6 ms·

How much exposure does the Western world have to this? My guess would be "not much". It'll sting some emerging market investors, but I don't think you'll see a

How much exposure does the Western world have to this? My guess would be "not much". It'll sting some emerging market investors, but I don't think you'll see a massive knock-on here.

raesene9 5y ago
My guess is the opposite :) Chinese bonds have nice high yields and there's a load of money from western companies looking for yield. Until recently they were considered (by most people) to be a relatively safe bet, so why wouldn't there be a load of money in there...
bsanr2 5y ago
A lot of people seem intent on letting us know that this is the case, at least.
- WhisperingShiba 5y ago
  The economy is held up by belief, and while I'm sure there are some good intentioned people telling us this, there are certainly some people who are using this as an opportunity to change financial positions.
  - bsanr2 5y ago
    It's important to point out that DMSA's release alledges that media has been trading on rumors that Evergrande had made the earlier missed debt payments before the grace period ended, when in fact it it had not. Several commentators over the past few weeks have pointed out that all of the media reports saying that the payments had been made were circuitously cited; no one had heard from a creditor directly. Now we have. So now one has to wonder why essentially every major journalistic entity involved in the financial space would bet their reputation on hearsay, for something with such limited effects; especially when it would only buy a few weeks, at most, of this false belief.
    - svnt 5y ago
      a) All owned by the billionaire set, directly or indirectly b) Their reputations are already unimportant in important circles; see a) c) A few weeks is enough time to comfortably check even a complex portfolio and exit positions with exposure
    - itronitron 5y ago
      https://www.prnewswire.com/news-releases/evergrande-officially-defaulted---dmsa-is-preparing-bankruptcy-proceedings-against-evergrande-group-301421327.html https://www.prnewswire.com/news-releases/evergrande-official...
01100011 5y ago
Hasn't Ray Dalio been advocating investing in China for a couple of years now? His thesis is that the US is a world power on the decline and China will soon rise to take its place. I wonder how that worked out for him and his fund?
- Quarrelsome 5y ago
  > His thesis is that the US is a world power on the decline and China will soon rise to take its place. I feel like someone has mistaken 100 years for 10 years.
- klodolph 5y ago
  Bridgewater suffered massive losses and laid off a ton of staff a year or two ago. The losses were something like $12 billion in 2020. If you are hiring in the northeast, you've probably run into ex-Bridgewater employees.
- boringg 5y ago
  In the long run China has a lot of power here. This might be a correction in how they set up their economy but I don't think anyone doubts that China is an economic superpower. The thing is investing in China a foreigner is a complete dice roll where you have no real power and no visibility into what you are investing in.
  - JumpCrisscross 5y ago
    > I don't think anyone doubts that China is an economic superpower They are, but the foundation is rickety. Xi is a dictator. That increases the odds of catastrophic failure. Were an economic collapse to become protracted, it's not hard to imagine separatist movements and competing power sectors turning to violence as a political tool.
    - whimsicalism 5y ago
      People have been talking about the "rickety foundation" of China for decades. I'm sure when they have an economic downturn sometime in the next two decades, those people will all come out to crow about how they had been right all along. To me, they seem to be building on top of a more modern infrastructure base and do not have the super-prevalent NIMBY problems that exist in the West.
LatteLazy 5y ago
The CCP are in a similar position to the west: if they let one mega corp fail, others might, if others might maybe you need to re-evaluate your investments in all of China? Here in the west we've just extended indefinite credit (13 years and counting). So it's a bit of a pivotal moment for the CCP imho. It might turn out they're more committed to markets than we are :)
LurkingPenguin 5y ago
> It'll sting some emerging market investors, but I don't think you'll see a massive knock-on here. China has basically been the single biggest driver of global growth over the past decade. Its highly overleveraged real estate market is a huge threat to its overall economy, and that has plenty of potential to create a massive knock-on. https://www.reuters.com/article/us-economy-global-kemp-column/china-has-replaced-u-s-as-locomotive-of-global-economy-kemp-idUSKBN1XF211 https://www.reuters.com/article/us-economy-global-kemp-colum...
- jerf 5y ago
  Leverage in the US is very high too. I'm thinking the next crisis will in the end be known as the Leverage Crisis, because it's leverage that will take what was already going to be a big financial crisis into financial catastrophe. It really wouldn't take much to tip us over right now because the ever-rising stock prices are encouraging everyone and their duck to leverage to the max, further pushing up prices... it's not a good cycle.
- whimsicalism 5y ago
  > China has basically been the single biggest driver of global growth over the past decade. Its highly overleveraged real estate market is a huge threat to its overall economy, and that has plenty of potential to create a massive knock-on. I think what Western observers are missing is that this was an intentional "let fail" in order to prevent this structural weakness from becoming too big of a problem. China is basically euthanizing this industry because they perceive it as a structural weakness.
  - LurkingPenguin 5y ago
    > I think what Western observers are missing is that this was an intentional "let fail" in order to prevent this structural weakness from becoming too big of a problem. I think what you're missing is that China isn't even out of the first inning on this one. Evergrande hasn't even failed yet. It's a slow-moving trainwreck and the contagion is only just starting to spread. https://www.reuters.com/world/china/chinas-state-council-held-meeting-with-property-developers-banks-source-2021-11-09/ https://www.reuters.com/world/china/chinas-state-council-hel...
markus_zhang 5y ago
I think it's more like exposure of Chinese companies from international investors. It's going to be very tough to get fx credit lines for those construction companies from now on.
riffraff 5y ago
I'm personally looking forward to see if tether comes out of this with a hole in their books, due to common suspicion they hold a ton of Chinese commercial paper.
- AlexandrB 5y ago
  Even if they do, does it matter? Everyone already seems to be ok with Tether lying about the backing of USDT. I don't expect USDT holders to decide to sell based on loss of value in the assets backing USDT. Especially when Tether is so opaque that's it's hard to know what the real impact might be.
  - riffraff 5y ago
    Eh, I don't know. I am convinced cartoon gravity will keep tether afloat, but it would be interesting to see!
  - baq 5y ago
    in a game of musical chairs everybody is having fun while the music is playing.
- loeg 5y ago
  Would anyone notice? As long as they can continue paying redemptions they could hide a hole for a long time; it wouldn't be the first time.
mym1990 5y ago
My guess is that nobody really knows. How could someone(or even a group of trained experts) possibly know the full extent and the dominoes that might fall elsewhere in a situation as complex as this?

How much exposure does the Western world have to this? My guess would be "not much". It'll sting some emerging market investors, but I don't think you'll see a massive knock-on here.

raesene9 5y ago

My guess is the opposite :) Chinese bonds have nice high yields and there's a load of money from western companies looking for yield. Until recently they were considered (by most people) to be a relatively safe bet, so why wouldn't there be a load of money in there...

bsanr2 5y ago

A lot of people seem intent on letting us know that this is the case, at least.

WhisperingShiba 5y ago
The economy is held up by belief, and while I'm sure there are some good intentioned people telling us this, there are certainly some people who are using this as an opportunity to change financial positions.
- bsanr2 5y ago
  It's important to point out that DMSA's release alledges that media has been trading on rumors that Evergrande had made the earlier missed debt payments before the grace period ended, when in fact it it had not. Several commentators over the past few weeks have pointed out that all of the media reports saying that the payments had been made were circuitously cited; no one had heard from a creditor directly. Now we have. So now one has to wonder why essentially every major journalistic entity involved in the financial space would bet their reputation on hearsay, for something with such limited effects; especially when it would only buy a few weeks, at most, of this false belief.
  - svnt 5y ago
    a) All owned by the billionaire set, directly or indirectly b) Their reputations are already unimportant in important circles; see a) c) A few weeks is enough time to comfortably check even a complex portfolio and exit positions with exposure
  - itronitron 5y ago
    https://www.prnewswire.com/news-releases/evergrande-officially-defaulted---dmsa-is-preparing-bankruptcy-proceedings-against-evergrande-group-301421327.html https://www.prnewswire.com/news-releases/evergrande-official...

01100011 5y ago

Hasn't Ray Dalio been advocating investing in China for a couple of years now? His thesis is that the US is a world power on the decline and China will soon rise to take its place. I wonder how that worked out for him and his fund?

Quarrelsome 5y ago
> His thesis is that the US is a world power on the decline and China will soon rise to take its place. I feel like someone has mistaken 100 years for 10 years.
klodolph 5y ago
Bridgewater suffered massive losses and laid off a ton of staff a year or two ago. The losses were something like $12 billion in 2020. If you are hiring in the northeast, you've probably run into ex-Bridgewater employees.
boringg 5y ago
In the long run China has a lot of power here. This might be a correction in how they set up their economy but I don't think anyone doubts that China is an economic superpower. The thing is investing in China a foreigner is a complete dice roll where you have no real power and no visibility into what you are investing in.
- JumpCrisscross 5y ago
  > I don't think anyone doubts that China is an economic superpower They are, but the foundation is rickety. Xi is a dictator. That increases the odds of catastrophic failure. Were an economic collapse to become protracted, it's not hard to imagine separatist movements and competing power sectors turning to violence as a political tool.
  - whimsicalism 5y ago
    People have been talking about the "rickety foundation" of China for decades. I'm sure when they have an economic downturn sometime in the next two decades, those people will all come out to crow about how they had been right all along. To me, they seem to be building on top of a more modern infrastructure base and do not have the super-prevalent NIMBY problems that exist in the West.

LatteLazy 5y ago

The CCP are in a similar position to the west: if they let one mega corp fail, others might, if others might maybe you need to re-evaluate your investments in all of China? Here in the west we've just extended indefinite credit (13 years and counting). So it's a bit of a pivotal moment for the CCP imho. It might turn out they're more committed to markets than we are :)

LurkingPenguin 5y ago

> It'll sting some emerging market investors, but I don't think you'll see a massive knock-on here. China has basically been the single biggest driver of global growth over the past decade. Its highly overleveraged real estate market is a huge threat to its overall economy, and that has plenty of potential to create a massive knock-on. https://www.reuters.com/article/us-economy-global-kemp-column/china-has-replaced-u-s-as-locomotive-of-global-economy-kemp-idUSKBN1XF211 https://www.reuters.com/article/us-economy-global-kemp-colum...

jerf 5y ago
Leverage in the US is very high too. I'm thinking the next crisis will in the end be known as the Leverage Crisis, because it's leverage that will take what was already going to be a big financial crisis into financial catastrophe. It really wouldn't take much to tip us over right now because the ever-rising stock prices are encouraging everyone and their duck to leverage to the max, further pushing up prices... it's not a good cycle.
whimsicalism 5y ago
> China has basically been the single biggest driver of global growth over the past decade. Its highly overleveraged real estate market is a huge threat to its overall economy, and that has plenty of potential to create a massive knock-on. I think what Western observers are missing is that this was an intentional "let fail" in order to prevent this structural weakness from becoming too big of a problem. China is basically euthanizing this industry because they perceive it as a structural weakness.
- LurkingPenguin 5y ago
  > I think what Western observers are missing is that this was an intentional "let fail" in order to prevent this structural weakness from becoming too big of a problem. I think what you're missing is that China isn't even out of the first inning on this one. Evergrande hasn't even failed yet. It's a slow-moving trainwreck and the contagion is only just starting to spread. https://www.reuters.com/world/china/chinas-state-council-held-meeting-with-property-developers-banks-source-2021-11-09/ https://www.reuters.com/world/china/chinas-state-council-hel...

markus_zhang 5y ago

I think it's more like exposure of Chinese companies from international investors. It's going to be very tough to get fx credit lines for those construction companies from now on.

riffraff 5y ago

I'm personally looking forward to see if tether comes out of this with a hole in their books, due to common suspicion they hold a ton of Chinese commercial paper.

AlexandrB 5y ago
Even if they do, does it matter? Everyone already seems to be ok with Tether lying about the backing of USDT. I don't expect USDT holders to decide to sell based on loss of value in the assets backing USDT. Especially when Tether is so opaque that's it's hard to know what the real impact might be.
- riffraff 5y ago
  Eh, I don't know. I am convinced cartoon gravity will keep tether afloat, but it would be interesting to see!
- baq 5y ago
  in a game of musical chairs everybody is having fun while the music is playing.
loeg 5y ago
Would anyone notice? As long as they can continue paying redemptions they could hide a hole for a long time; it wouldn't be the first time.

mym1990 5y ago

My guess is that nobody really knows. How could someone(or even a group of trained experts) possibly know the full extent and the dominoes that might fall elsewhere in a situation as complex as this?