Evergrande: The Beginning of China’s Economic Collapse?

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LoukBongThom
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by LoukBongThom »

nemo wrote: Thu Nov 18, 2021 3:01 pm https://www.smh.com.au/business/the-eco ... 599dj.html
China’s economy is slowing to the lows seen way back in 1990 – a price President Xi Jinping seems willing to pay to reduce its dependence on the property sector.

Beijing’s squeeze on the real estate sector will linger into next year and beyond, a development many hadn’t seen coming that has now prompted banks like Goldman Sachs, Nomura Holdings and Barclays to cut their growth forecasts in 2022 to below 5 per cent. Bar last year’s pandemic year, that would be the weakest in more than three decades.
Latest China GDP slow down has a lot more to do besides the property sector troubles
- Tech sector crackdowns
- Private tutoring and private school crackdown
- Nationwide power blackout (some medias attributed this to Australian coal import ban)
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by SternAAlbifrons »

Well, Thank the Stars, at least Australia's banks are not panicking like you lot. Or partying.
Here is Westpac's latest advice.

The plight of Evergrande, one of China’s biggest property developers, remains front of mind for investors globally.

With the equivalent of $US300 billion in liabilities and an opaque financing structure, it is an immensely uncertain situation that will surely see some market participants incur significant losses. Fears that smaller developers are running into their own troubles has only increased the drama.

However, for China’s ‘real’ economy, even a breakup of Evergrande will prove an insignificant, temporary negative – minimising the risk of a flow-on hit to Australia’s economic prospects.

https://www.westpac.com.au/news/in-dept ... ereffects/
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by IraHayes »

SternAAlbifrons wrote: Mon Nov 22, 2021 2:56 am Well, Thank the Stars, at least Australia's banks are not panicking like you lot. Or partying.
Here is Westpac's latest advice.

The plight of Evergrande, one of China’s biggest property developers, remains front of mind for investors globally.

With the equivalent of $US300 billion in liabilities and an opaque financing structure, it is an immensely uncertain situation that will surely see some market participants incur significant losses. Fears that smaller developers are running into their own troubles has only increased the drama.

However, for China’s ‘real’ economy, even a breakup of Evergrande will prove an insignificant, temporary negative – minimising the risk of a flow-on hit to Australia’s economic prospects.

https://www.westpac.com.au/news/in-dept ... ereffects/
Is this like when a PM says “He/She is a trusted and valued member of my cabinet” and then the person resigns a week later?
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SternAAlbifrons
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by SternAAlbifrons »

No Ira. This is the BigBank hard core bottom line fully informed cool headed analysis of China's current economic situation - strengths, vulnerabilities and likely forward trajectory.
Including the implications of the current speculative property sector clean up.
Hence it is to be considered far more perceptive and accurate than any political (or jingoistic) statements about anything.

imo anyway
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by armchairlawyer »

Follow Michael Pettis and China Beige Book, both on Twitter, for good analysis on China.
Here's a summary of the main points:
1. China's financial system is closed off to the rest of the world, so they are able to control their markets unlike any other country. Therefore there is no chance that Evergrande or anything else will cause major disruption to Chinese markets.
2.The property sector (plus infrastructure construction) has been used for at least 10 years to provide a boost to GDP in years when "real" growth has been deemed inadequate by the powers that be. China's GDP would be around 3% without that assistance boosting it to 6%+. Such spending was a major plus to China when it needed that infrastructure (up to 2008) but now it does not and it is causing problems.
3. That has led to the famous ghost cities, airports etc. It has also caused wealth inequality to get worse, and has caused massive levels of debt in both the public and private sector.
4. The government did not let property prices fall so Chinese people now put most of their investment money into new condos. And Chinese property prices are much higher than US, UK, Europe etc. Even so, there are 65 million empty apartments in China. Enough to house the entire population of France.
5. The developers funded themselves through off plan sales because escrow accounts are not required for off plan sales. They are getting less of this now plus sales are declining.
6. The government has decided that using property and infrastructure to boost GDP has to stop becuase it is stoking up too many problems for the future (high debt and inequality).
7. So the government wishes to engineer a slow down in construction and it is also adopting various policies that will promote wealth equality. But they will ensure that the property sector has a well managed decline. No price crashes. Some developers may go under. Most will scale back their operations. The (hugely wealthy) Evergrande boss had to sell some personal stuff, HK villa, private plane etc.
8. Meanwhile the Chinese economy has experienced declining rates of growth for 3 quarters and now has rising inflation. That is not good. However, by the second quater of 2022, their growth rate should start to accelerate again but not to previous rip-roaring levels. So things will be tough for a few months before improving generally. (BTW, the US is the opposite - rising rates of growth now but swining to negative in 2Q 2022).
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by SternAAlbifrons »

Yes. China's growth has fallen to levels we can only dream of.

And there is not one authoritative projection i can find that does not put their GDP growth lower than a multiple of around X 2.5 that of OECD/Eu/G20/USA/Au or anyone.
Short, medium or long term.

So no need to panic about that either. For now.
- but don't worry, something will come along - it always does.
I don't think China is immune to the worst ills of the world.

(but it's not Evergrande thats going to be the body blow. that's for sure)
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Re: Evergrande: The Beginning of China’s Economic Collapse?

Post by SternAAlbifrons »

China Evergrande Gets $4.6 Billion Lifeline From State Firms
https://www.bloombergquint.com/china/ch ... tate-firms

"Chinas ability to contain such stresses are second to none" (or similar) from a biz news link posted here last week.
This is exactly the kind of thing it was referring to.

It does not mean that Evergrande will not eventually go to the wall.
It means that China is not about to collapse right in front of our eyes tomorrow morning like some of our more excitable commentators have been suggesting.

You can just wish an enemy away, sure - just like you can overestimate your own military capability.
But that has not gotten us very far in the past 50 years. 'Time to get real if we are going to have half a chance against China.
Hardcore realistic, not dreaming..

PS. The 3 Gorges dam is not going to collapse either. (ref, a few pages back) These type of cracks are normal.
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