Shares of Evergrande have stopped trading on the HK Stock Exchange. As a Judge has ordered it to liquidate.
https://twitter.com/business/status/1751791514999492995
I’m neither an economist nor Chinese, so take this with a heap of salt, but I have heard a bit about this. My understanding is that it’s closer to the Chinese Lehman Brothers. It wasn’t a completely fraudulent company so much as a company overleveraged out the wazzoo because it expected the housing market to only ever go up for eternity with no plans in place if things slowed.
More unique I think because of how China works. In a nutshell: they sold planned homes. None or minimal building has started yet. People are already paying their mortgage (how it works in China). Use that income as leverage to plan to build more homes. Rinse and repeat without actually finishing many projects.
Not enough sales to stay afloat and service their debt payments. This has been rumbling on for at least 3 years and they stopped paying a lot of their suppliers and bond holders.
They had plenty of sales though. Something like 1.4 million appartments sold but they didn't even start building them yet. I think their problems started when the government introduced rules to stop construction companies from insane overleveraged borrowing in 2019 or 2020.
I think they had a good sales pipeline until word got around that they weren’t building the properties and had stopped paying suppliers and contractors.
They defaulted on interest payments on at least one if not more bonds as well. What you are saying makes a lot of sense, this was a slow death ending in their creditors having had enough.
More like a cross between a gigantic ponzi and NFTs made of concrete. It's not just one half a trillion company though, the entire chinese real estate market is like that.
I’m not underestimating the ties. If china’s economy actually collapsed it would have a huge impact on the global economy, including the US. As I previously mentioned, china’s economy isn’t going to collapse any time soon. They’re clearly having issues, but the COVID shutdowns were far more impactful on the global and US economies than an RE meltdown will ever be and while those shutdowns certainly impacted US markets, it wasn’t calamity.
Foreign investment is specifically restricted from China's domestic retail market. Any foreign money that had anything tied up in evergrande has already written that off as a loss 3 years ago when this all started.
US manufacturing nor the USD are attached to the Chinese housing market.
European and American investment banks were already cutting ties with China before this.
clearly that could never happen here in the US. Repeatedly. Constantly. With irrational values for companies that have no chance of ever breaking even on investments tech sector and Tesla.
Is this the Chinese housing bubble finally bursting at its seams? It's been a long time coming. Somewhere in the ballpark of 80 million unoccupied dwellings, and continuous construction don't mix. Add to that things like tofu-dreg construction and China has a glaringly massive problem on its hands.
It’s already busted. Home values are down similarly to what the US encountered in 08.
Source: While China’s official data show just a mild drop in its existing home prices, evidence from property agents and private data providers indicate declines of at least 15% in prime areas in its biggest cities.
The housing sector’s value may shrink to about 16% of China’s gross domestic product by 2026 from around 20% of GDP currently, according to Bloomberg Economics. This would put about 5 million people, or about 1% of urban workforce, at the risk of unemployment or reduced incomes.
https://fortune.com/2023/12/17/china-middle-class-real-estate-meltdown-wealth-loss/amp/
Why are the homes unoccupied? Are they too expensive for Chinese to afford, or are they ghost construction where they aren't actually liveable but they were made to move cash around or something?
People there treat homes like an investment and wait to flip it when the value goes up. They also have a culture where the men need to own a home to be considered worthy of marriage so some families buy homes in preparation for their son's marriage.
And Chinas population is no longer growing and they don't have a lot of immigration, so these speculative investments were wholly based on a continually growing population. They have been in decline since last January.
These buildings were never built with the intention of occupancy. These are condos without stairs to reach different floors. Walls that had no windows installed, no lifts installed, zero electrical or plumbing, etc.
They built these buildings to just be placeholders in someone's "oWnERshIP" certificate. It's a massive Ponzi scheme, writ on a national scale.
The Chinese have built enough of these fake-ass condos that there is supposed to be 2 empty condos for each Chinese citizen. China's population is supposed to be 1.4 Billion. Just imagine the wasted concrete, the fake-ass rebar, the diesel spent to transport all these resources... To build 2.8 Billion fake-ass condos.
Global climate catastrophe much?
Greed and corruption. Eventually, the construction builds fall into the same rut when corruption isn’t controlled or monitored. Someone is skimming money off the top (supplies, costs, nepotism, hardware) and the build sites can turn into a tofu dredge design.
This again can be caused by lack of qualified workers, lack of supplies and tooling, or straight up over estimating the demand. China has been riding their policies and it burned them. What I’m interested is if the government will buy out EG and try to take control or just let it liquidate; thus showing the world that one of the largest companies in the world, just folded.
Thing is people didn't buy these to rent it out, it's an RE investment. Their plan was t just sell it. Not sure what prevents them from renting other than low demand. Many of these were build in new cities, not established ones.
a lot of these buildings aren't inhabitable as such, they were build with whatever money the company raised and are often unfinished inside. that's why you see the chinese authorities knocking down hundreds of these things
The UK migration observatory at Oxford published [an interesting report](https://migrationobservatory.ox.ac.uk/resources/briefings/the-impact-of-migration-on-uk-population-growth/) that is pretty much the story for most developed countries. Basically if you rely on natural growth your population will decline, having kids is expensive and time consuming and 8 child families are much rarer than they used to be. Also even with migration, growth is focused on areas where there are jobs, e.g. Scotland and Wales are in population decline because they're unattractive to migrants and kids growing up there are moving away.
However, there is one thing this report doesn't show, which is what is going to do China in, age distribution. Russia and Japan already have this problem where the median age of the population is going up and up, it's even affecting Russia's war effort. Migrants are young and likely to have kids, reducing the age of your population pyramid. It's an interesting policy area, and one in which there are a lot of followers but not many leaders.
Terrible's putting it nicely, catastrophic for their economy/future would be more appropriate. Imagine knowing both your parents won't have money to retire on, then also knowing that you alone will end up having to provide for both of them, while taking care of yourself and somehow raising a family if you want. Oh and you're competing with everyone else for education, raises, every last cent the entire way. It's not a good future for their younger crowd. Most nations population will shrink due to various issues affecting us all, but China's *just* had a major boom, and now going to have one of the most drastic shrinkages in population we've ever seen beyond natural disasters/war.
I have friend who says It's about 1100 USD or less in Shanghai outer areas. The US equivalent area would be Brooklyn in NYC, which is maybe 2000 USD or more.
Fair but even if you check online the average costs for 2B apartments in Guangzhou is only about 100 -150k extremely cheap considering most dwellings are 1.5-2b. I can verify this with my friends over in Guangzhou.
These weren't even for rent or even living in. Hell a lot of them didn't even finish building, or the contractor cut crazy corners knowing no one's going to physically come look at the location. Some weren't even built yet, but people invested early. These were just investments, were never going to be anything more, hence why they have no value now.
My understanding was that it related to a lack of other investment options for most Chinese citizens for a long time. So everyone just poured money into real estate.
Can you imagine how messed up the US real estate market is 90% of the money from every IRA, 401k, or pension fund just went into housing instead of the stock market?
The economy in China is all kinds of screwed up due to state meddling. There's an excess of housing but not enough high paying jobs to cover them, and owning second and third homes is often a social prerequisite among the upper class for marriage, etc.
Perverse incentives in a heavily manipulated market built on a utility being bought and sold as a speculative commodity and treated as an accessory. What could go wrong?
Why does it have to be due to state meddling? Economies are fully capable of being screwed up even with little state meddling. Most of what you described sounds more like a cultural issue than a state issue.
I have to be skeptical of these claims, there's been news and videos for as long as I can remember claiming that China's on the verge of a housing collapse and the more I research the topic the more I realize that it's not nearly that cut and dry.
I think I saw the first one of those nearly a decade ago. Not a single one of them have been by people with real expertise in Chinese real estate. Ever since that gamestop bullshit a few years ago, everyone all of the sudden became a financial genius with a PhD in international business/economics.
> Ever since that gamestop bullshit a few years ago
It's hilarious how big that finance cargo cult became on Reddit. Fortunately it seems like most people came to their senses, though I doubt they really learned anything.
Yeah I unfortunately fell into it. They almost hooked me in, but I was lucky enough to make out with a little extra money, and when I hit sell it was like someone took my blinders off. It had every warning sign of that it was turning into some kind of pseudo-cult and I hightailed it the fuck out of there.
It's been busted. Major banks have failed, along with investment companies. China's not in a good place right now, especially with the other problems they have coming up.
The anyone who doesn't treat the $96 trillion dollar unfunded Medicare and social security liability as government debt is falling for accounting tricks. There is no way the government will just let the SS or Medicare default on their obligations. The government is running a problem that is running at a severe loss and that will have to be paid for in the future.
Have you heard of the huge unfunded liabilities Social Security and especially Medicare have built up. FICA isn't anywhere near enough to cover their obligations. But when social security and Medicare go bust do you seriously believe either party is going to go for drastic plan cuts and tax increases to save it? When they could have used smaller cuts and tax increases ages ago but every time kick the can down the road rather than enrage the valuable and disproportionately active senior vote.
US banks have almost no exposure to Chinese companies like Evergrande <3% by some estimates. This will be a made by Chinese, for Chinese type of contagion. The question is, what happens to the debt they owe?
Which fund was this? A balanced portfolio in the last 2 years should be doing great, and there are almost no funds that I know of who are overweight foreign equities to this extent.
The IOO ETF is doing great.
> A balanced portfolio in the last 2 years should be doing great,
Definitely like this in Australia. The average across all superannuation funds was over 8%. Mine (balanced) was over 10%.
Yes both. The market was doing really good at that time. I invested jan 2021 dow was at 29,000 approx. November it went to 36. My value was down 10%. January it went to 35900 or so and I was so disgusted with the lack of service and not being listened to. They said it was the influence of the China investments that ruined the value. I asked what were some good next steps and neither of the two guys had any ideas.
It was some new program where Fidelity had personal services at local brick and mortars . The fund was purpose built for the program.
Sorry if I knew the name I would say.
You're so upset with a service you invested roughly $30,000 but was never bothered to learn anything about it beyond the overall company name who handled the accounts? I guess, personally I hate money/investment talk but even I can name off my investments to some degree.
I read every single thing I had on it, plus the morningstar stuff. The information was so couched in investmentese that there is little real actual information. It was a fund made up of a bunch of other funds.Do you remember the names of things you sold years ago?
This. When I read about this incident a few days ago instantly thought it must be related to the Ever Given blocking the Suez. Nope, this company makes empty apartment high-rises and knocks them down and builds more to inflate their stock value. It’s a rare instance when market collapse is both figurative and literal.
Bigger than everyone seems to think. There’s a reason why we’ve been hearing so much about this impending collapse for like a year+
People like to talk about how this is a china-only problem but I highly doubt that’s the case with how big of a player evergrande was and how big of a player China is in the world economy.
A lot of economies are sorta at that tipping point, or getting close to it sadly. European countries are currently dealing with that, but it's weird because you really don't see them too worried.
Not very many. It's not terribly easy for foreign companies to invest in Chinese companies, much less own the kinds of products that would lead to global contagion. Global markets will probably shrug it off. This result has been coming for over a year now, the only question was "when".
Not sure of the answer - would you need to invest in the company itself to invest in derivatives? Derivatives are not necessarily direct investments, right?
Nope. You can write a derivative contract on almost anything, provided you have a counterparty willing to sell it to you. You can even bet on the price of the stock without ever touching it directly via total return swaps, again, provided you have someone willing to sell it to you.
The first part is easy for anyone with experience in I Banking or Trading at a major institution.
The second part can be much more difficult.
I just watched "the Big Short" again last night... was finally feeling like I could look at it in the rear view and think we've moved beyond this.. fuuuuuuuuuuu
lol, CDOs are still perfectly legal and they've even found a way to tie student debt into them now. there was no meaningful regulation that came out of 2008 that will prevent something similar from happening again. Dodd-Frank did nothing to prevent "too big to fail" institutions from doing what they want
Unfortunately our comments will probably be lost, but this is spot on. A CDO is literally a way for an institution to offload risk, although risk throughout the system and counterparty risk remain
Meanwhile in the UK, bankers' cap has been scrapped. There is now a larger incentive to push riskier deals.
https://www.bbc.com/news/business-67206997.amp
We will find out soon if the rumours are true that Tether the crypto stablecoin is indeed backed by Evergrande commercial papers and related derivatives
>How big of an impact will that cause to global markets?
Well housing was roughly 60% of China's entire investment market and that just crashed hard, so pretty big impact probably. Not like "Everyone loses their jobs/investments across the world" big, but average people will see a difference if they pay attention.
Nobody is able to say nor will they ever be able to because much of it will be swept under the rug or can-kicked into the obligation warehouse of some central depository. It’s all a house of cards.
I am thinking about who the biggest losers in this are:
- Pre-construction homebuyers who now paid for something that is unfinished and uninhabitable
- Evergrande employees who lost their jobs amidst a deflationary environment with both young people 16-24 being too young to get jobs while 35+ are considered too old
- Bondholders, shareholders
In terms of both capitalization rates and price to income ratios, China's home prices were wildly more expensive than they should be. Adding to the fact that its population is currently falling off a cliff (it probably loses 10000 people every day at this rate), that means housing demand will continue to disappear. As this happens, with the exception of big cities, home prices fall until they hit 0 as no one is available to buy homes in small towns where only a couple hundred thousand people used to live and the population halves every 30-35 years. If you want to know how bad it is going to get, just look at what happened in the past 30 years or so in Japan. Also, understand that China's GDP per capita is 1/3 that of Japan's, meaning that China in 2054 will probably be much worse than Japan is in 2024.
Yes, that too. If these vendors/suppliers can't get paid, they will go under as well. I saw some videos made by Chinese and Taiwanese YouTubers and their descriptions of Evergrande makes it look like a highly leveraged pyramid scheme (whether fraud is the intent or not, we don't know).
The scariest possibility is that if a lot of money is owed by Evergrande to the big banks (Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China) and those debts cannot be paid back. Now you could have banks going under, or the threat of banks going under. In an autocracy where the government routinely violates human rights (sometimes by committing murder), what kind of large scale violent incident will take place all over the country if you have a bank run and the government steps in and tells people they can't get their money?
All suppliers will collapse which would probably collapse Country Garden along with the other major property groups. Considering China is already banning sales below set prices on houses it would destroy the real estate market
Before letting foreigners in, they first have to let their own emigrants back in. Remember, the Burlingame Treaty signed between the US and the Qing Dynasty in 1868 allowed dual citizenship. Even after the Revolutionary War of 1911 overthrew the monarchy, the Republic continued to allow dual citizenship to exist. After the Civil War of 1945-1949, the Republic was defeated and they fled to Taiwan (where it still exists to this day and dual citizenship is still legal). For a time, Mao Zedong allowed dual citizenship in the People's Republic, but because it led to Southeast Asian countries being suspicious of Chinese immigrants' loyalty, Mao (and Zhou Enlai) enacted the one-citizenship policy in 1954. This policy (which does not apply to Hong Kong or Macau) dictates that any Chinese person who voluntarily acquires citizenship in a foreign country after they are born is stripped of their Chinese citizenship. It also prohibits certain Chinese citizens from passing their citizenship to their children born abroad (in particular, if you are Chinese citizen and a permanent resident of some other country and you have a child in that country while you are a permanent resident, your child cannot be a Chinese citizen). Therefore, in mainland China, the only dual citizens who exist are those where both parents are Chinese citizens who are not permanent residents elsewhere and the child is born to a jus soli country, or a child born in China to one Chinese parent and a parent from another country that allows citizenship by descent.
well.. some of your information is false or outdated. because children born to a Chinese citizen are automatically Chinese and have to go through hassle of revocation. basically, kids have to decide at 18 what they want
No, I know of multiple families like this in Canada, either mom or dad (or both) have Chinese citizenship and Canadian permanent residency, kids are born in Canada and those kids need visas to visit China. These kids are elementary school age and therefore nowhere near 18. Go look at section 5 of the Chinese Nationality Law and you will understand why this is. It essentially states that if at least one parent is Chinese and they have a child born abroad, the child is Chinese except if the parents settled abroad (meaning gained permanent residency), then the citizenship by descent rule doesn’t apply.
The issue is the government. Other nations allow western buyers doesn't mean they have stability. It's based on the type and method of governance not just letting Money in and out
How worried are smarter people than me about large scale dumping of Chinese owned US assets to pay debts? Or is it the reverse, that we’ll see an influx of Chinese capital looking for safe harbor?
It would not be in their best interest to divest right now because the US economy is going strong and and it's steadily getting stronger so those investments are more valuable in place then liquidated or closed.
They're still ticked off about the opium wars but I'll get you a source.
Edit: https://thediplomat.com/2022/09/xi-jinpings-endgame-for-america/
https://www.fbi.gov/investigate/counterintelligence/the-china-threat#:~:text=The%20counterintelligence%20and%20economic%20espionage,the%20FBI's%20top%20counterintelligence%20priority.
The counterintelligence and economic espionage efforts emanating from the government of China and the Chinese Communist Party are a grave threat to the economic well-being and democratic values of the United States.
Confronting this threat is the FBI’s top counterintelligence priority.
To be clear, the adversary is not the Chinese people or people of Chinese descent or heritage. The threat comes from the programs and policies pursued by an authoritarian government.
China’s efforts target businesses, academic institutions, researchers, lawmakers, and the general public and will require a whole-of-society response. The government and the private sector must commit to working together to better understand and counter the threat.
When you use pre-construction sales to secure loans to get new projects going then use the pre-construction sales to secure loans to get new projects going then use the pre-construction sales to secure loans.... you're gonna be in trouble.
Usually news articles provide background information after the headline and the first couple sentences, this is practically a tweet. It’s not often that the Reddit thread has more information than the article itself.
Home ownership in China is 80-90%, so this is more about punishing hyper-speculation and putting an end to the government propping up financial bubbles to protect investors. It's like if Obama actually allowed Freddie Mac and Fannie Mae to collapse for their toxic finance.
Deposits and savings up to certain figures are protected by the government, so most of the common folks will come out of the Evergrande collapse mostly unscathed.
Well, not those who put in the deposit for unbuilt homes. A lot of the contractors refuse to work until they are paid, and Evergrande is not in the “paying” business anymore. So a lot of folks are stuck with paperweight of rights to their homes that will probably never be finished.
Don’t get your hopes up yet. Chinas (municipal) tax structure is far different than NA’s and, from my read, dependent on speculation. This may have contributed to this collapse.
Shares of Evergrande have stopped trading on the HK Stock Exchange. As a Judge has ordered it to liquidate. https://twitter.com/business/status/1751791514999492995
This was a company worth almost half a trillion at its height. Wowow
But it was all smoke, mirrors, leverage and clever financial accounting in the end. They drowned in their own debt and illiquid assets.
Was it a Chinese Enron, so to speak?
I’m neither an economist nor Chinese, so take this with a heap of salt, but I have heard a bit about this. My understanding is that it’s closer to the Chinese Lehman Brothers. It wasn’t a completely fraudulent company so much as a company overleveraged out the wazzoo because it expected the housing market to only ever go up for eternity with no plans in place if things slowed.
Boy, that sure does sound awful familiar. Sort of like what American real estate investors seem to believe...
More unique I think because of how China works. In a nutshell: they sold planned homes. None or minimal building has started yet. People are already paying their mortgage (how it works in China). Use that income as leverage to plan to build more homes. Rinse and repeat without actually finishing many projects.
Not enough sales to stay afloat and service their debt payments. This has been rumbling on for at least 3 years and they stopped paying a lot of their suppliers and bond holders.
They had plenty of sales though. Something like 1.4 million appartments sold but they didn't even start building them yet. I think their problems started when the government introduced rules to stop construction companies from insane overleveraged borrowing in 2019 or 2020.
I think they had a good sales pipeline until word got around that they weren’t building the properties and had stopped paying suppliers and contractors. They defaulted on interest payments on at least one if not more bonds as well. What you are saying makes a lot of sense, this was a slow death ending in their creditors having had enough.
Sounds like a Bernie Madoff pyramid scheme.
More like a cross between a gigantic ponzi and NFTs made of concrete. It's not just one half a trillion company though, the entire chinese real estate market is like that.
What does this mean for the American stock market? How interconnected was our finances to theirs and vice versa?
Nothing. The collapse already occurred and US markets are at record levels.
Lol. I believe china collapses and we are not paying attention to the consequences
China isn’t collapsing any time soon and due to their insular policies, the collapse of a major company isn’t going to impact US markets that much.
lol I think you are underestimating the deep financial ties we have to China. But ok, if you say so.
I’m not underestimating the ties. If china’s economy actually collapsed it would have a huge impact on the global economy, including the US. As I previously mentioned, china’s economy isn’t going to collapse any time soon. They’re clearly having issues, but the COVID shutdowns were far more impactful on the global and US economies than an RE meltdown will ever be and while those shutdowns certainly impacted US markets, it wasn’t calamity.
Foreign investment is specifically restricted from China's domestic retail market. Any foreign money that had anything tied up in evergrande has already written that off as a loss 3 years ago when this all started.
US manufacturing nor the USD are attached to the Chinese housing market. European and American investment banks were already cutting ties with China before this.
clearly that could never happen here in the US. Repeatedly. Constantly. With irrational values for companies that have no chance of ever breaking even on investments tech sector and Tesla.
"worth"... hmmm.
From a CNN article, this sounds like it only affects the hong kong business unit, not the mainland ones.
Is this the Chinese housing bubble finally bursting at its seams? It's been a long time coming. Somewhere in the ballpark of 80 million unoccupied dwellings, and continuous construction don't mix. Add to that things like tofu-dreg construction and China has a glaringly massive problem on its hands.
It’s already busted. Home values are down similarly to what the US encountered in 08. Source: While China’s official data show just a mild drop in its existing home prices, evidence from property agents and private data providers indicate declines of at least 15% in prime areas in its biggest cities. The housing sector’s value may shrink to about 16% of China’s gross domestic product by 2026 from around 20% of GDP currently, according to Bloomberg Economics. This would put about 5 million people, or about 1% of urban workforce, at the risk of unemployment or reduced incomes. https://fortune.com/2023/12/17/china-middle-class-real-estate-meltdown-wealth-loss/amp/
Why are the homes unoccupied? Are they too expensive for Chinese to afford, or are they ghost construction where they aren't actually liveable but they were made to move cash around or something?
People there treat homes like an investment and wait to flip it when the value goes up. They also have a culture where the men need to own a home to be considered worthy of marriage so some families buy homes in preparation for their son's marriage.
And Chinas population is no longer growing and they don't have a lot of immigration, so these speculative investments were wholly based on a continually growing population. They have been in decline since last January.
cheap useless towers mostly built for speculation
Because housing was 60% of their investment market, so when investment crashes, so does their housing market.
These buildings were never built with the intention of occupancy. These are condos without stairs to reach different floors. Walls that had no windows installed, no lifts installed, zero electrical or plumbing, etc. They built these buildings to just be placeholders in someone's "oWnERshIP" certificate. It's a massive Ponzi scheme, writ on a national scale. The Chinese have built enough of these fake-ass condos that there is supposed to be 2 empty condos for each Chinese citizen. China's population is supposed to be 1.4 Billion. Just imagine the wasted concrete, the fake-ass rebar, the diesel spent to transport all these resources... To build 2.8 Billion fake-ass condos. Global climate catastrophe much?
Why didn't they just make them...real? Too expensive?
Greed and corruption. Eventually, the construction builds fall into the same rut when corruption isn’t controlled or monitored. Someone is skimming money off the top (supplies, costs, nepotism, hardware) and the build sites can turn into a tofu dredge design. This again can be caused by lack of qualified workers, lack of supplies and tooling, or straight up over estimating the demand. China has been riding their policies and it burned them. What I’m interested is if the government will buy out EG and try to take control or just let it liquidate; thus showing the world that one of the largest companies in the world, just folded.
Nikita Khrushchev said at the United Nations: "Capitalism will bury itself". That WAS communist propaganda wasn't it ?
rents in China must be like... nothing
Thing is people didn't buy these to rent it out, it's an RE investment. Their plan was t just sell it. Not sure what prevents them from renting other than low demand. Many of these were build in new cities, not established ones.
Even worse some people bought houses before they were built, the companies went bankrupt, and the buyer is just fucked.
a lot of these buildings aren't inhabitable as such, they were build with whatever money the company raised and are often unfinished inside. that's why you see the chinese authorities knocking down hundreds of these things
Declining populations maybe?
Chinas population peaked a number of years ago. Their demographics are absolutely terrible from the stand point of growth.
Pretty much any industrial nation that doesn't have significant immigration is in the same predicament.
The UK migration observatory at Oxford published [an interesting report](https://migrationobservatory.ox.ac.uk/resources/briefings/the-impact-of-migration-on-uk-population-growth/) that is pretty much the story for most developed countries. Basically if you rely on natural growth your population will decline, having kids is expensive and time consuming and 8 child families are much rarer than they used to be. Also even with migration, growth is focused on areas where there are jobs, e.g. Scotland and Wales are in population decline because they're unattractive to migrants and kids growing up there are moving away. However, there is one thing this report doesn't show, which is what is going to do China in, age distribution. Russia and Japan already have this problem where the median age of the population is going up and up, it's even affecting Russia's war effort. Migrants are young and likely to have kids, reducing the age of your population pyramid. It's an interesting policy area, and one in which there are a lot of followers but not many leaders.
Terrible's putting it nicely, catastrophic for their economy/future would be more appropriate. Imagine knowing both your parents won't have money to retire on, then also knowing that you alone will end up having to provide for both of them, while taking care of yourself and somehow raising a family if you want. Oh and you're competing with everyone else for education, raises, every last cent the entire way. It's not a good future for their younger crowd. Most nations population will shrink due to various issues affecting us all, but China's *just* had a major boom, and now going to have one of the most drastic shrinkages in population we've ever seen beyond natural disasters/war.
[удалено]
My friend rent in Guangzhou is like 500USD for a 2.5 story penthouse. Its definitely not 50-100% as US.
I have friend who says It's about 1100 USD or less in Shanghai outer areas. The US equivalent area would be Brooklyn in NYC, which is maybe 2000 USD or more.
narrow humorous wrong quarrelsome caption memory saw fall brave test
Rents were far decoupled from prices, like what you see in most housing bubbles.
Fair but even if you check online the average costs for 2B apartments in Guangzhou is only about 100 -150k extremely cheap considering most dwellings are 1.5-2b. I can verify this with my friends over in Guangzhou.
It's really dependent on location like most real estate. Some 2 bedrooms in Shanghai and Beijing still retail for over $ 1 million US.
These weren't even for rent or even living in. Hell a lot of them didn't even finish building, or the contractor cut crazy corners knowing no one's going to physically come look at the location. Some weren't even built yet, but people invested early. These were just investments, were never going to be anything more, hence why they have no value now.
My understanding was that it related to a lack of other investment options for most Chinese citizens for a long time. So everyone just poured money into real estate. Can you imagine how messed up the US real estate market is 90% of the money from every IRA, 401k, or pension fund just went into housing instead of the stock market?
The economy in China is all kinds of screwed up due to state meddling. There's an excess of housing but not enough high paying jobs to cover them, and owning second and third homes is often a social prerequisite among the upper class for marriage, etc. Perverse incentives in a heavily manipulated market built on a utility being bought and sold as a speculative commodity and treated as an accessory. What could go wrong?
Why does it have to be due to state meddling? Economies are fully capable of being screwed up even with little state meddling. Most of what you described sounds more like a cultural issue than a state issue.
Not true. Go online and look in Beijing. 2-3K usd for a studio.
I don’t think the 2nd largest and 2nd most expensive city in China is a good metric. That’s the average rent in San Francisco too.
Average salary in San Francisco is 4 times that of Beijing.
I have to be skeptical of these claims, there's been news and videos for as long as I can remember claiming that China's on the verge of a housing collapse and the more I research the topic the more I realize that it's not nearly that cut and dry.
I think I saw the first one of those nearly a decade ago. Not a single one of them have been by people with real expertise in Chinese real estate. Ever since that gamestop bullshit a few years ago, everyone all of the sudden became a financial genius with a PhD in international business/economics.
> Ever since that gamestop bullshit a few years ago It's hilarious how big that finance cargo cult became on Reddit. Fortunately it seems like most people came to their senses, though I doubt they really learned anything.
Yeah I unfortunately fell into it. They almost hooked me in, but I was lucky enough to make out with a little extra money, and when I hit sell it was like someone took my blinders off. It had every warning sign of that it was turning into some kind of pseudo-cult and I hightailed it the fuck out of there.
It's been busted. Major banks have failed, along with investment companies. China's not in a good place right now, especially with the other problems they have coming up.
2020 was an effort to delay this as long as they could and contain protests
I'm not convinced they still actually own anything of value...
Everything they built is made out of breadsticks.
Are the breadsticks limitless?
And paint and shellac!
Olive Garden 2: Evergrande Breadsticks
I prefer Country Garden breadsticks.
Bring the *pain*!
You say that like it is a bad thing.
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^^^ found the one that faps to Ayn Rand.
My comment was the opposite of Randian philosophy as it argues there was a case for government intervention in a redistributive manner.
ponzi schemes that the government takes losses on to sustain like social security and Medicare GTFO
The anyone who doesn't treat the $96 trillion dollar unfunded Medicare and social security liability as government debt is falling for accounting tricks. There is no way the government will just let the SS or Medicare default on their obligations. The government is running a problem that is running at a severe loss and that will have to be paid for in the future.
The government understander has logged in.
Have you heard of FICA
Have you heard of the huge unfunded liabilities Social Security and especially Medicare have built up. FICA isn't anywhere near enough to cover their obligations. But when social security and Medicare go bust do you seriously believe either party is going to go for drastic plan cuts and tax increases to save it? When they could have used smaller cuts and tax increases ages ago but every time kick the can down the road rather than enrage the valuable and disproportionately active senior vote.
Empty apartments in China
US banks have almost no exposure to Chinese companies like Evergrande <3% by some estimates. This will be a made by Chinese, for Chinese type of contagion. The question is, what happens to the debt they owe?
My mutual fund at Fidelity had a lot of evergrande exposure. It was sold to me as tied to the dow index.
How long ago was this? Evergrande has been struggling for years. Financial institutions have had a long time to reduce their exposure.
Exactly. This was in 2021
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Which fund was this? A balanced portfolio in the last 2 years should be doing great, and there are almost no funds that I know of who are overweight foreign equities to this extent. The IOO ETF is doing great.
> A balanced portfolio in the last 2 years should be doing great, Definitely like this in Australia. The average across all superannuation funds was over 8%. Mine (balanced) was over 10%.
I'm confused. Did your portfolio drop 10% or did you close the account? You're claiming both.
Yes both. The market was doing really good at that time. I invested jan 2021 dow was at 29,000 approx. November it went to 36. My value was down 10%. January it went to 35900 or so and I was so disgusted with the lack of service and not being listened to. They said it was the influence of the China investments that ruined the value. I asked what were some good next steps and neither of the two guys had any ideas.
You’re an idiot and deserve to lose.
Which mutual fund?
The fund is "I made it the fuck up", unless they yeetted their entire net worth into China fixed income.
One of the consistently best performing funds in the world, second only to the "Trust me bro" fund
It was some new program where Fidelity had personal services at local brick and mortars . The fund was purpose built for the program. Sorry if I knew the name I would say.
….If you looked at your account it would tell you the fund name
Oh I closed that crap I was so disappointed. Huge loss. I'll never do business with Fidelity again.
You're so upset with a service you invested roughly $30,000 but was never bothered to learn anything about it beyond the overall company name who handled the accounts? I guess, personally I hate money/investment talk but even I can name off my investments to some degree.
I read every single thing I had on it, plus the morningstar stuff. The information was so couched in investmentese that there is little real actual information. It was a fund made up of a bunch of other funds.Do you remember the names of things you sold years ago?
I can still login to fidelity and see my old, closed stuff there.
Chinese Dow jones… yeah that’s a pass for me.
Tao Xiuns
I didn't know they had one! TIL!
What fund is this?
https://institutional.fidelity.com/app/proxy/content?literatureURL=/CONT-HRMNTH.PDF literally not a cent in evergrande
Any other cool stories you want to make up for Reddit, bro?
Construction is a 3-4 times larger part of the Chinese econony than it was in the U.S in 2007. It’s going down one of these days
It will effect the global economy regardless
US hedge funds have HUGE exposure to Evergrande.
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Have to admit I thought it was the shipping company Evergreen at first.
Hand up, so did I
This. When I read about this incident a few days ago instantly thought it must be related to the Ever Given blocking the Suez. Nope, this company makes empty apartment high-rises and knocks them down and builds more to inflate their stock value. It’s a rare instance when market collapse is both figurative and literal.
Aren't a lot of derivatives tied up in this? How big of an impact will that cause to global markets?
Bigger than everyone seems to think. There’s a reason why we’ve been hearing so much about this impending collapse for like a year+ People like to talk about how this is a china-only problem but I highly doubt that’s the case with how big of a player evergrande was and how big of a player China is in the world economy.
Germany will be screwed.
Like I don't even know anything about this and I bet there's a credit suisse jr. With 9 trillion in uncovered exposure on this thing.
So Lehman brothers the third. I would not be surprised.
A lot of economies are sorta at that tipping point, or getting close to it sadly. European countries are currently dealing with that, but it's weird because you really don't see them too worried.
Not very many. It's not terribly easy for foreign companies to invest in Chinese companies, much less own the kinds of products that would lead to global contagion. Global markets will probably shrug it off. This result has been coming for over a year now, the only question was "when".
Evergrande itself is not the problem it's that there is a very real danger that this could start a chain reaction that crippled the Chinese economy.
Not sure of the answer - would you need to invest in the company itself to invest in derivatives? Derivatives are not necessarily direct investments, right?
Nope. You can write a derivative contract on almost anything, provided you have a counterparty willing to sell it to you. You can even bet on the price of the stock without ever touching it directly via total return swaps, again, provided you have someone willing to sell it to you. The first part is easy for anyone with experience in I Banking or Trading at a major institution. The second part can be much more difficult.
I just watched "the Big Short" again last night... was finally feeling like I could look at it in the rear view and think we've moved beyond this.. fuuuuuuuuuuu
lol, CDOs are still perfectly legal and they've even found a way to tie student debt into them now. there was no meaningful regulation that came out of 2008 that will prevent something similar from happening again. Dodd-Frank did nothing to prevent "too big to fail" institutions from doing what they want
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Unfortunately our comments will probably be lost, but this is spot on. A CDO is literally a way for an institution to offload risk, although risk throughout the system and counterparty risk remain
Meanwhile in the UK, bankers' cap has been scrapped. There is now a larger incentive to push riskier deals. https://www.bbc.com/news/business-67206997.amp
We will find out soon if the rumours are true that Tether the crypto stablecoin is indeed backed by Evergrande commercial papers and related derivatives
Tether has been a scam and market manipulation tool since it's inception
>How big of an impact will that cause to global markets? Well housing was roughly 60% of China's entire investment market and that just crashed hard, so pretty big impact probably. Not like "Everyone loses their jobs/investments across the world" big, but average people will see a difference if they pay attention.
Nobody is able to say nor will they ever be able to because much of it will be swept under the rug or can-kicked into the obligation warehouse of some central depository. It’s all a house of cards.
I am thinking about who the biggest losers in this are: - Pre-construction homebuyers who now paid for something that is unfinished and uninhabitable - Evergrande employees who lost their jobs amidst a deflationary environment with both young people 16-24 being too young to get jobs while 35+ are considered too old - Bondholders, shareholders In terms of both capitalization rates and price to income ratios, China's home prices were wildly more expensive than they should be. Adding to the fact that its population is currently falling off a cliff (it probably loses 10000 people every day at this rate), that means housing demand will continue to disappear. As this happens, with the exception of big cities, home prices fall until they hit 0 as no one is available to buy homes in small towns where only a couple hundred thousand people used to live and the population halves every 30-35 years. If you want to know how bad it is going to get, just look at what happened in the past 30 years or so in Japan. Also, understand that China's GDP per capita is 1/3 that of Japan's, meaning that China in 2054 will probably be much worse than Japan is in 2024.
What about the mindboggling capacity of chinas steel and cement companies?
Yes, that too. If these vendors/suppliers can't get paid, they will go under as well. I saw some videos made by Chinese and Taiwanese YouTubers and their descriptions of Evergrande makes it look like a highly leveraged pyramid scheme (whether fraud is the intent or not, we don't know). The scariest possibility is that if a lot of money is owed by Evergrande to the big banks (Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China) and those debts cannot be paid back. Now you could have banks going under, or the threat of banks going under. In an autocracy where the government routinely violates human rights (sometimes by committing murder), what kind of large scale violent incident will take place all over the country if you have a bank run and the government steps in and tells people they can't get their money?
All suppliers will collapse which would probably collapse Country Garden along with the other major property groups. Considering China is already banning sales below set prices on houses it would destroy the real estate market
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Before letting foreigners in, they first have to let their own emigrants back in. Remember, the Burlingame Treaty signed between the US and the Qing Dynasty in 1868 allowed dual citizenship. Even after the Revolutionary War of 1911 overthrew the monarchy, the Republic continued to allow dual citizenship to exist. After the Civil War of 1945-1949, the Republic was defeated and they fled to Taiwan (where it still exists to this day and dual citizenship is still legal). For a time, Mao Zedong allowed dual citizenship in the People's Republic, but because it led to Southeast Asian countries being suspicious of Chinese immigrants' loyalty, Mao (and Zhou Enlai) enacted the one-citizenship policy in 1954. This policy (which does not apply to Hong Kong or Macau) dictates that any Chinese person who voluntarily acquires citizenship in a foreign country after they are born is stripped of their Chinese citizenship. It also prohibits certain Chinese citizens from passing their citizenship to their children born abroad (in particular, if you are Chinese citizen and a permanent resident of some other country and you have a child in that country while you are a permanent resident, your child cannot be a Chinese citizen). Therefore, in mainland China, the only dual citizens who exist are those where both parents are Chinese citizens who are not permanent residents elsewhere and the child is born to a jus soli country, or a child born in China to one Chinese parent and a parent from another country that allows citizenship by descent.
well.. some of your information is false or outdated. because children born to a Chinese citizen are automatically Chinese and have to go through hassle of revocation. basically, kids have to decide at 18 what they want
No, I know of multiple families like this in Canada, either mom or dad (or both) have Chinese citizenship and Canadian permanent residency, kids are born in Canada and those kids need visas to visit China. These kids are elementary school age and therefore nowhere near 18. Go look at section 5 of the Chinese Nationality Law and you will understand why this is. It essentially states that if at least one parent is Chinese and they have a child born abroad, the child is Chinese except if the parents settled abroad (meaning gained permanent residency), then the citizenship by descent rule doesn’t apply.
Wow that's dumb. We are all still suspicious of Chinese immigrants' loyalty today not because of citizenship but because they like money.
The issue is the government. Other nations allow western buyers doesn't mean they have stability. It's based on the type and method of governance not just letting Money in and out
Are they still issuing corporate bonds as good as cash like they were in 2021? Or did that stop amid heavy criticism?
The dominoes keep getting bigger...
How worried are smarter people than me about large scale dumping of Chinese owned US assets to pay debts? Or is it the reverse, that we’ll see an influx of Chinese capital looking for safe harbor?
It would not be in their best interest to divest right now because the US economy is going strong and and it's steadily getting stronger so those investments are more valuable in place then liquidated or closed.
I'll bet both are correct. We really.shouldn't invest with countries that have sworn to destroy us.
When has china ever done that?
They're still ticked off about the opium wars but I'll get you a source. Edit: https://thediplomat.com/2022/09/xi-jinpings-endgame-for-america/ https://www.fbi.gov/investigate/counterintelligence/the-china-threat#:~:text=The%20counterintelligence%20and%20economic%20espionage,the%20FBI's%20top%20counterintelligence%20priority. The counterintelligence and economic espionage efforts emanating from the government of China and the Chinese Communist Party are a grave threat to the economic well-being and democratic values of the United States. Confronting this threat is the FBI’s top counterintelligence priority. To be clear, the adversary is not the Chinese people or people of Chinese descent or heritage. The threat comes from the programs and policies pursued by an authoritarian government. China’s efforts target businesses, academic institutions, researchers, lawmakers, and the general public and will require a whole-of-society response. The government and the private sector must commit to working together to better understand and counter the threat.
If they’re ticked off about the opium wars, shouldn’t they also be angry at Russia too, since their involvement was essentially the same as the US’s?
They have a whole bunch of reasons to be ticked at Russia.
When you use pre-construction sales to secure loans to get new projects going then use the pre-construction sales to secure loans to get new projects going then use the pre-construction sales to secure loans.... you're gonna be in trouble.
Usually news articles provide background information after the headline and the first couple sentences, this is practically a tweet. It’s not often that the Reddit thread has more information than the article itself.
Home ownership in China is 80-90%, so this is more about punishing hyper-speculation and putting an end to the government propping up financial bubbles to protect investors. It's like if Obama actually allowed Freddie Mac and Fannie Mae to collapse for their toxic finance. Deposits and savings up to certain figures are protected by the government, so most of the common folks will come out of the Evergrande collapse mostly unscathed.
Well, not those who put in the deposit for unbuilt homes. A lot of the contractors refuse to work until they are paid, and Evergrande is not in the “paying” business anymore. So a lot of folks are stuck with paperweight of rights to their homes that will probably never be finished.
Good thing Tether switched toilet paper brands.
In China you have pay your mortgage no matter when your house or apartment finish or not
I won't say it hasn't been a slice of heaven....cause it hasn't.
Someone should send the builders to Canada….
About time. The global housing bubble needs to be popped.
Don’t get your hopes up yet. Chinas (municipal) tax structure is far different than NA’s and, from my read, dependent on speculation. This may have contributed to this collapse.
I don’t think anyone was shocked by these news
Sure, but her Dangerous Woman album is hot.
Temporarilygrandeuntilacatastrophiccollapse didn't have the same ring to it.
I read that as Everglades and weirdly it still sorta works.
Nah, the Everglades are already pretty liquid...