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China’s property giant Evergrande files for bankruptcy protection in Manhattan

334 points by donsupreme 3y ago

adra 3y ago
Nice, creates corporation in tax havens to maximize tax dodging, files for bankruptcy in country that can actually put disgruntled debt owners to task. Good ol' capitalism.
- cscurmudgeon 3y ago
  Under "Good ol' capitalism" companies like Evergrande won't exist in the first place. Edit: CCP imposing market restrictions causing average folks to invest only in real estate is not "Good ol' capitalism".
  - greesil 3y ago
    Capitalism, like socialism, or postmodernism, or the labels conservative or liberal are almost devoid of meaning. But please, both the parent commenter and you keep arguing what the true meaning of capitalism is. Meanwhile I will head to the market and barter some of my guns for butter.
    - cscurmudgeon 3y ago
      > Meanwhile I will head to the market and barter some of my guns for butter. vs > Meanwhile I will head to the local apparatchik and request permission to barter some of my guns for butter while paying homage to dear leader. Those are two distinct experiences.
    - AnthonyMouse 3y ago
      The problem with these terms is not that they have no meaning, it's that they have no context-free virtue. Prohibiting leaded gasoline is good and prohibiting housing construction is bad, even if they're both government regulations. Competitive markets are good and concentrated markets are bad, even if they're both markets. But people want to assign a label to the category instead of the instance, and then they fight with people whose instance doesn't fit the label -- or whose instance does fit the label but they refuse to accept it because they assigned a different label to the category.
      - jxramos 3y ago
        that's a pretty deep meta level observation, the wrestling with a category to sully it with bad associations.
      - satvikpendem 3y ago
        Indeed, or put another way, nuance doesn't exist on the internet. I've seen this time and time again, where one party will blame something on capitalism or government regulation as some blanket statement, without saying which policies they're even talking about. At that point, it's a tribal opinion that was arrived at through emotional means, not logical means.
        AnthonyMouse 3y ago
        Better yet, sometimes that is what it is. For example, it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation, it's a result of the total number of regulations increasing over time like a ratchet when each one adds another tick to the cost of doing business.
        hackerlight 3y ago
        > it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation Yes, but each individual regulation that is contributing to this aggregate cost disease has varying degrees of value. Even if a specific regulation contributes +1 to the overall cost disease, it may also contribute +2 of positive value elsewhere that makes it net worthwhile, all things considered. So we're back to where we started. Each distinct thing needs to be considered on its own merits without trying to automatically judge it based on what category it belongs to. Aside from that, I could not agree more with your overall view. It's a good distillation of the broader concept of thinking things through from first principles. I don't want more or less regulations. I want more good regulations, and less bad regulations. In some areas (e.g. carbon emissions), I only want more regulations. In other areas (e.g. housing construction), I only want less regulations. I think these conclusions come from starting with the desired end goal (e.g. less pollution) and working backwards. Many people wrongly start with an ideology (e.g. regulations are good) and work forwards from that.
  - orwin 3y ago
    'free market' implies liberalism (Smith, Hume). Capitalism only imply that the capital owners decide what is produced, where, how, and how workers are treated/paid. It's in the name. In china's case, it isn't pure capitalism, it's a soviet-style capitalism (or a capitalist sovietism?) so I agree it isn't faire to reduce it to capitalism.
- drekipus 3y ago
  * communist country is corrupt, falls apart * Good ol' capitalism strikes again. Real communism has never been tried. Yet again
  - joshuaissac 3y ago
    Which country is falling apart? Or did you mean to write 'communist company' instead?
  - jraby3 3y ago
    There sure are a lot of examples of awful attempts though.
- CatWChainsaw 3y ago
  The countries of Delaware and Nevada are some of the most desirable tax havens in the world, you know.
roschdal 3y ago
Will the stock market crash of 1929 happen again now? https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
- SomethingNew2 3y ago
  What is your rationale for this comment? Can you provide more detail around metrics and financial indicators?
  - roschdal 3y ago
    Evergrande files for bankruptcy protection. The China Evergrande Group is the second largest property developer in China by sales. "History never repeats itself, but it does often rhyme", etc.
    - csomar 3y ago
      The chinese stock market (Shanghai index) has been through lots of boom and busts. It didn't affect western market in the slightest. I'd not expect otherwise. The only difference is that if the Chinese economy tanks hard (great depression style), this might be contagious to the rest of Asia and eventually to the rest of the world. But any guess is good if that happens.
      - irjustin 3y ago
        Agreed a crash in China would have fallout but not 08/09. The Chinese housing market was fueled by the familial need to own a house. Which led people to lead no matter what people would buy property, basically "stocks always go up"... "housing always goes up"... We can never run out of buyers!
        vxNsr 3y ago
        isn't the chinese market even more messed up because people are buying houses that don't exist yet, at least in 08/09 there was something, the asset itself, while overvalued did at least have some value, in china a lot of people just own and are paying a mortgage on a future promise.
ipnon 3y ago
There are many real estate giants and so-called "trust" companies who are incapable of repaying debt right now. Some of these companies have trillions in RMB on their balance sheets. The central bank can bail them out but at the expense of the assets of the middle and lower class. This would only further incentivize cash hoarding, and tighten the middle income trap. It is not an enviable situation.
- dragonelite 3y ago
  China will not be captured by the middle income trap because it has already escaped the middle income trap. The middle income in my opinion has a different reason countries get stuck there and its by design. Because the road to high income is protected by western IP protection. Patents are way for the west to forever license fees for their high end technology, China is beating the west in new IP generation and hence will get an ever bigger share of the high end technology fees income. If one thing i expect western nations most likely EU nations to slip back into middle income status and get trapped their with their suicidal foreign policy. I got this insight in 2016 when the US started its suicidal trade and tech war with China which they claimed would be easy to win. It was never about money or trade it was all about keeping asians down and dependent.
  - deleted 3y ago
    [deleted]
  - kristofferg 3y ago
    Some bold claims with little evidence. GDP capita flattened at 13k is hardly “escaped the middle income trap”. IPs can be harmful to growth but then again China has never shown any intent to enforce IPs of western origin. There are no evidence of the US wanting to “keep asians down” - many of USAs asian trading partners enjoy less trade regulation. The “trade war” might be counterproductive but was a, imo mild, response to the extreme levels of protectionism exhibited by the chinese communist party.
    - geysersam 3y ago
acyou 3y ago
There is a sort of balance where one market going down makes another go up. For example, real estate assets everywhere but China now look better in the long term. Bank crashing = money printing = asset values go back up. Can't lose.
- seydor 3y ago
  higher is not better
- steve76 3y ago
  [dead]
- AnthonyMouse 3y ago
  > Bank crashing = money printing = asset values go back up. Can't lose. If you buy real estate right before a housing crash, you immediately lose a lot of money vs. having just sold or not bought it, and even if the prices recover in the long term it can take years. Meanwhile you can't refinance the loan at the new lower rates because you're underwater and no longer have the collateral for a loan that size. Then there's the "risk" that people learned the lesson of the last housing crash and don't do the same thing, i.e. reinflate a housing bubble right after it pops. This wouldn't even have to be not lowering interest rates, it could just be lowering them but continuing the existing momentum behind relaxing zoning rules so the lower rates can fund new construction. Then the low rates save the rest of the economy but real estate prices stay reduced because the lower interest rates are offset by (and pay for) new construction. You can definitely lose.
  - acyou 3y ago
    I should have been more clear - this is to indicate that "we" can't lose, meaning society as a whole. Individuals for sure can lose their shirts, but overall, this bank collapsing won't be an issue. This bankruptcy happening and not causing a huge, devastating, world ending crash is a gigantic feature of the Chinese economy. Not a bug. It means asset values in China are deflating in a semi-controlled manner. People love to complain about the banks that are "too big to fail". Now this huge company that should really be too big to fail is failing, and the world isn't ending. The only people who are upset that everything isn't tumbling down, are the ones hoping for the crash.
jamesaurichs 3y ago
Some real estate related news from China: - Country garden, China's second biggest property company after Evergrande, missed a mere 22.5M payments for dollar denominated bonds. It is trying to restructure a $340B debt owned. https://abcnews.go.com/Business/wireStory/chinas-government-defuse-economic-fears-after-real-estate-102332535 https://abcnews.go.com/Business/wireStory/chinas-government-... - Li Ka Shing, richest man in Hong Kong, just offered an immediate 30% off on his newest buildings for sale - One of China's biggest shadow banks skipped payment. These shadow banks provide liquidity to real estate companies, in short. https://www.bloomberg.com/news/articles/2023-08-16/chinese-shadow-bank-misses-dozens-of-payments-as-fallout-spreads https://www.bloomberg.com/news/articles/2023-08-16/chinese-s... Some economic related news from China: - China stopped reporting youth unemployment, estimated around 20-50%. Which is why nobody really thinks China is growing at 5%. https://www.washingtonpost.com/world/2023/08/15/china-economy-youth-unemployment-rate/ https://www.washingtonpost.com/world/2023/08/15/china-econom... - foreign investment fell down 87% from the same period last year, lowest level in 25 years. https://www.bloomberg.com/news/articles/2023-08-07/china-foreign-investment-gauge-at-25-year-low-amid-high-tensions?in_source=embedded-checkout-banner https://www.bloomberg.com/news/articles/2023-08-07/china-for... - China's fertility rate dropped to record low 1.09 in 2022 https://www.reuters.com/world/china/chinas-fertility-rate-drops-record-low-109-2022-state-media-2023-08-15/ https://www.reuters.com/world/china/chinas-fertility-rate-dr... - China records fewest marriages in more than 3 decades https://www.cnn.com/2023/06/12/china/china-marriages-record-low-intl-hnk/index.html https://www.cnn.com/2023/06/12/china/china-marriages-record-... - China's exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% https://www.cnbc.com/2023/08/08/china-reports-double-digit-plunge-in-july-exports-and-imports-missing-expectations.html https://www.cnbc.com/2023/08/08/china-reports-double-digit-p... - China's economy slipped into deflation https://www.bbc.com/news/business-66435870 https://www.bbc.com/news/business-66435870
- whimsicalism 3y ago
  Yes, it is not looking good for their outlook. That said, nobody is seriously claiming Chinese youth unemployment at 50% unless you are looking at something like labor force participation rate, which is then a similar number for the US as well.
expertentipp 3y ago
I guess Caymanians will have to tighten their belts now.
louis8799 3y ago
- Li Ka Shing, richest man in Hong Kong, just offered an immediate 30% off on his newest buildings for sale -> This also result in immediate sold-out with 22X over-subscription.
- raverbashing 3y ago
  Smart guy ;) It's not his loan that's going to end up in arrears
- starfallg 3y ago
  Hong Kong is a completely separate market to mainland China, the latter is further segmented by region/city. Li more or less withdrew from mainland China in the past decade or so.
w10-1 3y ago
This is really a breathtaking legal situation. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. International bankruptcies are even weirder. In this case, US bankruptcy law has the power to intervene in ongoing bankruptcy proceedings in Hong Kong, Cayman's, etc. Bankruptcy law protects debt-holders and the company, but not other stakeholders. As far as I know under US law the court has no basis to change anything for reasons of economic policy or impact. If the Hong Kong court pushes mainland Chinese interests, it's unclear to me how the other courts would respond. Further, the due diligence required to qualify debts and debt-holders could uncover some unsettling relationships. I can imagine China viewing US bankruptcy discovery as an fishing expedition for intelligence. Huge amounts, even larger consequences, and super-power competition would make this difficult even if the law were programmatic, but here so much depends on the court's discretion, and the court itself is the finder of fact. ("So much depends/on the red wheel barrow"?) In the US we're lucky that these proceedings are mostly in the open and on the record (albeit sometimes only to record the results of debt-holder negotiations).
- throwaway2037 3y ago
  This is really a breathtaking legal situation. Yeah, not really. They issued USD debt and chose NYC as the legal jurisdiction to make their bond more attractive to overseas buyers. There are probably a myriad of overseas entities involved. It is very unlikely this will spread back to Mainland China. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. No, sovereignty does. We learned that during the CoCo bond 100% write-down during the Credit Suisse forced merger with UBS.
  - HWR_14 3y ago
    What CoCo bond write down? Or do you mean those special bonds bank issues that go to zero before any other assets during a run?
    - throwaway2037 3y ago
      Thanks for asking. Yes, exactly right. To be clear, I needed to Google the exact meaning of CoCo bonds. It would better to say AT1 bonds. Google defines AT1/CoCo bonds as: AT1 bonds are contingent convertable (CoCo) bonds that are designed to functon as both debt and equity. More: https://www.investopedia.com/terms/c/contingentconvertible.asp https://www.investopedia.com/terms/c/contingentconvertible.a... BTW -- The writedown is incomplete. There are numerous court battles in numerous jurisdictions that may take 5-10 years to wind down. And, no, I don't think the Swiss Gov't will lose any of them. In the end, UBS will probably throw some pennies at these poor fools.
meowtimemania 3y ago
I’m never sure if news about China’s upcoming economic problems is written because such an event is actually coming or if the media writes it just for the clicks.
- dmix 3y ago
  No one else can be certain either. It's always very difficult to tell whether the numbers coming out of China are real and how "real" certain markets are. But personally I wouldn't buy into the "China is doomed" narratives that the internet loves to bring up yearly. Reality is usually far more boring and the issues (especially central gov ones) are usually far more deep rooted and survive long term like cockroaches. Regardless the article links to some major long term worries in China's real estate which account for 30% of their assets. The number of defaults is declining but the housing market is still in a major slump: https://www.cnbc.com/2023/07/26/china-signals-more-support-for-real-estate-with-a-big-change-in-tone.html https://www.cnbc.com/2023/07/26/china-signals-more-support-f...
  - NovaDudely 3y ago
    Their problems always seem to look worse than it should be but functions better than expected.
- ricardo81 3y ago
  Agree, it's so hard to tell nowadays and consensus of different media outlets maybe helps. FWIW on Evergrande, I always find Patrick Boyle's channel educational and insightful. He has a few videos on the topic. https://www.youtube.com/watch?v=wXCpis_Mlwk&list=PLHC72UlhAthC95h4szTLnmfr4zP7dRwBp https://www.youtube.com/watch?v=wXCpis_Mlwk&list=PLHC72UlhAt...
  - NovaDudely 3y ago
    China has been tipped to fail any time now for the last 25 years. They have long term issues but they will play out over long term results. A whimper rather than a boom!
hulitu 3y ago
> China’s property giant Evergrande files for bankruptcy protection in Manhattan If it is "China’s property giant" why does it "files for bankruptcy protection in Manhattan" ? Why not in China ?
- dmix 3y ago
  Companies open regional HQs all the time and they register corporations in those countries. Those are still technically independent legal entities with their own financial paperwork.
- raincole 3y ago
  Bankruptcy is just you admitting to the court/gov you're not going to pay your creditors, and you're ready to face the legal consequence (like reconstruction). They filed bankruptcy in Manhattan because they are not going to pay their creditors in the US. That's it.
  - fergal 3y ago
    What is it about the topic of global finance that when someone asks a straightforward questions it illicits an answer wrapped in condescension.
    - raincole 3y ago
      I read the question as it implies Evergrande is not a "China's property giant", which it definitely is. But I might read it wrong. I'll edit out my condescending tone.
  - local_issues 3y ago
    They filed in Manhattan in particular for very good reason - the venue is extremely good at huge, complex bankruptcies like this. It's non-trivial to unwind these financial obligations, and is really only done in NYC. https://en.wikipedia.org/wiki/United_States_Bankruptcy_Court_for_the_Southern_District_of_New_York https://en.wikipedia.org/wiki/United_States_Bankruptcy_Court...
- 3y ago
txdv 3y ago
It's been a long process, 2 years ago people were already talking about Evergrande falling
- onlyrealcuzzo 3y ago
  Psh, I've been talking about Evergrande failing since at least 2016. This broken clock is gonna be right sooner or later - even if I gotta wait til the heat death of the universe!
  - jncfhnb 3y ago
    Evergrande has been failing for a long time with no ambiguity
jacquesm 3y ago
This isn't necessarily super bad in its own right even though it is a very large company and it signals that some of China's big developers are under water. The question is whether it is a harbinger or the whole of it. If the former there will be a domino effect just like what happened in 2008, but hopefully more limited to China. I imagine that 'heads will roll' is more than just a figurative expression here, Xi & co will do everything they can to lay the blame with others even though this clearly happened on their watch and is a failure of oversight as much as incompetence at Evergrande. China real estate is a subject you could write several books on (and it probably has been done) it is a series of houses of cards that are all precariously balanced against each other and that is why the fall-out from this could be substantial. It will be an interesting number of weeks, the larger questions that will determine some of the outcome are: Who holds the debt? Which other companies are overextended in the same way? What will Xi & co do to deflect blame? Are the assets valued fairly or are the worth much less in a sale than their book value? (the bigger the discrepancy the larger the effect will be, for a giant of this size to fall over would have to result in a significant effect on the market) This could be everything between 'meh' and 'there goes the house' and I have no idea how you'd get to reliable information from inside China to get those questions answered.
- throwaway2990 3y ago
  The people are the ones who suffer. Not the banks. Evergrande sold homes that didn’t exist. People got loans from banks to buy those homes. Citizens in China can’t file for bankruptcy. So even if they never get a home. They are in debt for life. This is what you get living under the rule of the CCP.
  - onlyrealcuzzo 3y ago
    People associated with Evergrande are very screwed. Yes, the people who bought unfinished homes are screwed, too, and there's more of them. But the whole entire country is screwed when their housing bubble pops. This happened just 15 years ago with 2008 in the US. China and the CCP aren't particularly extraordinary. And they definitely didn't invent incompetence and greed...
- 3y ago
bigbacaloa 3y ago
Thread has far too much analysis premises on notions such as the US economy works the best and everything works like in the US that are simply stupid.
- hospitalJail 3y ago
  I think long term we are going to find out economics is more religion than science. What is good for the macro (Spending on consumables during a recession) isnt good for the micro. Hording assets that hedge fiat currency is good for the micro, but not good for the macro. CPI/real inflation wasn't averaging 2% for the last 30 years, but probably was like 3-4%. Technology and out sourcing kept CPI looking like it was 2% + some gaming by each administration.
bohadi 3y ago
The 200$ billion hole in CN real estate is comparable in size to the SVB signature US banking crisis. In that case US treasury policy was a bailout for uninsured depositors who are wealthy supporters of the ruling blue party. Most of the underwater property developers are wealthy patrons of the ruling red party in China and will ultimately receive similar government bailouts. Privatized gains and socialized losses it's the same movie everywhere. But this is just theatre, on the order of 1 trillion disappearing in smoke is not going to sink the ship of any nation with 100 trillion in wealth assets. edit: I should say this money doesn't really disappear in smoke, it's bourne on the backs of mostly middle classes amortization over the period of decades in hidden inflation taxes and marginal lower living standards.
- kasey_junk 3y ago
  Why would Chinese Communist party members bail out USD denominated bond holders when they didn’t bail out Yuan denominated bond holders in 2021?
  - bohadi 3y ago
    where do you see the onshore forex market moving? merits investigation though
- namaria 3y ago
  The whole financial and taxation systems are engineered to reward owners of wealth and discipline laborers. The outcomes are pre-defined. I thought this was pretty well understood.
- worrycue 3y ago
  This isn't their only problem though. Local Government Financing Vehicles are also having trouble servicing their debts - the only way they make money is leasing out land but the real estate sector had imploded. One of their biggest lenders, Zhongrong International Trust Co. also just failed to make payments. Their economy seem to be swimming in bad debt.
  - 3y ago
tibbydudeza 3y ago
My understanding is that lots of families invested their life savings into either having no apartments on paper or half-finished ones or some close to completion but unlivable. Social unrest or govt bailout ???. Who is holding the can for this one - Western investors ???.
ironborn123 3y ago
How can a declining population selling mostly commoditized goods support ever increasing property prices, that too when property is already overleveraged!! This crash was always on the cards. Just a matter of when, and the when may have finally arrived.
- onlyrealcuzzo 3y ago
  > How can a declining population selling mostly commoditized goods support ever increasing property prices It's pretty simple. If you believed China was going to keep growing at 10% per year indefinitely - then the property prices were a bargain. I think you needed to be mathematically challenged to believe that, but a lot of people did, or at least thought everyone else just assumed it would happen and they could get in and out before anything bad happened. You also have to realize it wasn't foreign investment, and the Chinese are astoundingly nationalistic.
  - nradov 3y ago
    It was more like there was no alternative. Capital controls prevent regular Chinese investors (those without special Party connections) from taking their money out of the country. The domestic stock market is a joke. Banks pay low interest rates. So, the only thing they can do with their money is speculate in residential real estate.
    - urthor 3y ago
      Exactly this. Consequence of capital controls.
    - onlyrealcuzzo 3y ago
      The stock market in China is likely to look better than the property market when it implodes on leverage, and definitely bonds and savings. People didn't want to miss out. That's it. You're not going to buy a house on 3:1 leverage if you think it's overpriced by 30% just because you think the stock market is overpriced by 50%. You'd just keep your cash in savings. The problem is - they believed it would keep going up - because it had been for almost everyone's entire adult life.
wenyuanyu 3y ago
The Chinese government's approach to dealing with failing real-estate companies, including Evergrande, is distinct from typical Western bailouts. In China, the strategy often involves allowing such companies to default in a controlled manner. Given that the major lenders and banks are state-owned , this essentially means that the government bears the loss through these institutions (what else can happen anyway??) . Asset management companies are then allowed to bid for any remaining valuable assets of the failed company. The state government has also issued directives to local governments, ensuring they take responsibility for the completion of housing projects for homebuyers. It's clear that there have been instances of questionable financial maneuvering by individuals behind these real estate companies, involving substantial sums of money being moved out of China through various, potentially illicit means. In Evergrande's case, critics point to dubious ventures, such as an automotive business that never produced cars, as potential vehicles for siphoning money to overseas entities. Additionally, the issuance of USD-denominated bonds—often purchased by shareholders—is another strategy that has been scrutinized. To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence... exit-ban and blackmailing are the only way China can go... As for Evergrande, while it's severely distressed, it continues to operate, largely as a 'zombie' company under state guidance, to resolve as much of its outstanding debt and obligations as possible. A full government bailout, in the Western sense, does not appear to be on the table. Regarding the broader crisis, I feel the situation is largely controllable due to the extensive tools at the disposal of the Chinese government. It's almost certain that the authorities have already devised a comprehensive plan and roadmap to navigate this crisis 1-2 years ago...
- bradleyjg 3y ago
  To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence... exit-ban and blackmailing are the only way China can go... This doesn’t sound so unreasonable to me. These guys knew what game they were playing. They could have not tried to scam the Chinese government in order to build a foreign fortune and live abroad as kleptocrats.
nologic01 3y ago
Fears about the Chinese real estate sector have been around for at least a decade. The amount of stuff that has been erected is just mind-boggling and unprecedented in human history. You cannot "rightsize" an exponential process. But a spectacular bust to obliterate all speculative busts is not the deterministic outcome in this instance. The intermingling or state finances, state supported banks etc. is also a major characteristic of the Chinese system. In such a system you can push around and hide issues, redistribute the pain wherever it is politically acceptable and other such "conveniences". One interesting question is whether the work-from-home behavioral change is further affecting the oversupply of commercial real estate in China as it does elsewhere...
- tigeroil 3y ago
  Anecdotal but I will say the shift to WFH isn't really a thing in China from what I've seen.
  - seanmcdirmid 3y ago
    Ya, housing is too small in general for that. If you work from home, it’s probably because you are drop shipping or doing your own business, but the office is needed. I never worked from home when working for Microsoft Beijing, although I would work from a cafe sometimes. My housing simply wasn’t good enough for WFH.
- bradleyjg 3y ago
  The intermingling or state finances, state supported banks etc. is also a major characteristic of the Chinese system. In such a system you can push around and hide issues, redistribute the pain wherever it is politically acceptable and other such "conveniences". Japan famously has had decades of zombie conglomerates surviving despite insolvency. I don’t think state intermingling is necessary.
  - Vt71fcAqt7 3y ago
    Who do you think was proping up those zombie conglomerates?
LargoLasskhyfv 3y ago
Peanuts.
- LargoLasskhyfv 3y ago
  Some popcorn, then?

334 points by donsupreme 3y ago

adra 3y ago

Nice, creates corporation in tax havens to maximize tax dodging, files for bankruptcy in country that can actually put disgruntled debt owners to task. Good ol' capitalism.

cscurmudgeon 3y ago
Under "Good ol' capitalism" companies like Evergrande won't exist in the first place. Edit: CCP imposing market restrictions causing average folks to invest only in real estate is not "Good ol' capitalism".
- greesil 3y ago
  Capitalism, like socialism, or postmodernism, or the labels conservative or liberal are almost devoid of meaning. But please, both the parent commenter and you keep arguing what the true meaning of capitalism is. Meanwhile I will head to the market and barter some of my guns for butter.
  - cscurmudgeon 3y ago
    > Meanwhile I will head to the market and barter some of my guns for butter. vs > Meanwhile I will head to the local apparatchik and request permission to barter some of my guns for butter while paying homage to dear leader. Those are two distinct experiences.
  - AnthonyMouse 3y ago
    The problem with these terms is not that they have no meaning, it's that they have no context-free virtue. Prohibiting leaded gasoline is good and prohibiting housing construction is bad, even if they're both government regulations. Competitive markets are good and concentrated markets are bad, even if they're both markets. But people want to assign a label to the category instead of the instance, and then they fight with people whose instance doesn't fit the label -- or whose instance does fit the label but they refuse to accept it because they assigned a different label to the category.
    - jxramos 3y ago
      that's a pretty deep meta level observation, the wrestling with a category to sully it with bad associations.
    - satvikpendem 3y ago
      Indeed, or put another way, nuance doesn't exist on the internet. I've seen this time and time again, where one party will blame something on capitalism or government regulation as some blanket statement, without saying which policies they're even talking about. At that point, it's a tribal opinion that was arrived at through emotional means, not logical means.
      - AnthonyMouse 3y ago
        Better yet, sometimes that is what it is. For example, it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation, it's a result of the total number of regulations increasing over time like a ratchet when each one adds another tick to the cost of doing business.
        hackerlight 3y ago
        > it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation Yes, but each individual regulation that is contributing to this aggregate cost disease has varying degrees of value. Even if a specific regulation contributes +1 to the overall cost disease, it may also contribute +2 of positive value elsewhere that makes it net worthwhile, all things considered. So we're back to where we started. Each distinct thing needs to be considered on its own merits without trying to automatically judge it based on what category it belongs to. Aside from that, I could not agree more with your overall view. It's a good distillation of the broader concept of thinking things through from first principles. I don't want more or less regulations. I want more good regulations, and less bad regulations. In some areas (e.g. carbon emissions), I only want more regulations. In other areas (e.g. housing construction), I only want less regulations. I think these conclusions come from starting with the desired end goal (e.g. less pollution) and working backwards. Many people wrongly start with an ideology (e.g. regulations are good) and work forwards from that.
- orwin 3y ago
  'free market' implies liberalism (Smith, Hume). Capitalism only imply that the capital owners decide what is produced, where, how, and how workers are treated/paid. It's in the name. In china's case, it isn't pure capitalism, it's a soviet-style capitalism (or a capitalist sovietism?) so I agree it isn't faire to reduce it to capitalism.
drekipus 3y ago
* communist country is corrupt, falls apart * Good ol' capitalism strikes again. Real communism has never been tried. Yet again
- joshuaissac 3y ago
  Which country is falling apart? Or did you mean to write 'communist company' instead?
- jraby3 3y ago
  There sure are a lot of examples of awful attempts though.
CatWChainsaw 3y ago
The countries of Delaware and Nevada are some of the most desirable tax havens in the world, you know.

roschdal 3y ago

Will the stock market crash of 1929 happen again now? https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

SomethingNew2 3y ago
What is your rationale for this comment? Can you provide more detail around metrics and financial indicators?
- roschdal 3y ago
  Evergrande files for bankruptcy protection. The China Evergrande Group is the second largest property developer in China by sales. "History never repeats itself, but it does often rhyme", etc.
  - csomar 3y ago
    The chinese stock market (Shanghai index) has been through lots of boom and busts. It didn't affect western market in the slightest. I'd not expect otherwise. The only difference is that if the Chinese economy tanks hard (great depression style), this might be contagious to the rest of Asia and eventually to the rest of the world. But any guess is good if that happens.
    - irjustin 3y ago
      Agreed a crash in China would have fallout but not 08/09. The Chinese housing market was fueled by the familial need to own a house. Which led people to lead no matter what people would buy property, basically "stocks always go up"... "housing always goes up"... We can never run out of buyers!
      - vxNsr 3y ago
        isn't the chinese market even more messed up because people are buying houses that don't exist yet, at least in 08/09 there was something, the asset itself, while overvalued did at least have some value, in china a lot of people just own and are paying a mortgage on a future promise.

ipnon 3y ago

There are many real estate giants and so-called "trust" companies who are incapable of repaying debt right now. Some of these companies have trillions in RMB on their balance sheets. The central bank can bail them out but at the expense of the assets of the middle and lower class. This would only further incentivize cash hoarding, and tighten the middle income trap. It is not an enviable situation.

dragonelite 3y ago
China will not be captured by the middle income trap because it has already escaped the middle income trap. The middle income in my opinion has a different reason countries get stuck there and its by design. Because the road to high income is protected by western IP protection. Patents are way for the west to forever license fees for their high end technology, China is beating the west in new IP generation and hence will get an ever bigger share of the high end technology fees income. If one thing i expect western nations most likely EU nations to slip back into middle income status and get trapped their with their suicidal foreign policy. I got this insight in 2016 when the US started its suicidal trade and tech war with China which they claimed would be easy to win. It was never about money or trade it was all about keeping asians down and dependent.
- deleted 3y ago
  [deleted]
- kristofferg 3y ago
  Some bold claims with little evidence. GDP capita flattened at 13k is hardly “escaped the middle income trap”. IPs can be harmful to growth but then again China has never shown any intent to enforce IPs of western origin. There are no evidence of the US wanting to “keep asians down” - many of USAs asian trading partners enjoy less trade regulation. The “trade war” might be counterproductive but was a, imo mild, response to the extreme levels of protectionism exhibited by the chinese communist party.
  - geysersam 3y ago

acyou 3y ago

There is a sort of balance where one market going down makes another go up. For example, real estate assets everywhere but China now look better in the long term. Bank crashing = money printing = asset values go back up. Can't lose.

seydor 3y ago
higher is not better
steve76 3y ago
[dead]
AnthonyMouse 3y ago
> Bank crashing = money printing = asset values go back up. Can't lose. If you buy real estate right before a housing crash, you immediately lose a lot of money vs. having just sold or not bought it, and even if the prices recover in the long term it can take years. Meanwhile you can't refinance the loan at the new lower rates because you're underwater and no longer have the collateral for a loan that size. Then there's the "risk" that people learned the lesson of the last housing crash and don't do the same thing, i.e. reinflate a housing bubble right after it pops. This wouldn't even have to be not lowering interest rates, it could just be lowering them but continuing the existing momentum behind relaxing zoning rules so the lower rates can fund new construction. Then the low rates save the rest of the economy but real estate prices stay reduced because the lower interest rates are offset by (and pay for) new construction. You can definitely lose.
- acyou 3y ago
  I should have been more clear - this is to indicate that "we" can't lose, meaning society as a whole. Individuals for sure can lose their shirts, but overall, this bank collapsing won't be an issue. This bankruptcy happening and not causing a huge, devastating, world ending crash is a gigantic feature of the Chinese economy. Not a bug. It means asset values in China are deflating in a semi-controlled manner. People love to complain about the banks that are "too big to fail". Now this huge company that should really be too big to fail is failing, and the world isn't ending. The only people who are upset that everything isn't tumbling down, are the ones hoping for the crash.

jamesaurichs 3y ago

Some real estate related news from China: - Country garden, China's second biggest property company after Evergrande, missed a mere 22.5M payments for dollar denominated bonds. It is trying to restructure a $340B debt owned. https://abcnews.go.com/Business/wireStory/chinas-government-defuse-economic-fears-after-real-estate-102332535 https://abcnews.go.com/Business/wireStory/chinas-government-... - Li Ka Shing, richest man in Hong Kong, just offered an immediate 30% off on his newest buildings for sale - One of China's biggest shadow banks skipped payment. These shadow banks provide liquidity to real estate companies, in short. https://www.bloomberg.com/news/articles/2023-08-16/chinese-shadow-bank-misses-dozens-of-payments-as-fallout-spreads https://www.bloomberg.com/news/articles/2023-08-16/chinese-s... Some economic related news from China: - China stopped reporting youth unemployment, estimated around 20-50%. Which is why nobody really thinks China is growing at 5%. https://www.washingtonpost.com/world/2023/08/15/china-economy-youth-unemployment-rate/ https://www.washingtonpost.com/world/2023/08/15/china-econom... - foreign investment fell down 87% from the same period last year, lowest level in 25 years. https://www.bloomberg.com/news/articles/2023-08-07/china-foreign-investment-gauge-at-25-year-low-amid-high-tensions?in_source=embedded-checkout-banner https://www.bloomberg.com/news/articles/2023-08-07/china-for... - China's fertility rate dropped to record low 1.09 in 2022 https://www.reuters.com/world/china/chinas-fertility-rate-drops-record-low-109-2022-state-media-2023-08-15/ https://www.reuters.com/world/china/chinas-fertility-rate-dr... - China records fewest marriages in more than 3 decades https://www.cnn.com/2023/06/12/china/china-marriages-record-low-intl-hnk/index.html https://www.cnn.com/2023/06/12/china/china-marriages-record-... - China's exports fell by 14.5% in July from a year ago, while imports dropped by 12.4% https://www.cnbc.com/2023/08/08/china-reports-double-digit-plunge-in-july-exports-and-imports-missing-expectations.html https://www.cnbc.com/2023/08/08/china-reports-double-digit-p... - China's economy slipped into deflation https://www.bbc.com/news/business-66435870 https://www.bbc.com/news/business-66435870

whimsicalism 3y ago
Yes, it is not looking good for their outlook. That said, nobody is seriously claiming Chinese youth unemployment at 50% unless you are looking at something like labor force participation rate, which is then a similar number for the US as well.

expertentipp 3y ago

I guess Caymanians will have to tighten their belts now.

louis8799 3y ago

- Li Ka Shing, richest man in Hong Kong, just offered an immediate 30% off on his newest buildings for sale -> This also result in immediate sold-out with 22X over-subscription.

raverbashing 3y ago
Smart guy ;) It's not his loan that's going to end up in arrears
starfallg 3y ago
Hong Kong is a completely separate market to mainland China, the latter is further segmented by region/city. Li more or less withdrew from mainland China in the past decade or so.

w10-1 3y ago

This is really a breathtaking legal situation. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. International bankruptcies are even weirder. In this case, US bankruptcy law has the power to intervene in ongoing bankruptcy proceedings in Hong Kong, Cayman's, etc. Bankruptcy law protects debt-holders and the company, but not other stakeholders. As far as I know under US law the court has no basis to change anything for reasons of economic policy or impact. If the Hong Kong court pushes mainland Chinese interests, it's unclear to me how the other courts would respond. Further, the due diligence required to qualify debts and debt-holders could uncover some unsettling relationships. I can imagine China viewing US bankruptcy discovery as an fishing expedition for intelligence. Huge amounts, even larger consequences, and super-power competition would make this difficult even if the law were programmatic, but here so much depends on the court's discretion, and the court itself is the finder of fact. ("So much depends/on the red wheel barrow"?) In the US we're lucky that these proceedings are mostly in the open and on the record (albeit sometimes only to record the results of debt-holder negotiations).

throwaway2037 3y ago
This is really a breathtaking legal situation. Yeah, not really. They issued USD debt and chose NYC as the legal jurisdiction to make their bond more attractive to overseas buyers. There are probably a myriad of overseas entities involved. It is very unlikely this will spread back to Mainland China. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. No, sovereignty does. We learned that during the CoCo bond 100% write-down during the Credit Suisse forced merger with UBS.
- HWR_14 3y ago
  What CoCo bond write down? Or do you mean those special bonds bank issues that go to zero before any other assets during a run?
  - throwaway2037 3y ago
    Thanks for asking. Yes, exactly right. To be clear, I needed to Google the exact meaning of CoCo bonds. It would better to say AT1 bonds. Google defines AT1/CoCo bonds as: AT1 bonds are contingent convertable (CoCo) bonds that are designed to functon as both debt and equity. More: https://www.investopedia.com/terms/c/contingentconvertible.asp https://www.investopedia.com/terms/c/contingentconvertible.a... BTW -- The writedown is incomplete. There are numerous court battles in numerous jurisdictions that may take 5-10 years to wind down. And, no, I don't think the Swiss Gov't will lose any of them. In the end, UBS will probably throw some pennies at these poor fools.

meowtimemania 3y ago

I’m never sure if news about China’s upcoming economic problems is written because such an event is actually coming or if the media writes it just for the clicks.

dmix 3y ago
No one else can be certain either. It's always very difficult to tell whether the numbers coming out of China are real and how "real" certain markets are. But personally I wouldn't buy into the "China is doomed" narratives that the internet loves to bring up yearly. Reality is usually far more boring and the issues (especially central gov ones) are usually far more deep rooted and survive long term like cockroaches. Regardless the article links to some major long term worries in China's real estate which account for 30% of their assets. The number of defaults is declining but the housing market is still in a major slump: https://www.cnbc.com/2023/07/26/china-signals-more-support-for-real-estate-with-a-big-change-in-tone.html https://www.cnbc.com/2023/07/26/china-signals-more-support-f...
- NovaDudely 3y ago
  Their problems always seem to look worse than it should be but functions better than expected.
ricardo81 3y ago
Agree, it's so hard to tell nowadays and consensus of different media outlets maybe helps. FWIW on Evergrande, I always find Patrick Boyle's channel educational and insightful. He has a few videos on the topic. https://www.youtube.com/watch?v=wXCpis_Mlwk&list=PLHC72UlhAthC95h4szTLnmfr4zP7dRwBp https://www.youtube.com/watch?v=wXCpis_Mlwk&list=PLHC72UlhAt...
- NovaDudely 3y ago
  China has been tipped to fail any time now for the last 25 years. They have long term issues but they will play out over long term results. A whimper rather than a boom!

hulitu 3y ago

> China’s property giant Evergrande files for bankruptcy protection in Manhattan If it is "China’s property giant" why does it "files for bankruptcy protection in Manhattan" ? Why not in China ?

dmix 3y ago
Companies open regional HQs all the time and they register corporations in those countries. Those are still technically independent legal entities with their own financial paperwork.
raincole 3y ago
Bankruptcy is just you admitting to the court/gov you're not going to pay your creditors, and you're ready to face the legal consequence (like reconstruction). They filed bankruptcy in Manhattan because they are not going to pay their creditors in the US. That's it.
- fergal 3y ago
  What is it about the topic of global finance that when someone asks a straightforward questions it illicits an answer wrapped in condescension.
  - raincole 3y ago
    I read the question as it implies Evergrande is not a "China's property giant", which it definitely is. But I might read it wrong. I'll edit out my condescending tone.
- local_issues 3y ago
  They filed in Manhattan in particular for very good reason - the venue is extremely good at huge, complex bankruptcies like this. It's non-trivial to unwind these financial obligations, and is really only done in NYC. https://en.wikipedia.org/wiki/United_States_Bankruptcy_Court_for_the_Southern_District_of_New_York https://en.wikipedia.org/wiki/United_States_Bankruptcy_Court...
3y ago

txdv 3y ago

It's been a long process, 2 years ago people were already talking about Evergrande falling

onlyrealcuzzo 3y ago
Psh, I've been talking about Evergrande failing since at least 2016. This broken clock is gonna be right sooner or later - even if I gotta wait til the heat death of the universe!
- jncfhnb 3y ago
  Evergrande has been failing for a long time with no ambiguity

jacquesm 3y ago

This isn't necessarily super bad in its own right even though it is a very large company and it signals that some of China's big developers are under water. The question is whether it is a harbinger or the whole of it. If the former there will be a domino effect just like what happened in 2008, but hopefully more limited to China. I imagine that 'heads will roll' is more than just a figurative expression here, Xi & co will do everything they can to lay the blame with others even though this clearly happened on their watch and is a failure of oversight as much as incompetence at Evergrande. China real estate is a subject you could write several books on (and it probably has been done) it is a series of houses of cards that are all precariously balanced against each other and that is why the fall-out from this could be substantial. It will be an interesting number of weeks, the larger questions that will determine some of the outcome are: Who holds the debt? Which other companies are overextended in the same way? What will Xi & co do to deflect blame? Are the assets valued fairly or are the worth much less in a sale than their book value? (the bigger the discrepancy the larger the effect will be, for a giant of this size to fall over would have to result in a significant effect on the market) This could be everything between 'meh' and 'there goes the house' and I have no idea how you'd get to reliable information from inside China to get those questions answered.

throwaway2990 3y ago
The people are the ones who suffer. Not the banks. Evergrande sold homes that didn’t exist. People got loans from banks to buy those homes. Citizens in China can’t file for bankruptcy. So even if they never get a home. They are in debt for life. This is what you get living under the rule of the CCP.
- onlyrealcuzzo 3y ago
  People associated with Evergrande are very screwed. Yes, the people who bought unfinished homes are screwed, too, and there's more of them. But the whole entire country is screwed when their housing bubble pops. This happened just 15 years ago with 2008 in the US. China and the CCP aren't particularly extraordinary. And they definitely didn't invent incompetence and greed...
3y ago

bigbacaloa 3y ago

Thread has far too much analysis premises on notions such as the US economy works the best and everything works like in the US that are simply stupid.

hospitalJail 3y ago
I think long term we are going to find out economics is more religion than science. What is good for the macro (Spending on consumables during a recession) isnt good for the micro. Hording assets that hedge fiat currency is good for the micro, but not good for the macro. CPI/real inflation wasn't averaging 2% for the last 30 years, but probably was like 3-4%. Technology and out sourcing kept CPI looking like it was 2% + some gaming by each administration.

bohadi 3y ago

The 200$ billion hole in CN real estate is comparable in size to the SVB signature US banking crisis. In that case US treasury policy was a bailout for uninsured depositors who are wealthy supporters of the ruling blue party. Most of the underwater property developers are wealthy patrons of the ruling red party in China and will ultimately receive similar government bailouts. Privatized gains and socialized losses it's the same movie everywhere. But this is just theatre, on the order of 1 trillion disappearing in smoke is not going to sink the ship of any nation with 100 trillion in wealth assets. edit: I should say this money doesn't really disappear in smoke, it's bourne on the backs of mostly middle classes amortization over the period of decades in hidden inflation taxes and marginal lower living standards.

kasey_junk 3y ago
Why would Chinese Communist party members bail out USD denominated bond holders when they didn’t bail out Yuan denominated bond holders in 2021?
- bohadi 3y ago
  where do you see the onshore forex market moving? merits investigation though
namaria 3y ago
The whole financial and taxation systems are engineered to reward owners of wealth and discipline laborers. The outcomes are pre-defined. I thought this was pretty well understood.
worrycue 3y ago
This isn't their only problem though. Local Government Financing Vehicles are also having trouble servicing their debts - the only way they make money is leasing out land but the real estate sector had imploded. One of their biggest lenders, Zhongrong International Trust Co. also just failed to make payments. Their economy seem to be swimming in bad debt.
- 3y ago

tibbydudeza 3y ago

My understanding is that lots of families invested their life savings into either having no apartments on paper or half-finished ones or some close to completion but unlivable. Social unrest or govt bailout ???. Who is holding the can for this one - Western investors ???.

ironborn123 3y ago

How can a declining population selling mostly commoditized goods support ever increasing property prices, that too when property is already overleveraged!! This crash was always on the cards. Just a matter of when, and the when may have finally arrived.

onlyrealcuzzo 3y ago
> How can a declining population selling mostly commoditized goods support ever increasing property prices It's pretty simple. If you believed China was going to keep growing at 10% per year indefinitely - then the property prices were a bargain. I think you needed to be mathematically challenged to believe that, but a lot of people did, or at least thought everyone else just assumed it would happen and they could get in and out before anything bad happened. You also have to realize it wasn't foreign investment, and the Chinese are astoundingly nationalistic.
- nradov 3y ago
  It was more like there was no alternative. Capital controls prevent regular Chinese investors (those without special Party connections) from taking their money out of the country. The domestic stock market is a joke. Banks pay low interest rates. So, the only thing they can do with their money is speculate in residential real estate.
  - urthor 3y ago
    Exactly this. Consequence of capital controls.
  - onlyrealcuzzo 3y ago
    The stock market in China is likely to look better than the property market when it implodes on leverage, and definitely bonds and savings. People didn't want to miss out. That's it. You're not going to buy a house on 3:1 leverage if you think it's overpriced by 30% just because you think the stock market is overpriced by 50%. You'd just keep your cash in savings. The problem is - they believed it would keep going up - because it had been for almost everyone's entire adult life.

wenyuanyu 3y ago

The Chinese government's approach to dealing with failing real-estate companies, including Evergrande, is distinct from typical Western bailouts. In China, the strategy often involves allowing such companies to default in a controlled manner. Given that the major lenders and banks are state-owned , this essentially means that the government bears the loss through these institutions (what else can happen anyway??) . Asset management companies are then allowed to bid for any remaining valuable assets of the failed company. The state government has also issued directives to local governments, ensuring they take responsibility for the completion of housing projects for homebuyers. It's clear that there have been instances of questionable financial maneuvering by individuals behind these real estate companies, involving substantial sums of money being moved out of China through various, potentially illicit means. In Evergrande's case, critics point to dubious ventures, such as an automotive business that never produced cars, as potential vehicles for siphoning money to overseas entities. Additionally, the issuance of USD-denominated bonds—often purchased by shareholders—is another strategy that has been scrutinized. To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence... exit-ban and blackmailing are the only way China can go... As for Evergrande, while it's severely distressed, it continues to operate, largely as a 'zombie' company under state guidance, to resolve as much of its outstanding debt and obligations as possible. A full government bailout, in the Western sense, does not appear to be on the table. Regarding the broader crisis, I feel the situation is largely controllable due to the extensive tools at the disposal of the Chinese government. It's almost certain that the authorities have already devised a comprehensive plan and roadmap to navigate this crisis 1-2 years ago...

bradleyjg 3y ago
To address these challenges, the Chinese government has enforced exit bans and placed these individuals under strict supervision. They are often required to return these funds to China, potentially under threat of reduced prison sentences. This sounds not right... but yeah... it is China. And China does not have other means to use like US to extradite fugitives or request the money back even it got all the evidence... exit-ban and blackmailing are the only way China can go... This doesn’t sound so unreasonable to me. These guys knew what game they were playing. They could have not tried to scam the Chinese government in order to build a foreign fortune and live abroad as kleptocrats.

nologic01 3y ago

Fears about the Chinese real estate sector have been around for at least a decade. The amount of stuff that has been erected is just mind-boggling and unprecedented in human history. You cannot "rightsize" an exponential process. But a spectacular bust to obliterate all speculative busts is not the deterministic outcome in this instance. The intermingling or state finances, state supported banks etc. is also a major characteristic of the Chinese system. In such a system you can push around and hide issues, redistribute the pain wherever it is politically acceptable and other such "conveniences". One interesting question is whether the work-from-home behavioral change is further affecting the oversupply of commercial real estate in China as it does elsewhere...

tigeroil 3y ago
Anecdotal but I will say the shift to WFH isn't really a thing in China from what I've seen.
- seanmcdirmid 3y ago
  Ya, housing is too small in general for that. If you work from home, it’s probably because you are drop shipping or doing your own business, but the office is needed. I never worked from home when working for Microsoft Beijing, although I would work from a cafe sometimes. My housing simply wasn’t good enough for WFH.
bradleyjg 3y ago
The intermingling or state finances, state supported banks etc. is also a major characteristic of the Chinese system. In such a system you can push around and hide issues, redistribute the pain wherever it is politically acceptable and other such "conveniences". Japan famously has had decades of zombie conglomerates surviving despite insolvency. I don’t think state intermingling is necessary.
- Vt71fcAqt7 3y ago
  Who do you think was proping up those zombie conglomerates?

LargoLasskhyfv 3y ago

Peanuts.

LargoLasskhyfv 3y ago
Some popcorn, then?