Evergrande: The Beginning of China’s Economic Collapse?
Re: Evergrande: The Beginning of China’s Economic Collapse?
Suspended from trade on HKSE today
Re: Evergrande: The Beginning of China’s Economic Collapse?
Chinese "ghost towns" have long been featured in international media and found itself particularly in the spotlight following the drama surrounding Evergrande last autumn. Excessive property speculation will have major consequences for the Chinese economy. The banking system in China now equates to 350 percent of the country's GDP as opposed to in the United States, where it is 100 percent. The housing bubble in China is obvious.
In the UNITED States, property prices are between 4.5 to 7 times the average annual income. If you look at the well-developed cities in China, prices are now 30 times the average annual income.
This, together with a very low birth rate and a sharply declining population, will make property prices unsustainable in the long term. Already now, the Chinese own an average of 2.3 apartments each.
Real estate development currently accounts for a third of the Chinese economy, and a collapse will therefore greatly affect the already highly leveraged banks.
Credit rating giant Moody's is also seeing problems brewing in China, and has downgraded 91 Chinese property developers so far this year. That's up from 51 downgrades in the past 10 years combined, according to the trustee.
"The real estate developers in China are all going to be massacred," said Kyle Bass of Hayman Capital.
In recent days, there have been major riots around several of the country's largest banks, which also have less liquidity. Should there be a housing crash on top of this, it could quickly become ugly for the Chinese banks.
In the UNITED States, property prices are between 4.5 to 7 times the average annual income. If you look at the well-developed cities in China, prices are now 30 times the average annual income.
This, together with a very low birth rate and a sharply declining population, will make property prices unsustainable in the long term. Already now, the Chinese own an average of 2.3 apartments each.
Real estate development currently accounts for a third of the Chinese economy, and a collapse will therefore greatly affect the already highly leveraged banks.
Credit rating giant Moody's is also seeing problems brewing in China, and has downgraded 91 Chinese property developers so far this year. That's up from 51 downgrades in the past 10 years combined, according to the trustee.
"The real estate developers in China are all going to be massacred," said Kyle Bass of Hayman Capital.
In recent days, there have been major riots around several of the country's largest banks, which also have less liquidity. Should there be a housing crash on top of this, it could quickly become ugly for the Chinese banks.
Re: Evergrande: The Beginning of China’s Economic Collapse?
A year ago there was fear for the China Evergrande going bust. Since that a lot of interesting developments have occured. Being under goverment management at the moment things may seem normal for evergrande, however; Its rival, Country Garden Holdings are now in a woe of problems falling 30% at the stock exchange last week and now 18% down yesterday (monday). This is an historic low for the chinese real estate developers in form of growth.
This will spread, not only to the chinese real estate marked, but to all markeds where chinese real estate investors are involved.
Happy times?
This will spread, not only to the chinese real estate marked, but to all markeds where chinese real estate investors are involved.
Happy times?
Re: Evergrande: The Beginning of China’s Economic Collapse?
This may have the opposite effect as those in China with money to invest may start to look to alternative countries to invest their money - places like Cambodia, Canada, Australia etcTommie wrote: ↑Tue Aug 15, 2023 3:47 am A year ago there was fear for the China Evergrande going bust. Since that a lot of interesting developments have occured. Being under goverment management at the moment things may seem normal for evergrande, however; Its rival, Country Garden Holdings are now in a woe of problems falling 30% at the stock exchange last week and now 18% down yesterday (monday). This is an historic low for the chinese real estate developers in form of growth.
This will spread, not only to the chinese real estate marked, but to all markeds where chinese real estate investors are involved.
Happy times?
Re: Evergrande: The Beginning of China’s Economic Collapse?
For a straight forward analysis of the daily situation in China, I would recommend Tony at
https://www.youtube.com/@ChinaUpdate
I have been following him for a few years now and his daily reports cover all the important events as they unfold.
For the "why" I would suggest Peter Zeihan's China videos. Peter tends to cover more global subjects but his China videos are rather insightful.
https://www.youtube.com/@ChinaUpdate
I have been following him for a few years now and his daily reports cover all the important events as they unfold.
For the "why" I would suggest Peter Zeihan's China videos. Peter tends to cover more global subjects but his China videos are rather insightful.
- canucklhead
- Expatriate
- Posts: 1107
- Joined: Mon Oct 20, 2014 9:43 am
- Reputation: 439
Re: Evergrande: The Beginning of China’s Economic Collapse?
Evergrande bosses have been arrested in Shenzhen.
Re: Evergrande: The Beginning of China’s Economic Collapse?
China's housing market will continue to crash due to various factors that were not limited to Evergrande due to the way it rose to its giddying heights.
Chinese people do not have access to the same ways of investing money that we enjoy in the west. Thus the property market allowed many to reap huge rewards through speculation. Recent policy decisions aimed at rejuvenating the market have simply fallen flat and house prices are continuing to fall. And those figures are the official figures so expect the true numbers to be even worse.
Tied into all of this is the local government debt which is primarily in LGFV (Local Government Financing Vehicles) and it is these LGFV's that, historically, were paid by selling/leasing land rights to housing construction companies. Those sales have fallen off a cliff and so many local government bodies are going to go bankrupt. Well they wont actually go bankrupt as the central Gov. wont let them but the pain will be real and felt by those at the bottom.
To go back to the "speculation" that drove the boom. It explains the ghost cities... The houses were never meant to be lived in. They were bought as assets ... to be sold as the price of property rose. Now that rise is abating and no one is buying these partly built homes will never be finished and their value will drop to mere pennies on the dollar (or yuan, as it were).
Then there's the demographic shift that is starting to be felt. There is not enough people having babies as those living in cities don't have large families. If they have families at al! This is a ticking time bomb for China and will mean that since the country never got "rich" before it went to being a service based economy then it never will.
Slowly, but surely, as the world moves away from China and base their manufacturing elsewhere. In countries that won't steal their IP then China will become even more bellicose and belligerent on the world stage. The few friends China thinks it has in countries tied to its Belt & Road Initiative will start to move westwards as their citizens become disillusioned with their governments and those in power will follow the will of the people to stay in power. As almost all of these countries "friendly" towards China atm are about as corrupt as they can get. But, they are also the most unstable and staying in power is the only goal the elite in these country will be thinking of. And if that means dumping China in favor of a more western centric view then I believe that is the way they will go.
All in all, the Property sector in China is just 1 part, albeit a large part, of the current train wreck that we are witnessing in slow motion in China and before the dust settles lets hope Xi doesn't do anything stupid.
PS: if anyone knows anything about history then we know that countries that are in an existential crisis (see Russia/Ukraine right now) then I personally dont hold out much hope for how this will all end.
Chinese people do not have access to the same ways of investing money that we enjoy in the west. Thus the property market allowed many to reap huge rewards through speculation. Recent policy decisions aimed at rejuvenating the market have simply fallen flat and house prices are continuing to fall. And those figures are the official figures so expect the true numbers to be even worse.
Tied into all of this is the local government debt which is primarily in LGFV (Local Government Financing Vehicles) and it is these LGFV's that, historically, were paid by selling/leasing land rights to housing construction companies. Those sales have fallen off a cliff and so many local government bodies are going to go bankrupt. Well they wont actually go bankrupt as the central Gov. wont let them but the pain will be real and felt by those at the bottom.
To go back to the "speculation" that drove the boom. It explains the ghost cities... The houses were never meant to be lived in. They were bought as assets ... to be sold as the price of property rose. Now that rise is abating and no one is buying these partly built homes will never be finished and their value will drop to mere pennies on the dollar (or yuan, as it were).
Then there's the demographic shift that is starting to be felt. There is not enough people having babies as those living in cities don't have large families. If they have families at al! This is a ticking time bomb for China and will mean that since the country never got "rich" before it went to being a service based economy then it never will.
Slowly, but surely, as the world moves away from China and base their manufacturing elsewhere. In countries that won't steal their IP then China will become even more bellicose and belligerent on the world stage. The few friends China thinks it has in countries tied to its Belt & Road Initiative will start to move westwards as their citizens become disillusioned with their governments and those in power will follow the will of the people to stay in power. As almost all of these countries "friendly" towards China atm are about as corrupt as they can get. But, they are also the most unstable and staying in power is the only goal the elite in these country will be thinking of. And if that means dumping China in favor of a more western centric view then I believe that is the way they will go.
All in all, the Property sector in China is just 1 part, albeit a large part, of the current train wreck that we are witnessing in slow motion in China and before the dust settles lets hope Xi doesn't do anything stupid.
PS: if anyone knows anything about history then we know that countries that are in an existential crisis (see Russia/Ukraine right now) then I personally dont hold out much hope for how this will all end.
- newkidontheblock
- Expatriate
- Posts: 4468
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- Reputation: 1555
Re: Evergrande: The Beginning of China’s Economic Collapse?
In the long term, all will happen as you say.
Xi knows this, everyone does.
That’s why the promise of forced reunification with Taiwan.
War is predicted to happen around 2027 or sooner. After that things start turning against the communists.
AUKUS will start providing new submarines, bases in Japan, Philippines will be ready. F-35s will be deployed, the military ammunition production will be running full bore.
Xi knows this, everyone does.
That’s why the promise of forced reunification with Taiwan.
War is predicted to happen around 2027 or sooner. After that things start turning against the communists.
AUKUS will start providing new submarines, bases in Japan, Philippines will be ready. F-35s will be deployed, the military ammunition production will be running full bore.
Re: Evergrande: The Beginning of China’s Economic Collapse?
You cite no source for any of your statistics.Tommie wrote: ↑Thu Jul 14, 2022 7:15 pm ....The banking system in China now equates to 350 percent of the country's GDP as opposed to in the United States, where it is 100 percent. The housing bubble in China is obvious.
In the UNITED States, property prices are between 4.5 to 7 times the average annual income. If you look at the well-developed cities in China, prices are now 30 times the average annual income.
This, together with a very low birth rate and a sharply declining population, will make property prices unsustainable in the long term. Already now, the Chinese own an average of 2.3 apartments each.
Real estate development currently accounts for a third of the Chinese economy, and a collapse will therefore greatly affect the already highly leveraged banks.
Example all Chinese do not own more than one apartments each. 20% of them do....
https://www.ncbi.nlm.nih.gov/pmc/articl ... %2C%202020).
"Today China is a country of homeowners with more than 90% of households owning homes (87% in urban and 96% in rural China) (Clark, Huang, & Yi, 2019). At the same time, more than 20% Chinese households own multiple homes, higher than many developed nations (Huang et al., 2020)"
And,
"However, 'a decent home for all' remains a distant reality in China, owing to the multi-dimensional inequalities behind the overall high rate of homeownership (Huang & Li, 2014; Wang & Murie, 2000). Millions of urban poor, young adults, and rural-urban migrants continue to be denied basic housing, and homeownership remains an unachievable dream. Many have to live in boxy rooms in crumble shacks, low-rises in dusty suburban villages, and tiny dark dorms in bomb shelters and basements under glossy apartment buildings"
~+~+~+~+~+~+~+~+~+~+~+~+~+~+~+~+~+~
“There are terrible difficulties in the notion of probability, but we may ignore them at present.” - Bertrand Russell
“There are terrible difficulties in the notion of probability, but we may ignore them at present.” - Bertrand Russell
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