China’s property giant Evergrande files for bankruptcy protection in Manhattan • Hacker News Board

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

#291

Post by brigadier132 » Fri, Aug 18, 2023, 1:07 PM UTC

wenyuanyu wrote: post #266

bradleyjg wrote: post #230

Earlier quoted context omitted.

To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence..…

To me, the use of exit bans and coercive measures to bring fugitives back to China does not seem unreasonable under specific circumstances. While employing these tactics for political reasons would be problematic, they serve as some of the only tools available to the Chinese government to act against corruption and embezzlement. These measures provide leverage and serve as a deterrent to prevent corrupt officials fro…

So punishing innocent people is justified?

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

#292

Post by bradleyjg » Fri, Aug 18, 2023, 1:08 PM UTC

nradov wrote: post #284

wenyuanyu wrote: post #266

Earlier quoted context omitted.

To me, the use of exit bans and coercive measures to bring fugitives back to China does not seem unreasonable under specific circumstances. While employing these tactics for political reasons would be problematic, they serve as some of the only tools available to the Chinese government to act against corruption and embezzlement. These measures provide leverage and serve as a deterrent to prevent corrupt officials fro…

The other option that China has at its disposal is to introduce multiparty democracy with the rule of law and guarantees of civil rights. Most other countries would then be happy to extradite suspects to China.

If someone had the means and opportunity to make a clean break with PRC but instead choose to not only stay but work extensively and successfully, at least for a while, with the government—-well that guy seems like part of the problem.

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

#293

Post by jibe » Fri, Aug 18, 2023, 1:11 PM UTC

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.

List of banks acquired or bankrupted during the Great Recession

https://en.m.wikipedia.org/wiki/List_of_banks_acquired_or_ba...

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

#294

Post by onlyrealcuzzo » Fri, Aug 18, 2023, 1:11 PM UTC

nradov wrote: post #273

onlyrealcuzzo wrote: post #236

Earlier quoted context omitted.

> How can a declining population selling mostly commoditized goods support ever increasing property prices It's pretty simple. If you believed China was going to keep growing at 10% per year indefinitely - then the property prices were a bargain. I think you needed to be mathematically challenged to believe that, but a lot of people did, or at least thought everyone else just assumed it would happen and they could ge…

It was more like there was no alternative. Capital controls prevent regular Chinese investors (those without special Party connections) from taking their money out of the country. The domestic stock market is a joke. Banks pay low interest rates. So, the only thing they can do with their money is speculate in residential real estate.

The stock market in China is likely to look better than the property market when it implodes on leverage, and definitely bonds and savings.

People didn't want to miss out. That's it.

You're not going to buy a house on 3:1 leverage if you think it's overpriced by 30% just because you think the stock market is overpriced by 50%. You'd just keep your cash in savings.

The problem is - they believed it would keep going up - because it had been for almost everyone's entire adult life.

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

#295

Post by seanmcdirmid » Fri, Aug 18, 2023, 1:12 PM UTC

wenyuanyu wrote: post #266

bradleyjg wrote: post #230

Earlier quoted context omitted.

To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence..…

To me, the use of exit bans and coercive measures to bring fugitives back to China does not seem unreasonable under specific circumstances. While employing these tactics for political reasons would be problematic, they serve as some of the only tools available to the Chinese government to act against corruption and embezzlement. These measures provide leverage and serve as a deterrent to prevent corrupt officials fro…

Transparency would help out a lot. Allowing the press to actually investigate and report on things, and not trying to suppress information that allows corruption to thrive. Also, there are no power branch checks, the judicial branch is at the mercy of the official branch, and the legislative branch is just to rubber-stamp things. Unless you piss off an official more powerful than you, you can basically do whatever you want.

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

#296

Post by itsoktocry » Fri, Aug 18, 2023, 1:14 PM UTC

wenyuanyu wrote: post #220

The Chinese government's approach to dealing with failing real-estate companies, including Evergrande, is distinct from typical Western bailouts. In China, the strategy often involves allowing such companies to default in a controlled manner. Given that the major lenders and banks are state-owned , this essentially means that the government bears the loss through these institutions (what else can happen anyway??) . A…

>this essentially means that the government bears the loss through these institutions (what else can happen anyway??)

How is this different than the US? Where the treasury and/or Fed step in to oversee acquisitions and provide loan guarantees?

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

#297

Post by _fat_santa » Fri, Aug 18, 2023, 1:15 PM UTC

nologic01 wrote: post #228

Fears about the Chinese real estate sector have been around for at least a decade. The amount of stuff that has been erected is just mind-boggling and unprecedented in human history. You cannot "rightsize" an exponential process. But a spectacular bust to obliterate all speculative busts is not the deterministic outcome in this instance. The intermingling or state finances, state supported banks etc. is also a major…

This video[1] was posted about 6 years ago but I think were starting to see the effects of the bubble they were talking about. In the video they said most new apartments were bought as investments as real estate is seen as one of the only "safe" investments in China. It would be one thing if most of these buildings were occupied by residents and only a percentage was investment properties but it sounds like there were many buildings in these new cities where practically every unit was an "investment property". The problem is these "investment properties" stop being investments when everyone has one.

[1]: https://www.youtube.com/watch?v=BcyYyyaPz84

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

#298

Post by seanmcdirmid » Fri, Aug 18, 2023, 1:15 PM UTC

tigeroil wrote: post #243

nologic01 wrote: post #228

Fears about the Chinese real estate sector have been around for at least a decade. The amount of stuff that has been erected is just mind-boggling and unprecedented in human history. You cannot "rightsize" an exponential process. But a spectacular bust to obliterate all speculative busts is not the deterministic outcome in this instance. The intermingling or state finances, state supported banks etc. is also a major…

Anecdotal but I will say the shift to WFH isn't really a thing in China from what I've seen.

Ya, housing is too small in general for that. If you work from home, it’s probably because you are drop shipping or doing your own business, but the office is needed. I never worked from home when working for Microsoft Beijing, although I would work from a cafe sometimes. My housing simply wasn’t good enough for WFH.

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

#299

Post by jjoonathan » Fri, Aug 18, 2023, 1:16 PM UTC

benterix wrote: post #183

NhanH wrote: post #173

Earlier quoted context omitted.

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.

The first time it happens, you can call it a mistake. But second, third? Is int't it obvious that, seeing this trend, you should calculate the risk and factor in the land cost increase when pricing your offer?

Try doing that and someone who does take the leverage will simply outbid you for the land.

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

#300

Post by jjoonathan » Fri, Aug 18, 2023, 1:19 PM UTC

NhanH wrote: post #247

benterix wrote: post #183

Earlier quoted context omitted.

The first time it happens, you can call it a mistake. But second, third? Is int't it obvious that, seeing this trend, you should calculate the risk and factor in the land cost increase when pricing your offer?

It's a different issue than what you are imaging. It's not that they sell the property for less than the relevant land cost, it's that the increase is too steep that they can't buy and build the next one without pre-selling the lot, the company just doesn't have enough cash.

The magnitude of land speculation profits is not dictated by physics. If companies weren't able to pay what they did, the speculators (local governments in this case?) would live with less.

Developers compete with each other, so they will always take as much leverage as allowed, but the rules are adjustable by lenders. Lenders compete too, but they usually wind up backed by a central bank or other political entity, and that's the point at which changes can actually be made. Of course, there is no guarantee these changes won't create problems (Three Red Lines were a decade too late) but they can be made.