Evergrande: The Beginning of China’s Economic Collapse?

sigmoid · Post by **sigmoid** » Sat Sep 11, 2021 7:34 pm

Anchor Moy wrote: ↑Sat Sep 11, 2021 6:10 pm
The Judge wrote: ↑Sat Sep 11, 2021 5:56 pm One can only hope

Be careful what you wish for. The economy is global these days.
And when a country is having serious economic problems, there's nothing like a good war to stimulate the economy and to encourage nationalist sentiments among the population.

Yes, a collapse of China's economy will certainly affect the ASEAN Economic Community (AEC), which is being seriously wracked by the virus thing, and to some degree the rest of world.

Anyway, it seems that both the global economic collapse and WWIII, at least in terms of the manoeuvering, have already started.

Here's a recent headline, for example:

First US Navy carrier strike group to deploy with F-35C stealth fighters sails into the South China Sea

https://news.yahoo.com/first-us-navy-ca ... 58286.html

armchairlawyer · Post by **armchairlawyer** » Sat Sep 11, 2021 8:55 pm

Back to Evergrande, here is a composition of Prof Michael Pettis' tweets:

As a regulator this is probably what I would be most worried about: "Much of the cash that Evergrande has been able to drum up has come from presold apartments that are not yet completed. Evergrande has nearly 800 projects across China that are...unfinished, and as many as 1.2 million people who are still waiting to move into their new homes." If buyers who pre-purchased Evergrande apartments lose their deposits, not only will they represent a social and political problem for local authorities, but the impact...would probably cause a collapse in the pre-sale market, and this has become one of the most important (and cheapest) sources of financing for property developers.

techietraveller84 · Post by **techietraveller84** » Tue Sep 14, 2021 1:45 am

Over the years, I've seen headline after headline of China's imminent collapse, and it hasn't happened. Instead, it's grown, strengthened, and pretty much broken through everyone's predictions. With recent political developments in China, and large company after large company getting virtually shut down by the government, it seems that the country's leaders aren't too worried about corporate collapse. I'm not sure what protective systems they have in place to avoid an economic catastrophe, but if recent history proves a predictor of the future, China should come out of this just fine, if not stronger.

Doc67 · Post by **Doc67** » Tue Sep 14, 2021 11:43 am

Kammekor wrote: ↑Sat Sep 11, 2021 7:27 pm
Tommie wrote: ↑Sat Sep 11, 2021 7:10 pm Combine that with sea freigt rates that are 5x higher than normal, which in its self already has prices of goods produced in China going up to record levels. Importers from Europe and the US are currently looking elswhere for products due to this.

I don't think the (temporary) high price of container transport is the cause of that. The very fine tuned supply chains with 'just in time deliveries' which has been used by many since the start of this century has been flawed for over a year now, so loads of companies are buying extra now to have some extra stock because of disrupted global chains - thus disrupting these chains even more, driving prices of products and transport up.

...and everyone is also trying to stock-up for Christmas early, for just that reason.

Is it too early to mention the "c" word?

Bitte_Kein_Lexus · Post by **Bitte_Kein_Lexus** » Tue Sep 14, 2021 12:09 pm

sigmoid wrote:
Anchor Moy wrote: ↑Sat Sep 11, 2021 6:10 pm
The Judge wrote: ↑Sat Sep 11, 2021 5:56 pm One can only hope

Be careful what you wish for. The economy is global these days.
And when a country is having serious economic problems, there's nothing like a good war to stimulate the economy and to encourage nationalist sentiments among the population.
Yes, a collapse of China's economy will certainly affect the ASEAN Economic Community (AEC), which is being seriously wracked by the virus thing, and to some degree the rest of world.

Anyway, it seems that both the global economic collapse and WWIII, at least in terms of the manoeuvering, have already started.

Here's a recent headline, for example:

First US Navy carrier strike group to deploy with F-35C stealth fighters sails into the South China Sea

https://news.yahoo.com/first-us-navy-ca ... 58286.html

This has been going on for decades. Nothing new or alarming.

Apollo91881 · Post by **Apollo91881** » Tue Sep 14, 2021 1:24 pm

Doc67 wrote: ↑Tue Sep 14, 2021 11:43 am
Kammekor wrote: ↑Sat Sep 11, 2021 7:27 pm
Tommie wrote: ↑Sat Sep 11, 2021 7:10 pm Combine that with sea freigt rates that are 5x higher than normal, which in its self already has prices of goods produced in China going up to record levels. Importers from Europe and the US are currently looking elswhere for products due to this.

I don't think the (temporary) high price of container transport is the cause of that. The very fine tuned supply chains with 'just in time deliveries' which has been used by many since the start of this century has been flawed for over a year now, so loads of companies are buying extra now to have some extra stock because of disrupted global chains - thus disrupting these chains even more, driving prices of products and transport up.
...and everyone is also trying to stock-up for Christmas early, for just that reason.

Is it too early to mention the "c" word?

As someone who deals with this regularly, the freight prices are driving up prices in the US. That is getting passed onto consumers. It has been climbing for over almost a year.

Jerry Atrick · Post by **Jerry Atrick** » Tue Sep 14, 2021 5:17 pm

This is certainly not the beginning of any chinese state collapse. It's more like a war among competing factions to see who will blink first. EVERRE doesn't actually have a profitability crisis; it has a liquidity crisis; one can see on their balance sheet that they are fully collateralized with land and they haven't sold it due to competitors waiting to pounce

The reason they have this liquidity crisis is because of the influence of the three red lines campaign for delevering. Asking a giant company like this to delever quickly is almost impossible

Even if they do go into liquidation the value of the USD and HKD bonds it has outstanding is only around 21 Billion & and they trade at approx 0.25c to the USD so even in event of a full default the hit to investors would be less than 5.2 Billion

They are pretty much junk bonds held by hugely wealthy individuals anyhow - so would make a splash in China for sure but no real world ripple outside it and the offshore bonds already took the 75% or so mark down to accommodate losses

Kammekor · Post by **Kammekor** » Tue Sep 14, 2021 7:18 pm

Jerry Atrick wrote: ↑Tue Sep 14, 2021 5:17 pm
Even if they do go into liquidation the value of the USD and HKD bonds it has outstanding is only around 21 Billion & and they trade at approx 0.25c to the USD so even in event of a full default the hit to investors would be less than 5.2 Billion

I think your 5.2 billion should be 15.6 billion because at 25c to the dollar 75% of value was lost, not 25%.

If they default the value will drop even more, to just a few cents, maybe less. AFAIK these bonds are subordinated bonds so the chance of regaining anything after a default are extremely small.

crob · Post by **crob** » Tue Sep 14, 2021 8:18 pm

i think its time to change hong kong economic reporting laws to reflect what the regime wants.

timmydownawell · Post by **timmydownawell** » Tue Sep 14, 2021 8:54 pm

Can they do Sihanoukville next?

Evergrande: The Beginning of China’s Economic Collapse?

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