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Evergrande teeters on edge of default as $148M payment falls due

reuters.com

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Re: Evergrande teeters on edge of default as $148M payment falls due

#201

Post by JumpCrisscross »

puranjay wrote: post #195
JumpCrisscross wrote: post #92

Earlier quoted context omitted.

> I don't think anyone doubts that China is an economic superpower They are, but the foundation is rickety. Xi is a dictator. That increases the odds of catastrophic failure. Were an economic collapse to become protracted, it's not hard to imagine separatist movements and competing power sectors turning to violence as a political tool.

> Xi is a dictator. Countries that have never known democracy, or received democracy without ever truly fighting for it, don't really care much whether you're a dictator or not a dictator- that's all that they've known.

> Countries that have never known democracy, or received democracy without ever truly fighting for it, don't really care much whether you're a dictator or not a dictator- that's all that they've known

I'm not blaming anyone for the government model. Just staying that it comes with known risks, and one of those is economic depressions and power transitions becoming violent. The stakes are too high.

Re: Evergrande teeters on edge of default as $148M payment falls due

#202

Post by DebtDeflation »

Arnt wrote: post #186
PicassoCTs wrote: post #177

Earlier quoted context omitted.

So, the usual defaulting mechanism does not work. (Size of investment gives claim percentage, bank loans are fulfilled first). Instead, its a quite bizarr negotiation process- local investors first, then citizens (to prevent a riot) - then if anything is left, the international investors. If that is the full approach, then a massive retreat of investment out of china is to be expected.

That only happens after default, and default happens when a loan can't be repaid. Evergrande wasn't bankrupt yesterday, so the bankruptcy rules don't apply today. They may tomorrow, for the loans that weren't repaid today (or in the past).

Yeah, people seem to forget that "default" is a technical legal term meaning failure to fulfill a contractual obligation, in this case failure to make an interest payment on a bond by a specified date. If they didn't make the payment today, then they are in default. Bankruptcy is a more nebulous term and can refer to the filing, the court proceeding, or the final judgement. Being in default is a matter of fact and is not dependent on any of that.

Re: Evergrande teeters on edge of default as $148M payment falls due

#203

Post by quickthrower2 »

rwmj wrote: post #111
pezzana wrote: post #103

> Shares of developer Fantasia Holdings (1777.HK) plunged 50% on Wednesday after it said there was no guarantee it would be able to meet its other financial obligations following a missed payment of $205.7 million due on Oct. 4. Watch the US bond market closely. Today saw a sharp selloff on the 10-year maturity, a favorite "asset" of foreign governments and companies. When those organizations get into trouble, they s…

Is your theory that the US government will run out of dollars? How do you imagine that will happen - a paper shortage?

I take the post as the US dollar becoming more scarce but not running out.

If OP is right I don’t see the federal reserve acting to bail out China.

They might happen to do QE for another reason but not to help out other countries with their problems.

Re: Evergrande teeters on edge of default as $148M payment falls due

#204

Post by raesene9 »

DebtDeflation wrote: post #202
Arnt wrote: post #186

Earlier quoted context omitted.

That only happens after default, and default happens when a loan can't be repaid. Evergrande wasn't bankrupt yesterday, so the bankruptcy rules don't apply today. They may tomorrow, for the loans that weren't repaid today (or in the past).

Yeah, people seem to forget that "default" is a technical legal term meaning failure to fulfill a contractual obligation, in this case failure to make an interest payment on a bond by a specified date. If they didn't make the payment today, then they are in default. Bankruptcy is a more nebulous term and can refer to the filing, the court proceeding, or the final judgement. Being in default is a matter of fact and is…

The "interesting" piece with this default is whether it triggers further cross-defaults.

A couple of articles I read suggested that if Evergrande defaults on one bond it can trigger instant defaults on others.

Re: Evergrande teeters on edge of default as $148M payment falls due

#205

Post by lamontcg »

raesene9 wrote: post #197
AlexCoventry wrote: post #194

Earlier quoted context omitted.

Why do you believe that?

So AFAIK Tether has ~$30b of commercial paper ( https://tether.to/wp-content/uploads/2021/08/tether_assuranc... ) which would make it one of the larger commercial paper operators in the US market if it operated there. From what I've read, other paricipants in the US market have stated they don't see Tether partipating there, to that kind of volume. Combine that with the fact that, until recently, China was a huge mar…

I don't understand why anyone believes Tether when they say they own $30b of commercial paper. The fact that nobody in any of the commercial paper markets know who they are suggests that Tether is once again at least being misleading if not lying.

Re: Evergrande teeters on edge of default as $148M payment falls due

#207

Post by boringg »

JumpCrisscross wrote: post #155
whimsicalism wrote: post #108

Earlier quoted context omitted.

People have been talking about the "rickety foundation" of China for decades. I'm sure when they have an economic downturn sometime in the next two decades, those people will all come out to crow about how they had been right all along. To me, they seem to be building on top of a more modern infrastructure base and do not have the super-prevalent NIMBY problems that exist in the West.

> People have been talking about the "rickety foundation" of China for decades Economically, sure. (Those always struck me as sour grapes or a fundamental misunderstanding of how debt works in a centrally-planned economy.) Politically, however, the CCP had intraparty competition that avoided the sort of rot that felled the Soviets. It also kept the Party thinking long term. Hong Kong and Taiwan are good examples of X…

Agreed - the fundamental political structure is flawed. However we don't know how long it will take for that structure to break or change. Currently Xi is making some moves (with the historical resolution) to retain power indefinitely.

There are also economic problems in China that Evergrande has brought to the attention - the wild speculation in real estate that is concerning for the party to maintain control. As well with the tech crackdown recently. In broad brushes it points to some problems over there (manageable probably - but risks for control of the party).

Re: Evergrande teeters on edge of default as $148M payment falls due

#208

Post by thereddaikon »

smilekzs wrote: post #190
thereddaikon wrote: post #127

Earlier quoted context omitted.

Neither do you get one from China itself. Its hard to tell what is really going on when everyone has an agenda to warp reality.

FWIW, the quoted article is from Japan.

Oh yeah, I wasn't commenting on that article directly. Just adding that any discussion about matters on the ground in China will always get warped because every information broker has a strong incentive to push their agenda. CCP will always want to make things seem rosy and perfect. Western Media wants to make it seem bad because drama sells.

Re: Evergrande teeters on edge of default as $148M payment falls due

#209

Post by thereddaikon »

vkou wrote: post #156
thereddaikon wrote: post #117

There has been talk for years about China's wild construction programs, creating entire cities that nobody lives in. It was obviously unsustainable. Could it be finally falling apart?

China builds housing in advance of demand. In the United States, we fail to build housing even in the face of demand. There's pros and cons to either system, but so far, the demand has largely arrived. The ghost cities of 2010 are now bustling metropolises. The ghost cities of 2020... Are on track to become bustling metropolises. China has added ~500 million people to its cities over the past 50 years. 'Build in anti…

As long as you can make sure they don't rot before people move in. There are pros and cons to both approaches and I have personally seen the downsides to not building enough housing. We also allow far too much speculation on residential real estate in the US for my liking. People's livelihoods shouldn't be traded commodities.
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