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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

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. :)

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. :)