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China’s property giant Evergrande files for bankruptcy protection in Manhattan

cnbc.com

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Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#171

Post by worrycue »

ksey3 wrote: post #105
hurril wrote: post #95

Earlier quoted context omitted.

Moral hazard and inflation. If I know that I will be bailed out with a certain probability, then my actual cost of capital is much lower (since I am not expected to pay the entire volume of interest.) For instance: why not make the investors whole again instead by giving them the "printed money" instead of going through the middle-man of propping up these failed giants?

In the US sure, where its blasphemous to slit the throats of the leisure classes for their excesses. In China they made Jack Ma disappear. Through out history when it gets time for the Kings & Queens to waive the debt of the plebs away, cause they have nothing left to pay, the Rentier classes take the haircut. In the US the rentiers have owned the Kings & Queens for a long time. To the point where any American instit…

Jack Ma disappeared because he openly criticized the government.

The "leisure class" (of which many party members are part of) operate with impunity as long as they stay in the good graces of the party leadership.

You will only hear what the CCP wants you to hear. The rest of the "leisure class" flies under the radar.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#172

Post by oblio »

throwaway4good wrote: post #82
oblio wrote: post #57

Earlier quoted context omitted.

> it was all about keeping asians down and dependent. Probably because of this. The US is allied to several prosperous Asian countries.

Who all got seriously smacked down when they got too independent (from the Vietnam war to the Plaza accord).

Yes, the famous Asian Vietnamese ally, the Soviet Union.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#173

Post by NhanH »

tremon wrote: post #166
OtherShrezzing wrote: post #129

Earlier quoted context omitted.

The lenders in the Chinese housing market are mostly Chinese citizens. In modern China, rather than buying a house, you buy a promise of a house, then the house builder builds it for you. The house builders though have these huge debts, and they've been using money from new purchases to construct their backlog of homes. The $90bn outstanding is $90bn in outstanding housing construction, not just abstract debts to ban…

That sounds suspiciously like a pyramid scheme: the only thing financing the current construction are payments to new construction. How did they get into this situation? By continuously selling under cost, or perhaps by siphoning off profits?

Land price keeps increasing caused this problem. You can just imagine land price to increase 50% YoY (hypothetical number) and you will understand the situation.

Basically you can not have enough cash on hand to purchase the next piece of land for your development, but you want to always plan for the next step.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#174

Post by audunw »

meowtimemania wrote: post #103

I’m never sure if news about China’s upcoming economic problems is written because such an event is actually coming or if the media writes it just for the clicks.

I think it's pretty clear by this point that it's like an extreme slow motion train crash.

In a free economy China would probably have had a proper crash and perhaps even a rebound by now. But China is doing everything that can to prevent a crash that can be blamed on the government, but the problems are so fundamental that they're just postponing a full crash - one that will probably end up being much worse - instead of fixing the root problems.

A decade ago you could say that the people predicting China's economic crash didn't have anything concrete to support their arguments. Things seemed to be going well. Now there's many real tangible signs of deep economic problems. Youth unemployment, buildings not being finished, banks failing, .. It's probably even more telling that China's government is stopping reporting of relevant data. Not that they were super reliable to begin with.

China probably won't crash in the way USA's economy crash. But that's kind of the problem. A crash is essentially a rapid correction of the economy. China won't allow that. Which puts them on the path of serious long term stagnation.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#175

Post by worrycue »

contravert wrote: post #140
hurril wrote: post #95

Earlier quoted context omitted.

Moral hazard and inflation. If I know that I will be bailed out with a certain probability, then my actual cost of capital is much lower (since I am not expected to pay the entire volume of interest.) For instance: why not make the investors whole again instead by giving them the "printed money" instead of going through the middle-man of propping up these failed giants?

You definitely won't see anything like this in the US: https://www.businessinsider.com/china-tells-evergrande-found... Like in 2008, bankers made a killing selling toxic products and socialized all the losses when everything came crashing down.

Actually it's the US government that made a killing with TARP loans and acquisitions.

Bankers lost their shirts in the whole thing - having to pay interest on those TARP loans or had to sell their shares to the government to get capital to survive.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#176

Post by lotsofpulp »

dougmwne wrote: post #168
blackoil wrote: post #143

Earlier quoted context omitted.

China has a gross savings rate of 45-50%. Current gen has saved for their future.

Money is an abstract representation of the labor of others. If there’s no one to labor for you then your currency is just paper.

Currency might also just be bits on a server.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#177

Post by worrycue »

AnthonyMouse wrote: post #121
lmm wrote: post #78

Earlier quoted context omitted.

Who says those properties are worth their book value? This is how a crash happens these days - distressed asset holders forced into fire sales of the assets themselves, lowering asset values and putting more of the holders into distress.

They don't have to be worth book value to be worth more than the outstanding loan principal. This is also why it can make sense to pay the bank in real estate. The bank doesn't need to sell it immediately because they don't need to pay a mortgage so they can just sit on it and collect rental income until they can find a buyer. Another alternative is for the real estate trust to sell new shares into the market and use…

Evergrande has more debt than assets - including property - I believe. They can sell everything at book value and they will still owe money.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#178

Post by throwaway4good »

iancmceachern wrote: post #133
jsemrau wrote: post #132

Earlier quoted context omitted.

I see China in 2023 where Japan was in 1991. Real Estate is falling apart. But in the end, the are the workbench of the world. They have Billions of people that can potentially work. Some of them are well educated and highly industrious. Japan survived so will China.

Where can I read more about Japan's experience at that time?

"Princes of the Yen" - both a book and documentary - well worth watching:

https://www.youtube.com/watch?v=jsO0JYu_5WI

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#179

Post by worrycue »

globalise83 wrote: post #160
gman83 wrote: post #152

Earlier quoted context omitted.

In the 80s Americans were worried that Japan would leave them in the dust, yet they've had 30 years with almost no economic growth. Not exactly a great roadmap for China to follow. https://en.wikipedia.org/wiki/Lost_Decades

In 1980, Japan had a huge population boom in the 35-45 age range, of energetic people who had grown up during a golden age of technological and economic development. Then they were hit by a demographic timebomb... https://www.nippon.com/en/in-depth/a01001/ By 2060 Japanese children will be in the low single-digit millions, maybe 1/3 of the number when the experienced workers of the 80s were kids in the 1960s. There i…

China has the same demographic timebomb. China's peak labor was like in early 2010s I believe. Their birth rate has been declining the last few decades.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#180

Post by throwaway4good »

oblio wrote: post #172
throwaway4good wrote: post #82

Earlier quoted context omitted.

Who all got seriously smacked down when they got too independent (from the Vietnam war to the Plaza accord).

Yes, the famous Asian Vietnamese ally, the Soviet Union.

South Vietnam was a US ally; subject to US sponsored coups when they didn't behave and ultimately were abandonned when the cost of war got too high.
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