10 ms·

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

by 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
    > GDP capita flattened at 13k Flattened? It's growing something like 5% per year.
    - oblio 3y ago
      https://news.ycombinator.com/item?id=37171762 https://news.ycombinator.com/item?id=37171762
      - throwaway4good 3y ago
        You can cherry pick negative news all you want. But if you a clear picture look at the aggregate for longer terms.
        dmix 3y ago
        The article explains there are multiple signals which suggest we can't trust the growth numbers coming out of China. People have been ringing that bell for years. That still applies in aggregates and recent history.
        misja111 3y ago
        The CDS (credit default swap) on Chinese government bonds went up over 30% during the last week. This means that the market believes that the chance for a default on bond payments went up considerably. If you believe you are right and the market is wrong, you should short-sell CDS'es and get rich.
    - nradov 3y ago
      We really don't know how fast the Chinese economy is growing. The numbers are largely made up by Party functionaries with no oversight; they often exaggerate and falsely claim to be meeting goals in order to keep their jobs. Independent analysis based on satellite imagery and import/export volumes indicates the growth rate is probably lower, but no one knows for sure.
  - throwaway4good 3y ago
- jsiepkes 3y ago
  > It was never about money or trade it was all about keeping asians down and dependent. Thats way too much simplification. For starters there isn't a level playing field. Any Chinese company can start a company in the west but if a western company wants to start a company in China you can either start a "second class" entity (a WFOE) or if you want a level playing field with the locals you can use a joint venture but then a Chinese national must have 50+% stake in your business. Just ask ARM what can happen if you go for a joint venture.
  - justinclift 3y ago
    > ... then a Chinese national must have 50+% stake in your business. Didn't they drop that requirement last year?
  - oreally 3y ago
    > For starters there isn't a level playing field. Think about it, who determines what is a 'level playing field'? That's right, the US in this context. Every country has the right to determine it's own policies, and the US shouldn't have any say, and yet is applying pressure for it's own benefits. The same goes when China insists on one-on-one bilateral country negotiations on the issue of the south china sea instead of multilateral negotiations. Historically the number one country will always be putting pressure on potential the upstart countries, and Big countries will be big countries. The US especially is adapt at spinning up narratives, so calm down and take a look at the different perspectives.
    - krona 3y ago
      The US is still nominally governed by and accountable to the rule of law. Companies cannot use the court system in China to hold the government to account, the government is accountable only to itself. This difference is irreconcilable.
      - oreally 3y ago
        > The US is still nominally governed by and accountable to the rule of law. You mean the rule of law that it imposes upon others that they didn't agree on? And they'll bring it up only when it's convenient. I'll say it again: Big countries will be big countries.
- aylmao 3y ago
  Not sure why this comment is getting downvoted. I think it's relevant to the discussion, whether people agree with it or not.
  - oblio 3y ago
    > it was all about keeping asians down and dependent. Probably because of this. The US is allied to several prosperous Asian countries.
    - throwaway4good 3y ago
      Who all got seriously smacked down when they got too independent (from the Vietnam war to the Plaza accord).
      - dmix 3y ago
        Neither the Vietnam war nor Plaza Accords were about "keeping Asians down". Unintentional side effects is not intention. A very important distinction. Japan's recent Stagflation has plenty of obvious internal causes. Blaming the west for that is some weird cope. China is an expert at manipulating their currency and internal markets for global advantage. Countries reacting to China's top-down aggressive self interest in a global market is only logical. Other countries engaging in those markets aren't there for charity and nor is China.
        modo_mario 3y ago
        >Japan's recent Stagflation has plenty of obvious internal causes. Blaming the west for that is some weird cope. I don't think it extends so far since it's the 80's but I can see why one would blame the US there. Around this time Japan was forced to do technology transfers to the US, to have minimum marketshare in japan for US cars and semiconductors, to have unfavorable monetary policy. That smells equivalent to being a vassal at gunpoint. Of course European countries helped pressuring and it being the cold war japan did not have much developed (or allowed alternatives) for it's export based economy even if it did have an army, more independence and a more varied political landscape.
- unstatusthequo 3y ago
  “Beating the west in new IP generation” is highly misleading. China is probably the best at IP theft, and they are certainly beating everyone at that game. Have a look at their EV cars that look like BMWs and Fords. Or their completely stolen Boeing plans. I sure as hell would not get on a fake Chinese plane, that’s for sure.
- mensetmanusman 3y ago
  Um, no. China killed itself off with its own policy of ‘for every two of us there should be one of us’. Now their work force is shrinking and costs are rising fast. They aren’t competitive and the future is with India and Africa.
AnthonyMouse 3y ago
Are they actually underwater or do they just have higher loan payments than rental income? If it's the latter, let them sell some properties or transfer them to the bank in lieu of loan payments.
- HWR_14 3y ago
  Underwater. Totally underwater.
- Zetobal 3y ago
  The problem they have is that nobody buys their properties...
  - jldugger 3y ago
    Only in the sense that the problem with pyramid schemes is that people stop buying in.
  - mensetmanusman 3y ago
    Hard to rationalize with land rights that expire. You are just playing with government land for a while.
- lmm 3y ago
  Who says those properties are worth their book value? This is how a crash happens these days - distressed asset holders forced into fire sales of the assets themselves, lowering asset values and putting more of the holders into distress.
  - AnthonyMouse 3y ago
    They don't have to be worth book value to be worth more than the outstanding loan principal. This is also why it can make sense to pay the bank in real estate. The bank doesn't need to sell it immediately because they don't need to pay a mortgage so they can just sit on it and collect rental income until they can find a buyer. Another alternative is for the real estate trust to sell new shares into the market and use the money to pay the bank, or pay the bank in new shares. That dilutes the existing shareholders but doesn't force a fire sale of the properties.
throwaway2037 3y ago
Some of these companies have trillions in RMB on their balance sheets. I don't understand this sentence. It is nonsensical to use balance in this way. You wrote "trillions in RMB". Let's assume (your hand-wavy use of the term) balance sheet means: outstanding debt. Further, each 1T RMB is 137B USD. How many companies in the whole world carry more than this much debt? Let alone Chine property developers? Wildly overstated. Also, central bank's can print money, by definition. They can also buy debt issued by these companies to repay maturing debt. Then they can forgive this debt. Why would this harm "the assets of the middle and lower class"? The misunderstanding of monetary theory appears weak here.
- bakuninsbart 3y ago
  From a quick google Evergrande (officially) has 2.4 trillion Yuan in debt, and 1.7 trillion Yuan in assets. Assets seem to have lost more than 20% of their value since 2019. It is the largest one of the Chinese real estate developers, but there are a couple others that might break through the 1T Yuan mark.
  - blackoil 3y ago
    That is 90 billion USD shortfall. Assuming lenders will have to take some haircut the no. is big but not something that will break the economy!! am I missing some nos.?
    - bobthepanda 3y ago
      One is that apparently a bunch of suppliers and contractors for their projects have not been paid for a while, so those will default or go bankrupt as well, and cascade further down the economy. The other thing is that Evergrande sold mostly through presales so now there are all those paid for but unfinished apartment blocks.
    - deleted 3y ago
      [deleted]
    - OtherShrezzing 3y ago

by ipnon 3y ago

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
  > GDP capita flattened at 13k Flattened? It's growing something like 5% per year.
  - oblio 3y ago
    https://news.ycombinator.com/item?id=37171762 https://news.ycombinator.com/item?id=37171762
    - throwaway4good 3y ago
      You can cherry pick negative news all you want. But if you a clear picture look at the aggregate for longer terms.
      - dmix 3y ago
        The article explains there are multiple signals which suggest we can't trust the growth numbers coming out of China. People have been ringing that bell for years. That still applies in aggregates and recent history.
      - misja111 3y ago
        The CDS (credit default swap) on Chinese government bonds went up over 30% during the last week. This means that the market believes that the chance for a default on bond payments went up considerably. If you believe you are right and the market is wrong, you should short-sell CDS'es and get rich.
  - nradov 3y ago
    We really don't know how fast the Chinese economy is growing. The numbers are largely made up by Party functionaries with no oversight; they often exaggerate and falsely claim to be meeting goals in order to keep their jobs. Independent analysis based on satellite imagery and import/export volumes indicates the growth rate is probably lower, but no one knows for sure.
- throwaway4good 3y ago
jsiepkes 3y ago
> It was never about money or trade it was all about keeping asians down and dependent. Thats way too much simplification. For starters there isn't a level playing field. Any Chinese company can start a company in the west but if a western company wants to start a company in China you can either start a "second class" entity (a WFOE) or if you want a level playing field with the locals you can use a joint venture but then a Chinese national must have 50+% stake in your business. Just ask ARM what can happen if you go for a joint venture.
- justinclift 3y ago
  > ... then a Chinese national must have 50+% stake in your business. Didn't they drop that requirement last year?
- oreally 3y ago
  > For starters there isn't a level playing field. Think about it, who determines what is a 'level playing field'? That's right, the US in this context. Every country has the right to determine it's own policies, and the US shouldn't have any say, and yet is applying pressure for it's own benefits. The same goes when China insists on one-on-one bilateral country negotiations on the issue of the south china sea instead of multilateral negotiations. Historically the number one country will always be putting pressure on potential the upstart countries, and Big countries will be big countries. The US especially is adapt at spinning up narratives, so calm down and take a look at the different perspectives.
  - krona 3y ago
    The US is still nominally governed by and accountable to the rule of law. Companies cannot use the court system in China to hold the government to account, the government is accountable only to itself. This difference is irreconcilable.
    - oreally 3y ago
      > The US is still nominally governed by and accountable to the rule of law. You mean the rule of law that it imposes upon others that they didn't agree on? And they'll bring it up only when it's convenient. I'll say it again: Big countries will be big countries.
aylmao 3y ago
Not sure why this comment is getting downvoted. I think it's relevant to the discussion, whether people agree with it or not.
- oblio 3y ago
  > it was all about keeping asians down and dependent. Probably because of this. The US is allied to several prosperous Asian countries.
  - throwaway4good 3y ago
    Who all got seriously smacked down when they got too independent (from the Vietnam war to the Plaza accord).
    - dmix 3y ago
      Neither the Vietnam war nor Plaza Accords were about "keeping Asians down". Unintentional side effects is not intention. A very important distinction. Japan's recent Stagflation has plenty of obvious internal causes. Blaming the west for that is some weird cope. China is an expert at manipulating their currency and internal markets for global advantage. Countries reacting to China's top-down aggressive self interest in a global market is only logical. Other countries engaging in those markets aren't there for charity and nor is China.
      - modo_mario 3y ago
        >Japan's recent Stagflation has plenty of obvious internal causes. Blaming the west for that is some weird cope. I don't think it extends so far since it's the 80's but I can see why one would blame the US there. Around this time Japan was forced to do technology transfers to the US, to have minimum marketshare in japan for US cars and semiconductors, to have unfavorable monetary policy. That smells equivalent to being a vassal at gunpoint. Of course European countries helped pressuring and it being the cold war japan did not have much developed (or allowed alternatives) for it's export based economy even if it did have an army, more independence and a more varied political landscape.
unstatusthequo 3y ago
“Beating the west in new IP generation” is highly misleading. China is probably the best at IP theft, and they are certainly beating everyone at that game. Have a look at their EV cars that look like BMWs and Fords. Or their completely stolen Boeing plans. I sure as hell would not get on a fake Chinese plane, that’s for sure.
mensetmanusman 3y ago
Um, no. China killed itself off with its own policy of ‘for every two of us there should be one of us’. Now their work force is shrinking and costs are rising fast. They aren’t competitive and the future is with India and Africa.

AnthonyMouse 3y ago

Are they actually underwater or do they just have higher loan payments than rental income? If it's the latter, let them sell some properties or transfer them to the bank in lieu of loan payments.

HWR_14 3y ago
Underwater. Totally underwater.
Zetobal 3y ago
The problem they have is that nobody buys their properties...
- jldugger 3y ago
  Only in the sense that the problem with pyramid schemes is that people stop buying in.
- mensetmanusman 3y ago
  Hard to rationalize with land rights that expire. You are just playing with government land for a while.
lmm 3y ago
Who says those properties are worth their book value? This is how a crash happens these days - distressed asset holders forced into fire sales of the assets themselves, lowering asset values and putting more of the holders into distress.
- AnthonyMouse 3y ago
  They don't have to be worth book value to be worth more than the outstanding loan principal. This is also why it can make sense to pay the bank in real estate. The bank doesn't need to sell it immediately because they don't need to pay a mortgage so they can just sit on it and collect rental income until they can find a buyer. Another alternative is for the real estate trust to sell new shares into the market and use the money to pay the bank, or pay the bank in new shares. That dilutes the existing shareholders but doesn't force a fire sale of the properties.

throwaway2037 3y ago

Some of these companies have trillions in RMB on their balance sheets. I don't understand this sentence. It is nonsensical to use balance in this way. You wrote "trillions in RMB". Let's assume (your hand-wavy use of the term) balance sheet means: outstanding debt. Further, each 1T RMB is 137B USD. How many companies in the whole world carry more than this much debt? Let alone Chine property developers? Wildly overstated. Also, central bank's can print money, by definition. They can also buy debt issued by these companies to repay maturing debt. Then they can forgive this debt. Why would this harm "the assets of the middle and lower class"? The misunderstanding of monetary theory appears weak here.

bakuninsbart 3y ago
From a quick google Evergrande (officially) has 2.4 trillion Yuan in debt, and 1.7 trillion Yuan in assets. Assets seem to have lost more than 20% of their value since 2019. It is the largest one of the Chinese real estate developers, but there are a couple others that might break through the 1T Yuan mark.
- blackoil 3y ago
  That is 90 billion USD shortfall. Assuming lenders will have to take some haircut the no. is big but not something that will break the economy!! am I missing some nos.?
  - bobthepanda 3y ago
    One is that apparently a bunch of suppliers and contractors for their projects have not been paid for a while, so those will default or go bankrupt as well, and cascade further down the economy. The other thing is that Evergrande sold mostly through presales so now there are all those paid for but unfinished apartment blocks.
  - deleted 3y ago
    [deleted]
  - OtherShrezzing 3y ago