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Real estate giant China Evergrande will be liquidated

nytimes.com

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Re: Real estate giant China Evergrande will be liquidated

#311

Post by berserk1010 »

throwaway2037 wrote: post #306

This is a much more financially accurate article: https://www.ft.com/content/d7b61c43-be36-49da-894e-cac68fefb... > While Evergrande is listed in Hong Kong, almost all of its assets and the vast majority of its more than $300bn in liabilities are in China. > In theory, the ruling could pave the way for liquidators to attempt to seize control of some Evergrande assets in mainland China, since Hong Kong has a mutual re…

> Most of the unfinished buildings will be completed in 2-5 years.

Many things wrong with that statement. Chinese local governments are overloaded with debt - 12.6 TRILLION https://www.reuters.com/markets/asia/china-orders-local-gove.... National government has refused to supply local governments with more money, in fact it has limited some local governments to what they can build. Local Governments have zero incentives to add more inventory to an already bloated real estate supplies. A lot of these unfinished buildings were left unfinished for a number of years, is already left to ruin, and unsalvageable. Tofu dreg building qualities means it's easier to demolish these buildings.

Re: Real estate giant China Evergrande will be liquidated

#312

Post by berserk1010 »

blackoil wrote: post #298
dathinab wrote: post #257

Earlier quoted context omitted.

> If the default is changing in China too, their population is going to shrink no matter what. yes, that might actually be _the_ biggest incoming issue china has (through much much less because of housing prices). Basically by combining one child politics with various cultural and economic effects lead to a very strongly favor for having a boy over a girl. Combine that with natural reduction in birthrate due to reduc…

> start a war to kill many of their young and mid aged single men That would be stupid, one thing the regime is not. Easier is to allow immigration of brides from Vietnam, Laos and Cambodia. Also, they can simply promote mechanization of agriculture. Right now, ~20-30% population is in agriculture that can be reduced to 2-5%.

this regime, aka Xi Jing Ping's reign is pretty stupid. He has had failed projects after failed projects for 10 years now. Also, dictatorships don't care about unemployed young men, look at Putin, sending waves of unequipped untrained men to their death.

China already has human trafficking of women from Laos and Cambodia. Birth rate still dropping.

Re: Real estate giant China Evergrande will be liquidated

#313

Post by berserk1010 »

citrusybread wrote: post #310
dpflan wrote: post #276

Earlier quoted context omitted.

Very curious how these opportunities for housing were marketed to the masses? These ghost cities you describe, I can see how the new housing can be presented as a life-changing opportunity, with nice images/videos but the reality is...a ghost town, facade of a city.

China is still urbanizing rapidly. Just like GP said, it won't be a ghost city for long. It depends though on how long the investor can hold out, and whether or not the new city is doomed from the start. CCP planning is just different. TBD if it's doomed to fail like the Soviet Union, or if it will make it through a crisis like this. It's also hard to tell what will ultimately call a crisis; just thinking back to 200…

> China is still urbanizing rapidly.

Many things wrong with that statement. There is a reverse migration from cities back to countryside, since the wages in the city have fallen, jobs have disappeared, rent is still expensive, and it's harder to justify living in the city when you can only save a few hundred dollars a year from a job.

Thus, empty retail stores in major tier 1 cities. Empty apartments in Dongguan and Shenzhen. Small crowds at malls.

Re: Real estate giant China Evergrande will be liquidated

#314

Post by bilekas »

throwaway2037 wrote: post #306

This is a much more financially accurate article: https://www.ft.com/content/d7b61c43-be36-49da-894e-cac68fefb... > While Evergrande is listed in Hong Kong, almost all of its assets and the vast majority of its more than $300bn in liabilities are in China. > In theory, the ruling could pave the way for liquidators to attempt to seize control of some Evergrande assets in mainland China, since Hong Kong has a mutual re…

> Most of the unfinished buildings will be completed in 2-5 years.

If not fallen down by then. The Tofu Dredge of Evergrand won't age in anyway for even other developers to acquire for completion.

Re: Real estate giant China Evergrande will be liquidated

#315

Post by fspeech »

harpiaharpyja wrote: post #213
fspeech wrote: post #201

Earlier quoted context omitted.

In what sense did the rating agencies do a terrible job here? First B is a junk rating, not investment grade. Secondly if you get paid 7.9% for six years plus a market price of 30 cents on the dollar you get back more than 75 cents on the dollar, which would have been comparable to the performance of US 30 year Treasury issued around the same time. People do realize that if the principal is not paid back then whether…

Why would anyone put in a dollar to get 75 cents back?

Because there's no gain without risk? If it were riskless it would not have paid 5 percentage points higher than US Treasury.

Re: Real estate giant China Evergrande will be liquidated

#316

Post by NicoJuicy »

throwaway2037 wrote: post #306

This is a much more financially accurate article: https://www.ft.com/content/d7b61c43-be36-49da-894e-cac68fefb... > While Evergrande is listed in Hong Kong, almost all of its assets and the vast majority of its more than $300bn in liabilities are in China. > In theory, the ruling could pave the way for liquidators to attempt to seize control of some Evergrande assets in mainland China, since Hong Kong has a mutual re…

> China with directly or indirectly nationalise Evergrande. Most bondholders (especially foreigners) will be wiped out. Most of the unfinished buildings will be completed in 2-5 years.

I'm willing to take that bet!

My prediction, a bit different, not that much.

1) nationalized. Yes

2) foreigners will be wiped out. Yes.

3) Huge backlash and more foreign money will leave China

4) China will backtrack a bit to appease ( a bit, but not enough)

5) Most buildings won't be completed. China doesn't have the funds anymore to build property like x years ago. The elite already took out their money. Civilians lost their "investment" and won't buy real estate like they did in the past.

6) Property declines further. Others like Evergrande will fall.

7) property becomes "cheap" ( relatively)

8) population declines

9) property becomes even cheaper

... Etc

The thing I consider differently and shapes my narrative, is that it seems that China made a huge construction bet on population growth. And it seems that bet was wrong.

So they don't want to finish those buildings, since it would drive prices down quicker.

--- A lot of buildings were already abandoned and were never going to be build.

There's an elite group that can borrow money in China and they don't need much collateral for it. So they construct 25%, cash in and are gone. Perhaps this practice isn't common for Evergrande though.

But those buildings were abandoned because no one was willing to put in the 75% required to complete it ( which is a similar story, not the same though)

Source of this practice: a friend had to setup one of his client's division in China for a couple of weeks a couple of years ago.

Re: Real estate giant China Evergrande will be liquidated

#317

Post by badpun »

mrjin wrote: post #223
EZ-E wrote: post #205

Earlier quoted context omitted.

> In the long term, the bursting of China's property bubble is probably good news, affordable housing is in the interest of everybody except property developers. I unironically think a property bubble pop is a great way to defeat the demographic slump in the long term. That and the recent crackdown/reforms on private education makes me think the party is aware that property bubbles and education costs are a liability

I doubt that's going to help. The decades of property bubble has changed the mindset of the people. Just look at Japan, it's property bubble burst was decades ago, but till now, are there any signs of turnaround? Young people have enough trouble just to get a shelter and feed themselves, and now you want them to have kids which add more pressure onto what they are already struggling to coup with. How likely is that?

People live incomparably harder lives in Nigeria than in Japan, and yet they have plenty of children. It's about values, not circumstances.

Re: Real estate giant China Evergrande will be liquidated

#318

Post by bllguo »

pertymcpert wrote: post #211
doughnutstracks wrote: post #175

Earlier quoted context omitted.

[flagged]

All of what they said isn't very controversial. Which part did you disagree with so vehemently that you decided to stalk their profile?

if you're actually interested in reality, that it's not controversial to a western crowd predisposed to sinophobic sentiment is precisely what should be setting alarms off

Re: Real estate giant China Evergrande will be liquidated

#319

Post by badpun »

throw__away7391 wrote: post #275
thomasfl wrote: post #259

Just as serious is the problem of poor quality concrete used in many buildings in china. Due to corruption, many new buildings have been built of concrete made with normal beach sand. Sand with salt causes iron to corrode and the concrete becomes brittle. It is commonly known as tofu dreg. Lots of buildings have already collapsed. If the bubble burst, and the property market collapses, it will hopefully make houses m…

It is always crazy to me the ratio of damage done to benefit received by people committing crime and fraud. I don't know how much one could possibly pocket using such scheme, but I'm certain that compared to the destruction of the entire project it is not that high of a percent.

As a popular Polish libertarian politician (Janusz Korwin-Mikke) likes to say: "a government official will waste a billion to steal a million".

Re: Real estate giant China Evergrande will be liquidated

#320

Post by dathinab »

berserk1010 wrote: post #313
citrusybread wrote: post #310

Earlier quoted context omitted.

China is still urbanizing rapidly. Just like GP said, it won't be a ghost city for long. It depends though on how long the investor can hold out, and whether or not the new city is doomed from the start. CCP planning is just different. TBD if it's doomed to fail like the Soviet Union, or if it will make it through a crisis like this. It's also hard to tell what will ultimately call a crisis; just thinking back to 200…

> China is still urbanizing rapidly. Many things wrong with that statement. There is a reverse migration from cities back to countryside, since the wages in the city have fallen, jobs have disappeared, rent is still expensive, and it's harder to justify living in the city when you can only save a few hundred dollars a year from a job. Thus, empty retail stores in major tier 1 cities. Empty apartments in Dongguan and…

From what I heard that is a somewhat "recent" trend while most ghost city cases I heard of outdate that trend by month potential over a year.

I think a lot of people living in the west without ties to china haven't realized that there are many huge but sometimes subtle changes in China in the last view years.

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