5 ms·

China’s Evergrande veers toward collapse, unpaid debts spark protests

82 points by tigerlily 5y ago

haspoken 5y ago
https://archive.is/SvJqa https://archive.is/SvJqa
- deleted 5y ago
  [deleted]
redis_mlc 5y ago
What's happening is this: - China's recent economic growth was half due to real estate, a substantial part which was speculation - the "real estate developers" usually just take the deposits and sometimes build a property, but often not (a ponzi scheme) - it only takes a small amount of embezzlement, which is rife, for the house of cards to come down. Where's the money? In US and Canada Wsst Coast real estate, of course. - this exposes the ponzi practice for most such companies - which means China's real economic growth is somewhere between half to 2/3 of what has been reported for 2 decades - this threatens investment in China as the story is adjusted down. - in addition, China has stopped capital outflows since 2016, so foreign investment is one-way. (if you're Volkswagen and you invested in building a factory in China, you got played.)
- redis_mlc 5y ago
  You can learn more about China's pre-corona real estate economy here: Yukon Huang: Debunking Myths About China's Economy (2017) https://www.youtube.com/watch?v=XepCi0I_g6I https://www.youtube.com/watch?v=XepCi0I_g6I What he's saying is that Chinese real estate should be valued the same as other regional cities, hence the dramatic runup in value. But perhaps due to consumer speculation, low interest rates and ponzi developers, prices have exceeded reality after 2017.
- inglor_cz 5y ago
  So, do you expect a chain reaction?
  - WastingMyTime89 5y ago
    The issue has been known for a long time. I think I read something about it by Michael Pettis five years ago and the Chinese government has been trying to put in place contingencies for some times but you never know. Clearly China wants to avoid what happened to Japan after their sustained period of strong growth.
  - redis_mlc 5y ago
    Most people think that the CCP will announce an Evergrande bailout to inspire confidence, then basically ban Evergrande from new projects, to avoid the house of cards from falling nationally. The next step in Trump's plan was to restrict China's access to US capital markets, which would have combined with economic failures including bank runs, Evergrande and BRI to topple China, but instead we got stuck with Biden and Harris. (BRI is primarily a debt trap for the CCP to gain access to ports globally for its 20,000 ships.) The CCP has already restricted which skyscrapers can be built after a couple of the tallest buildings in the world were never finished, and one is wobbling with tenants running down the street in panic. :)
mgh2 5y ago
"Build it and they will come" startup myth https://www.youtube.com/watch?v=7UoiO51BIIo https://www.youtube.com/watch?v=7UoiO51BIIo
Proven 5y ago
It's no different in most of the EU and North America. The dollar and euro are IOUs, the the debtor (the state) is insolvent. As are 20-30% of all employers. Bitcoin is 10% down in the past 24 hours. So much for that store of value.
SMAAART 5y ago
A friend did some consulting for them a couple of year ago, this is a broad summary of events: - contacted - discussed scope of work, grandiose, with big budget - Evergrande people pressured the company to start doing work before the contract was executed by the big wigs - Evergrande people pressured the company for deliverables before the contract was executed by the big wigs - a few deliverable delivered (at this point we're a couple of months in) - still no contract, still no payment - Evergrande people pressured the company for more deliverables before the contract was executed by the big wigs - company delivers a few more deliverables, still no contract and still no money - company stops working and demands payment and contract - a few weeks later (we're not 4-5 months in) payment arrives - Evergrande people pressured the company for more deliverables before the contract was executed by the big wigs - company delivers some more deliverables, at this point Evergrande has good executable deliverables for their project - Evergrande ghosts the company, no contract, no payment for the additional services since the one and only payment Damage approx $150,000 (unpaid work) Life goes on
tibbydudeza 5y ago
Forcing employees and their families to take out loans to float the company is rather novel concept - raiding pension funds not possible in China ???.

82 points by tigerlily 5y ago

haspoken 5y ago

https://archive.is/SvJqa https://archive.is/SvJqa

deleted 5y ago
[deleted]

redis_mlc 5y ago

What's happening is this: - China's recent economic growth was half due to real estate, a substantial part which was speculation - the "real estate developers" usually just take the deposits and sometimes build a property, but often not (a ponzi scheme) - it only takes a small amount of embezzlement, which is rife, for the house of cards to come down. Where's the money? In US and Canada Wsst Coast real estate, of course. - this exposes the ponzi practice for most such companies - which means China's real economic growth is somewhere between half to 2/3 of what has been reported for 2 decades - this threatens investment in China as the story is adjusted down. - in addition, China has stopped capital outflows since 2016, so foreign investment is one-way. (if you're Volkswagen and you invested in building a factory in China, you got played.)

redis_mlc 5y ago
You can learn more about China's pre-corona real estate economy here: Yukon Huang: Debunking Myths About China's Economy (2017) https://www.youtube.com/watch?v=XepCi0I_g6I https://www.youtube.com/watch?v=XepCi0I_g6I What he's saying is that Chinese real estate should be valued the same as other regional cities, hence the dramatic runup in value. But perhaps due to consumer speculation, low interest rates and ponzi developers, prices have exceeded reality after 2017.
inglor_cz 5y ago
So, do you expect a chain reaction?
- WastingMyTime89 5y ago
  The issue has been known for a long time. I think I read something about it by Michael Pettis five years ago and the Chinese government has been trying to put in place contingencies for some times but you never know. Clearly China wants to avoid what happened to Japan after their sustained period of strong growth.
- redis_mlc 5y ago
  Most people think that the CCP will announce an Evergrande bailout to inspire confidence, then basically ban Evergrande from new projects, to avoid the house of cards from falling nationally. The next step in Trump's plan was to restrict China's access to US capital markets, which would have combined with economic failures including bank runs, Evergrande and BRI to topple China, but instead we got stuck with Biden and Harris. (BRI is primarily a debt trap for the CCP to gain access to ports globally for its 20,000 ships.) The CCP has already restricted which skyscrapers can be built after a couple of the tallest buildings in the world were never finished, and one is wobbling with tenants running down the street in panic. :)

mgh2 5y ago

"Build it and they will come" startup myth https://www.youtube.com/watch?v=7UoiO51BIIo https://www.youtube.com/watch?v=7UoiO51BIIo

Proven 5y ago

It's no different in most of the EU and North America. The dollar and euro are IOUs, the the debtor (the state) is insolvent. As are 20-30% of all employers. Bitcoin is 10% down in the past 24 hours. So much for that store of value.

SMAAART 5y ago

A friend did some consulting for them a couple of year ago, this is a broad summary of events: - contacted - discussed scope of work, grandiose, with big budget - Evergrande people pressured the company to start doing work before the contract was executed by the big wigs - Evergrande people pressured the company for deliverables before the contract was executed by the big wigs - a few deliverable delivered (at this point we're a couple of months in) - still no contract, still no payment - Evergrande people pressured the company for more deliverables before the contract was executed by the big wigs - company delivers a few more deliverables, still no contract and still no money - company stops working and demands payment and contract - a few weeks later (we're not 4-5 months in) payment arrives - Evergrande people pressured the company for more deliverables before the contract was executed by the big wigs - company delivers some more deliverables, at this point Evergrande has good executable deliverables for their project - Evergrande ghosts the company, no contract, no payment for the additional services since the one and only payment Damage approx $150,000 (unpaid work) Life goes on

tibbydudeza 5y ago

Forcing employees and their families to take out loans to float the company is rather novel concept - raiding pension funds not possible in China ???.