

Earlier quoted context omitted.

They can't block GitHub, but all it takes is one phone call to Redmond, and their problem will go away. Microsoft has no issue with getting rid of politically problematic repos. https://www.technadu.com/github-removes-protest-organizing-a... - when Microsoft won't respect the right to protest in Spain, they won't give two figs about that same right in China. https://www.google.com/amp/s/www.vice.com/amp/en/article/8x…

If you can't see how the two examples you cite are problematic, i don't know what to tell you. There's a difference between protest and sedition, and the Catalan independence movement went full in on treason. The second is doxxy, so it is understandable to an extent.

> There's a difference between protest and sedition

Is there? Please elaborate, because to me it merely looks like a matter of perspective.

Re: China mortgage boycott data erased by censors as crisis spreads

#169

Post by marianatom »

jpgvm wrote: post #144
marianatom wrote: post #12

I was one of those people that thought China would never collapse due to its iron grip on economy and population. But look at recent activities * Chinese GDP shrinks to 0.4% in Q2 2022. Which is still suspicious because Shanghai economic activities declined -40%, and real estate overall activities dropped -30% * Massive mortgage boycott. Also public protests against lost deposits and unable to access bank is being ai…

Same story has been foretold over and over for the last 30 years. I will believe it when I see it. The RE bubble is bad but substantially less bad than what the US was facing in 2008. There is a big difference between over-leveraged developers (the Chinese problem) and rotten Main street banks (which was the US problem). In China's case we are likely going to see a continued drop in housing prices for a little bit lo…

Right so I had similar vein of thoughts years ago when I thought China was in a real estate bubble and did think that the government can just make certain type of investors take the loss and move on. However, that's only if the collapse is only in real estate. What I'm seeing right now with China is a death spiral, namely

bad policies such as zero covid, tech crackdown, or not resolving the root of real estate crisis -> investor (domestic and foreign) loss of confidence -> companies leaving or shut down -> rising unemployment or reduced salary -> debt bubble gets bigger -> bad policies.

This death spiral is enhanced by demographics collapse which is happening now, not 30 or 15 or 10 years ago, as well as nationalistic behaviors that isolates China. Not to mention global inflation and consumer demand collapse.

In my list of things I also didn't mention

* 20% unemployment rate for new grads

* layoffs from big tech companies

* 70% of China's economy is real estate related, which means China will take an even bigger impact from real estate collapse than other countries that have less % of economy in real estate.

* collapse in demand for real estate due to fast aging population

* 20% of built real estate stays empty (not even rented) due to investment vehicles purpose

Re: China mortgage boycott data erased by censors as crisis spreads

#170

Post by chii »

cowmoo728 wrote: post #120
holografix wrote: post #118

Earlier quoted context omitted.

I guess you haven’t heard about what happened to Jack Ma recently

I see it as they can't control technology and academia without stifling it in the process

I suspect that they will "merely" need to instill enough propaganda and "brainwashing" politically onto academia such that those who have the knowledge and skill would not go against the CCP.

This effectively restricts the talent pool - those who are smart are likely able to see thru any propaganda. And those that are smart are also more capable of emigrating overseas where you make more money anyway.

So it's not about stifling, but more about slowness. But with a large enough population, even a smaller % of talent is still a huge number.

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