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What you're describing applies to any country, not just China, and not to mention your numbers are off anyways (see sibling comment). I don't know why people k

What you're describing applies to any country, not just China, and not to mention your numbers are off anyways (see sibling comment). I don't know why people keep comparing China to Japan, the only real similarity is that they're both in east Asia. China has an order of magnitude more people, isn't a small island, has a larger military, different form of government, different economic system, etc. etc. Much of China's debt is in the form of housing and infrastructure - it's debt nonetheless, but is also an asset. Not all debt is strictly a "liability." Not to mention Chinese citizens save far more than American's, so a simple comparison of the total debt load isn't entirely fair to either nation. China's main issue is not making sure their (debt) investments are fueling more growth and not going into the ether, like other countries' debt. Of course, this challenge is hardly unique to China. Fortunately for them, they have a large domestic population to use to fuel growth. They'll just need to make sure they can properly incentivize more population growth to keep the positive feedback loop humming along.

zepto 5y ago
Empty and decaying real-estate is a liability, not an asset.
- endisneigh 5y ago
  I disagree - tales of the decaying infrastructure in China is greatly exaggerated (though, like the USA there is decaying and unrenovated housing). The majority of China lives in rural areas, until this is no longer the case, urban housing will always be a large asset in China due to their attempts to urbanize the entire country.
  - zepto 5y ago
    There are 90 million currently empty homes in China.
    - endisneigh 5y ago
      So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion). If you compare it by density it looks even worse for the USA. In any case, it's not really a useful, or meaningful metric anyway. https://www.abc.net.au/news/2021-09-21/china-property-bust-evergrande/100472190 https://www.abc.net.au/news/2021-09-21/china-property-bust-e... https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Year%20Estimates%20Detailed%20Tables&tid=ACSDT1Y2019.B25002 https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Yea...
      - dfee 5y ago
        Your math seems suspect. You also appear to have a slant. The result is a reluctance to take your perspective seriously.
      - frenchy 5y ago
        > So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion) I have no horse in this game, but 17/300 = 5.2% and 90/1300 = 6.9%. (edit: wikipedia says population of China is 1.4 billion, which would give 6.4%).
        endisneigh 5y ago
        you're using the wrong numbers here. 17/330 = 5.2% 60/1400 = 4.2% the grandparent poster was mistaken (the 90 million represented the amount of people the empty housing could house, not the amount of empty homes itself) so I found real number and included the link.
        frenchy 5y ago
        Oh! That makes a difference.
      - sizzle 5y ago
        Yeah but out of that USA total, how many vacant properties are from foreign investors, let alone Chinese investors trying to stash their wealth out of reach of the CCP.
xyzzy21 5y ago
Because of "chà bu duō" and " dòufuzhā gōngchéng" buildings (I know, redundant), it's NOT really an asset in the normal sense. https://chinese.yabla.com/chinese-english-pinyin-dictionary.php?define=cha+bu+duo https://chinese.yabla.com/chinese-english-pinyin-dictionary.... https://www.sourcingallies.com/blog/cha-bu-duo https://www.sourcingallies.com/blog/cha-bu-duo https://en.wikipedia.org/wiki/Tofu-dreg_project https://en.wikipedia.org/wiki/Tofu-dreg_project https://www.youtube.com/watch?v=s-2DtL-Wjkc https://www.youtube.com/watch?v=s-2DtL-Wjkc The presumption that you can compare US financial/economic norms to Chinese is Epic Fail as an assumption. You have to take your head out of the clouds and challenge you ideals assumptions that underlie your understanding of the world!
- endisneigh 5y ago
  I can post videos of decaying buildings in the USA too - not really super relevant. The fact is that China is urbanizing at an unprecedented rate. You don't really have to believe the government - just go visit basically anywhere in China.
  - worrycue 5y ago
    The buildings in question are new though, not old decaying buildings. They are just very shoddy constructed with corner cutting everywhere. How prevalent? It’s hard to say. Guess we will find out in a few decades.
    - zepto 5y ago
      New buildings can be decaying liabilities just as much as old ones. More so if they have been constructed badly.
  - refurb 5y ago
    The point you’re missing is many of those home were bought as investments. No property tax makes them good stores of wealth, no carrying costs and my god a less risky investment than Chinese company equities. Problem is that despite the urbanization potential that doesn’t mean the properties are correctly priced or that they’ll continue to go up. I spent some time in another Asian country that has a per capita GDP 1/10th of the US, yet housing prices are comparable to the mid-west US and most are empty. Most are owned by the ultra rich and used to launder money. And I’m not talking prime location, these are basic apartments on the edge of the city going for $100,000USD or 30-40x average annual salaries. Unless GDP goes 3x no way those prices will hold. It’s a massive bet on continued income growth and demand for real estate which is not a given, which Japan showed with its massive property bubble.
chasd00 5y ago
> ..can properly incentivize more population growth .. did the one child policy mess that up? What i understand is China is short on women and the population situation is going to get worse before it gets better.
- endisneigh 5y ago
  yup - that's China's #1 problem IMHO. This is exactly why literally less than 6 months ago they implemented a three-child policy in order to incentivize more population growth with family planning, the elimination of private tutoring, etc. in an effort to drastically reduce the cost to raise a child. China has a lot of issues, one being a questionable government for those who are not Han, but China's existential issue is making sure the population of (young) people remains high and growing steadily.
  - 1270018080 5y ago
    Anecdote: I've talked to many people from China, and they all say almost no one wants kids. And for similar reasons to what people say in America (cost, stress, the environment). So I don't think the policy change is going to help them, too little too late.
    - endisneigh 5y ago
      yeah, that's exactly why it's the #1 issue. maybe their solution is opening up to immigration finally
      - deleted 5y ago
        [deleted]
      - zepto 5y ago
        How will they make immigration attractive?
    - mooreds 5y ago
      If you want a provocative view on China, check out Peter Zeihan: https://zeihan.com/video-dispatch-chinas-demographic-decline/ https://zeihan.com/video-dispatch-chinas-demographic-decline... tl;dr: China's population has already peaked and in 2070 there will be 50% of the current population.
jollybean 5y ago
"I don't know why people keep comparing China to Japan" Because they both went through hyper-growth periods after economic shock (war for Japan, and for China war then Mao). During that period of hubris they took on a lot of debt. They both had declining GDP growth and bad demographics. The negative momentum overwhelms the positive moment at some point. Your comment misses the bit were Real Estate is not a productive asset. Building new buildings on land is productive, but like Canada's housing bubble, when homes double in value quickly, it's just inflation. " They'll just need to make sure they can properly incentivize more population growth to keep the positive feedback loop humming along." I hope you realize the folly of this statement. Imagine if we all just did the 'body count for GDP strategy'.
infamia 5y ago
The United States thought the same thing and when through a housing crisis during 2008 and has been paying for it ever since with a frail economy and anemic growth. What China is doing now with Evergrande is exactly the approach the US took in 2008. Simply put, bad debt must be written off if you don't want to zomibify parts of your economy. Pretending that you can grow your way out of debt is fantasy as clearly evidenced by Japan and the US over the past 30 years. The fact that China has chosen to sweep this problem under the rug by rescuing Evergrande will be a drag on future growth and encourages future moral hazards. I don't predict doom and gloom for China, only that this will be a millstone around it's economic growth with additional systemic risk. If an asset depreciates or isn't worth what you paid for it, refusing to write down the asset and take your medicine sooner rather than later just drags out the pain. Better to take your medicine and get the pain over with so your economy can quickly reallocate and quickly bounce back. The losers must lose. This approach does not go down well with politicians, but is the best medicine for a sick patient.
- jkhdigital 5y ago
  The reason it doesn't go well with politicians is because, in a massively complex modern economy, the "losers" in an unexpected default are nearly always a wide swath of average citizens and public institutions. Why? Because they are the ones who dump all their savings into "safe" mass market investments like blue chip stocks and corporate debt ETFs.
  - cinquemb 5y ago
    Yeah, I said "fuck it" when they started buying corp bonds… DeFi only now, and just finished getting an audit for a decentralized derivatives protocol that was seeded funded with a decentralized incubator. We're planning on the protocol being able to lend liquidity into existence out of thin air (well more accurately, taking advantage of collateral dynamics and protocol stablecoin flows) and packaging that debt into decentralized stablecoins denominated in $… Thanks to the moral hazards, they've have motivated me and others to pursue alternatives that in their eyes have systemic risk, and I'd agree, very risk to their bailoutistan system :D
onlyrealcuzzo 5y ago
Chinese people only save to buy houses on debt with 5:1 leverage. The difference is there investments are all leveraged, whereas Westerners have a larger share of investments that are in equities with no leverage. It's easy to have a lot of "savings" when 100% of your investments on 5:1 leverage are appreciating at 7%+ per year for 2 decades. It's also easier to get that much appreciation when it's all debt fueled and on leverage.
splistud 5y ago
He compared them to Japan because the largest attribute of their economic problem is identical - high leverage on overpriced real estate.
TheOtherHobbes 5y ago
Much of Evergrande's debt is literally housing that hasn't been built yet. But has been paid for by investors/speculators. So there is no sense in which it's an asset. It's actually more of a Ponzi scheme with concrete accessories.

zepto 5y ago

Empty and decaying real-estate is a liability, not an asset.

endisneigh 5y ago
I disagree - tales of the decaying infrastructure in China is greatly exaggerated (though, like the USA there is decaying and unrenovated housing). The majority of China lives in rural areas, until this is no longer the case, urban housing will always be a large asset in China due to their attempts to urbanize the entire country.
- zepto 5y ago
  There are 90 million currently empty homes in China.
  - endisneigh 5y ago
    So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion). If you compare it by density it looks even worse for the USA. In any case, it's not really a useful, or meaningful metric anyway. https://www.abc.net.au/news/2021-09-21/china-property-bust-evergrande/100472190 https://www.abc.net.au/news/2021-09-21/china-property-bust-e... https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Year%20Estimates%20Detailed%20Tables&tid=ACSDT1Y2019.B25002 https://data.census.gov/cedsci/table?t=Vacancy&d=ACS%201-Yea...
    - dfee 5y ago
      Your math seems suspect. You also appear to have a slant. The result is a reluctance to take your perspective seriously.
    - frenchy 5y ago
      > So what? USA has more empty homes per capita (17 million for 330 million citizens, vs. 60 million in China for over 1.3 billion) I have no horse in this game, but 17/300 = 5.2% and 90/1300 = 6.9%. (edit: wikipedia says population of China is 1.4 billion, which would give 6.4%).
      - endisneigh 5y ago
        you're using the wrong numbers here. 17/330 = 5.2% 60/1400 = 4.2% the grandparent poster was mistaken (the 90 million represented the amount of people the empty housing could house, not the amount of empty homes itself) so I found real number and included the link.
        frenchy 5y ago
        Oh! That makes a difference.
    - sizzle 5y ago
      Yeah but out of that USA total, how many vacant properties are from foreign investors, let alone Chinese investors trying to stash their wealth out of reach of the CCP.

xyzzy21 5y ago

Because of "chà bu duō" and " dòufuzhā gōngchéng" buildings (I know, redundant), it's NOT really an asset in the normal sense. https://chinese.yabla.com/chinese-english-pinyin-dictionary.php?define=cha+bu+duo https://chinese.yabla.com/chinese-english-pinyin-dictionary.... https://www.sourcingallies.com/blog/cha-bu-duo https://www.sourcingallies.com/blog/cha-bu-duo https://en.wikipedia.org/wiki/Tofu-dreg_project https://en.wikipedia.org/wiki/Tofu-dreg_project https://www.youtube.com/watch?v=s-2DtL-Wjkc https://www.youtube.com/watch?v=s-2DtL-Wjkc The presumption that you can compare US financial/economic norms to Chinese is Epic Fail as an assumption. You have to take your head out of the clouds and challenge you ideals assumptions that underlie your understanding of the world!

endisneigh 5y ago
I can post videos of decaying buildings in the USA too - not really super relevant. The fact is that China is urbanizing at an unprecedented rate. You don't really have to believe the government - just go visit basically anywhere in China.
- worrycue 5y ago
  The buildings in question are new though, not old decaying buildings. They are just very shoddy constructed with corner cutting everywhere. How prevalent? It’s hard to say. Guess we will find out in a few decades.
  - zepto 5y ago
    New buildings can be decaying liabilities just as much as old ones. More so if they have been constructed badly.
- refurb 5y ago
  The point you’re missing is many of those home were bought as investments. No property tax makes them good stores of wealth, no carrying costs and my god a less risky investment than Chinese company equities. Problem is that despite the urbanization potential that doesn’t mean the properties are correctly priced or that they’ll continue to go up. I spent some time in another Asian country that has a per capita GDP 1/10th of the US, yet housing prices are comparable to the mid-west US and most are empty. Most are owned by the ultra rich and used to launder money. And I’m not talking prime location, these are basic apartments on the edge of the city going for $100,000USD or 30-40x average annual salaries. Unless GDP goes 3x no way those prices will hold. It’s a massive bet on continued income growth and demand for real estate which is not a given, which Japan showed with its massive property bubble.

chasd00 5y ago

> ..can properly incentivize more population growth .. did the one child policy mess that up? What i understand is China is short on women and the population situation is going to get worse before it gets better.

endisneigh 5y ago
yup - that's China's #1 problem IMHO. This is exactly why literally less than 6 months ago they implemented a three-child policy in order to incentivize more population growth with family planning, the elimination of private tutoring, etc. in an effort to drastically reduce the cost to raise a child. China has a lot of issues, one being a questionable government for those who are not Han, but China's existential issue is making sure the population of (young) people remains high and growing steadily.
- 1270018080 5y ago
  Anecdote: I've talked to many people from China, and they all say almost no one wants kids. And for similar reasons to what people say in America (cost, stress, the environment). So I don't think the policy change is going to help them, too little too late.
  - endisneigh 5y ago
    yeah, that's exactly why it's the #1 issue. maybe their solution is opening up to immigration finally
    - deleted 5y ago
      [deleted]
    - zepto 5y ago
      How will they make immigration attractive?
  - mooreds 5y ago
    If you want a provocative view on China, check out Peter Zeihan: https://zeihan.com/video-dispatch-chinas-demographic-decline/ https://zeihan.com/video-dispatch-chinas-demographic-decline... tl;dr: China's population has already peaked and in 2070 there will be 50% of the current population.

jollybean 5y ago

"I don't know why people keep comparing China to Japan" Because they both went through hyper-growth periods after economic shock (war for Japan, and for China war then Mao). During that period of hubris they took on a lot of debt. They both had declining GDP growth and bad demographics. The negative momentum overwhelms the positive moment at some point. Your comment misses the bit were Real Estate is not a productive asset. Building new buildings on land is productive, but like Canada's housing bubble, when homes double in value quickly, it's just inflation. " They'll just need to make sure they can properly incentivize more population growth to keep the positive feedback loop humming along." I hope you realize the folly of this statement. Imagine if we all just did the 'body count for GDP strategy'.

infamia 5y ago

The United States thought the same thing and when through a housing crisis during 2008 and has been paying for it ever since with a frail economy and anemic growth. What China is doing now with Evergrande is exactly the approach the US took in 2008. Simply put, bad debt must be written off if you don't want to zomibify parts of your economy. Pretending that you can grow your way out of debt is fantasy as clearly evidenced by Japan and the US over the past 30 years. The fact that China has chosen to sweep this problem under the rug by rescuing Evergrande will be a drag on future growth and encourages future moral hazards. I don't predict doom and gloom for China, only that this will be a millstone around it's economic growth with additional systemic risk. If an asset depreciates or isn't worth what you paid for it, refusing to write down the asset and take your medicine sooner rather than later just drags out the pain. Better to take your medicine and get the pain over with so your economy can quickly reallocate and quickly bounce back. The losers must lose. This approach does not go down well with politicians, but is the best medicine for a sick patient.

jkhdigital 5y ago
The reason it doesn't go well with politicians is because, in a massively complex modern economy, the "losers" in an unexpected default are nearly always a wide swath of average citizens and public institutions. Why? Because they are the ones who dump all their savings into "safe" mass market investments like blue chip stocks and corporate debt ETFs.
- cinquemb 5y ago
  Yeah, I said "fuck it" when they started buying corp bonds… DeFi only now, and just finished getting an audit for a decentralized derivatives protocol that was seeded funded with a decentralized incubator. We're planning on the protocol being able to lend liquidity into existence out of thin air (well more accurately, taking advantage of collateral dynamics and protocol stablecoin flows) and packaging that debt into decentralized stablecoins denominated in $… Thanks to the moral hazards, they've have motivated me and others to pursue alternatives that in their eyes have systemic risk, and I'd agree, very risk to their bailoutistan system :D

onlyrealcuzzo 5y ago

Chinese people only save to buy houses on debt with 5:1 leverage. The difference is there investments are all leveraged, whereas Westerners have a larger share of investments that are in equities with no leverage. It's easy to have a lot of "savings" when 100% of your investments on 5:1 leverage are appreciating at 7%+ per year for 2 decades. It's also easier to get that much appreciation when it's all debt fueled and on leverage.

splistud 5y ago

He compared them to Japan because the largest attribute of their economic problem is identical - high leverage on overpriced real estate.

TheOtherHobbes 5y ago

Much of Evergrande's debt is literally housing that hasn't been built yet. But has been paid for by investors/speculators. So there is no sense in which it's an asset. It's actually more of a Ponzi scheme with concrete accessories.