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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 unprecede

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?
jncfhnb 3y ago
Evergrande collapsing in slow motion is the limit of pushing things around
_fat_santa 3y ago
This video[1] was posted about 6 years ago but I think were starting to see the effects of the bubble they were talking about. In the video they said most new apartments were bought as investments as real estate is seen as one of the only "safe" investments in China. It would be one thing if most of these buildings were occupied by residents and only a percentage was investment properties but it sounds like there were many buildings in these new cities where practically every unit was an "investment property". The problem is these "investment properties" stop being investments when everyone has one. [1]: https://www.youtube.com/watch?v=BcyYyyaPz84 https://www.youtube.com/watch?v=BcyYyyaPz84
- toomuchtodo 3y ago
  When making a trade, being early is the same as being wrong [1]. You are right, the writing has been on the wall that eventually, the real estate pyramid scheme Chinese wealth is built on was going to crumble (the zeitgeist was that real estate was the path to wealth vs capital markets or other asset classes, and it was until it wasn't). We are only recently within sight of the event horizon, and there are no greater fools [2] left. [1] https://news.ycombinator.com/item?id=27673627 https://news.ycombinator.com/item?id=27673627 [2] https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory (ADVchina is a great channel btw, highly recommend the content if you're a remote scholar of Chinese macro)

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?

jncfhnb 3y ago

Evergrande collapsing in slow motion is the limit of pushing things around

_fat_santa 3y ago

This video[1] was posted about 6 years ago but I think were starting to see the effects of the bubble they were talking about. In the video they said most new apartments were bought as investments as real estate is seen as one of the only "safe" investments in China. It would be one thing if most of these buildings were occupied by residents and only a percentage was investment properties but it sounds like there were many buildings in these new cities where practically every unit was an "investment property". The problem is these "investment properties" stop being investments when everyone has one. [1]: https://www.youtube.com/watch?v=BcyYyyaPz84 https://www.youtube.com/watch?v=BcyYyyaPz84

toomuchtodo 3y ago
When making a trade, being early is the same as being wrong [1]. You are right, the writing has been on the wall that eventually, the real estate pyramid scheme Chinese wealth is built on was going to crumble (the zeitgeist was that real estate was the path to wealth vs capital markets or other asset classes, and it was until it wasn't). We are only recently within sight of the event horizon, and there are no greater fools [2] left. [1] https://news.ycombinator.com/item?id=27673627 https://news.ycombinator.com/item?id=27673627 [2] https://en.wikipedia.org/wiki/Greater_fool_theory https://en.wikipedia.org/wiki/Greater_fool_theory (ADVchina is a great channel btw, highly recommend the content if you're a remote scholar of Chinese macro)