Evergrande teeters on edge of default as $148M payment falls due • Hacker News Board

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

#71

Post by runako » Wed, Nov 10, 2021, 7:22 PM UTC

rp1 wrote: post #42

Specie33 wrote: post #26

Interesting about this is that Evergrande is defaulting only on foreign held debt. Not internal debt after a ccp mandate. If their economy continues its downturn then this precedent would hold for all debt. I would really watch personal funds and investments and insure they dont hold any chinese debt as an asset.

China has been waging economic warfare via equity markets for a while now. The U.S. hasn’t done anything to protect investors from billions in losses. Totally embarrassing.

I guess it's "warfare via equity markets" if you didn't exit the trade soon enough.

But what would you call it when American investors make boatloads of money investing in Chinese stocks? And should the US regulate away their ability to earn those returns?

Since US investors can also lose money when US companies default, should investors also be prevented from investing in those too?

Incidentally, this "protect investors" logic is the same reason for the accredited investor regulations that prevent the masses from investing in startups.

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

#72

Post by shmatt » Wed, Nov 10, 2021, 7:23 PM UTC

_xnmw wrote: post #65

xxpor wrote: post #44

Earlier quoted context omitted.

A) What do you propose the US do? B) Why should the US do anything? If your risk profile when dealing with Chinese companies doesn't include the risk that the CPC will change the rules of the game later to benefit the domestic economy, you're a sucker.

A) Fight back by limiting Chinese expansion with US financial influence. Sanctions, etc. B) The US should do something, because if they don't, China will continue to take advantage of US ineptness. States have powers which investors simply don't have.

US government ineptness? Or US citizen ineptness. It's not the government buying this debt

Now what, the government stops people from trying to make a quick buck on a high risk investments? We can start from stopping Americans from paying 7 figures for digital drawings of monkeys

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

#73

Post by nostromo » Wed, Nov 10, 2021, 7:23 PM UTC

JumpCrisscross wrote: post #23

bingohbangoh wrote: post #10

So is this still "the next Lehman brothers"? Or have we moved on to something else?

> is this still "the next Lehman brothers"? No, and it never was. With Lehman, the banks stopped lending to Lehman and then to everyone else. In China, Beijing can let Evergrande default while compelling lending to peripheral players. Thise players know this. The market knows this. That makes contagion risk de minimis . (For Western central banks, the analogous policy tool is “extraordinary measures,” i.e. committing…

> They’re wilfully deflating the bubble American policymakers ignored in ‘08.

The Fed was aware of the real estate bubble and tried to deflate it in 07-08. But it's hard to deflate a bubble gradually without triggering a catastrophic downturn.

The Fed played a huge role in triggering the recession. They intended to deflate the housing bubble, but didn't realize it would cause several banks to implode and risk the entire financial system.

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

#74

Post by boringg » Wed, Nov 10, 2021, 7:25 PM UTC

mpalczewski wrote: post #59

qnsi wrote: post #47

This is not even frontpage of ft, bloomberg etc. Bloomberg Europe TV station talks about Johnson & Johnson factory problems in China but not Evergrande. My reading from above pieces of information: it's not that important yet. Maybe they will pay late again as they did previously when they were late one day.

The news doesn't decide what to run based on importance but rather based on salience. As someone that is financially versed, even I have trouble grasping the why this is a big deal. Complicated things don't get run. Whereas J&J factory problems, that sounds like a covid thing and it's easy to see why that might be important.

People are concerned about this because of 2 reasons: (1) to see what the PRC does to contain the risk (it looks like they have contained the majority of the risk and forced the executives to pay from their own wealth [smart signaling]) (2) Broader narrative of concern around contagion effects from a Chinese real estate collapse and from a global media perspective its a great FUD similar to wall street financial collapse in the aughts on the surface but once you look deeper not similar at all. Theres always interest to see if a house of cards is about to fall. Also this sells newspaper / clickthrough ad dollars.

It's important to watch but the ripple effects on this look to be small and likely to be contained in China.

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

#75

Post by ChuckMcM » Wed, Nov 10, 2021, 7:25 PM UTC

Specie33 wrote: post #26

Interesting about this is that Evergrande is defaulting only on foreign held debt. Not internal debt after a ccp mandate. If their economy continues its downturn then this precedent would hold for all debt. I would really watch personal funds and investments and insure they dont hold any chinese debt as an asset.

Mark Levine had some good thoughts on this situation, and it really does seem to encapsulate the entire Chinese "free market" experiment in a single entity. I hope that market regulators all around the planet are paying attention to the challenges of trying to "control" market movements in order to promote an agenda (whether it is protecting pension funds or national prestige).

If you've got your "thumb on the scale" as the saying goes, there will always be forces that try to exploit that condition.

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

#76

Post by rp1 » Wed, Nov 10, 2021, 7:25 PM UTC

xxpor wrote: post #44

rp1 wrote: post #42

Earlier quoted context omitted.

China has been waging economic warfare via equity markets for a while now. The U.S. hasn’t done anything to protect investors from billions in losses. Totally embarrassing.

A) What do you propose the US do? B) Why should the US do anything? If your risk profile when dealing with Chinese companies doesn't include the risk that the CPC will change the rules of the game later to benefit the domestic economy, you're a sucker.

For A) the U.S. should delist all Chinese ADRs to start. There were literally billions of stock in completely fraudulent companies being sold on U.S. exchanges.

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

#77

Post by rp1 » Wed, Nov 10, 2021, 7:26 PM UTC

uoaei wrote: post #53

xxpor wrote: post #44

Earlier quoted context omitted.

A) What do you propose the US do? B) Why should the US do anything? If your risk profile when dealing with Chinese companies doesn't include the risk that the CPC will change the rules of the game later to benefit the domestic economy, you're a sucker.

The government should do everything* to protect me, the citizen. *Except the things that make me confused and angry, even if they benefit other citizens. Welcome to neoliberal hell.

Neoliberalism is an economic policy, it has nothing to do with liberal politics.

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

#78

Post by paulpauper » Wed, Nov 10, 2021, 7:27 PM UTC

Any top 10 billionaire could write them a check for the amount owed without even breaking a sweat and thus stave off of billions of dollars of systemic damage. It goes to show how bailouts, despite being maligned by the public, do work.

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

#79

Post by boringg » Wed, Nov 10, 2021, 7:27 PM UTC

01100011 wrote: post #33

mmastrac wrote: post #20

How much exposure does the Western world have to this? My guess would be "not much". It'll sting some emerging market investors, but I don't think you'll see a massive knock-on here.

Hasn't Ray Dalio been advocating investing in China for a couple of years now? His thesis is that the US is a world power on the decline and China will soon rise to take its place. I wonder how that worked out for him and his fund?

In the long run China has a lot of power here. This might be a correction in how they set up their economy but I don't think anyone doubts that China is an economic superpower.

The thing is investing in China a foreigner is a complete dice roll where you have no real power and no visibility into what you are investing in.

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

#80

Post by acomjean » Wed, Nov 10, 2021, 7:27 PM UTC

qnsi wrote: post #47

This is not even frontpage of ft, bloomberg etc. Bloomberg Europe TV station talks about Johnson & Johnson factory problems in China but not Evergrande. My reading from above pieces of information: it's not that important yet. Maybe they will pay late again as they did previously when they were late one day.

Its actually been on DW (german) news for a while. They spent an hour discussing it last week. It was in my feed often enough that I figured I should take a look after the 4th or 5th story..

But your right, it hasn't hit major media in any form.

https://www.youtube.com/watch?v=f5Qi4oB1W_8