China’s real estate sector was long seen as a vital growth engine in the world’s second-largest economy and accounted for as much as 30% of the country’s GDP. But Evergrande’s 2021 default sent shockwaves through China’s property markets, damaging homeowners and the broader financial system in the country.
this post was submitted on 18 Aug 2023
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damaging homeowners and the broader financial system in the country.
Or, showing that current homeowners overpaid, opening the door to new homeowners and allowing the broader financial system to have losses we all knew were possible.
Curious to see if there is going to be a domino effect with their real estate companies.
Its fucked, no way around it. Property bubble has already exploded with a whimper, thanks to CCP censorship. Chinese households are now extremely wary of trusting their money to others and aren't gonna be buying homes until the next (unsustainably small) generation.
Curious to see if there is going to be a domino effect with their real estate companies.
China Gardens, the largest real estate company, is toppling (article is from a week ago and those payments still haven't been made) and at least one of China's largest "Shadow Banks", Zhongzhi Enterprise Group, is going with them.
The dominoes aren't going to stop; Evergrande, Country Gardens, and Zhongzhi Enterprise Group are just the first visible ones.
surprised it took this long, surprised the shock on the charts isn't bigger around the world.
My best guess is that the almost two years of can kicking this conclusion was enough for most larger investors to reposition so the bag holders are now, once again, regular people.
Only difference being that it is a large amount of Chinese citizens getting fudged, rather than US or EU citizens.
I mean... gestures towards the surroundings We've got a pretty large pile of "Oh shit, we're fucked" stacked up here already. I guess add it to the pile?
So more of a Temporarilygrande, eh?
Wasgrande
Oh fuck you that’s so much better. Edit: read in an Australian accent, and I’m not Australian.
Damn that's one heck of a juxtaposition 🤣 like the opposite of TIHI
After all the warnings on the Chinese real estate market in the last years, this should only hit those who were to dumb to handle investments in the first place. A rather Darwinist approach to markets.
The Chinese property market is the worlds largest ponzi scheme overlayed by the world's largest shell game overseen by a group of referees that are either so incompetent they don't understand what's happening or so corrupt that they don't care what's happening. Whichever it is the sweet 2000s music of economic expansion has stopped and there will soon be hundreds of millions of investors trying to find a non-existent chair.
That comment isn't hyperbole and I don't make it lightly, for example their residential property market is jaw droppingly stupid to any Westerner. Chinese people commonly hand over their life or generational savings to buy a home, really an apartment, in a building that may not exist yet and then begin paying the mortgage for 2 or 3 years before their place is done! The property developers, like Evergrande and Country Gardens, would then take their money and combine it with loans to build the properties. It worked for the last 25ish years because the demand was never ending as their population shifted from rural to urban. You'd "invest" in a home and even if you didn't want it in the end you could sell it for more than you paid for it due to ever rising demand.
In something shockingly similar to the US Sub-Prime Mortgage Crisis of 2008 those loans were often being made by Asset Management Companies using money gathered from regular Chinese people by Investment Companies that were unknowingly owned by those same Asset Managers. They got people to invest because they offered a higher rate of return than the traditional banks and it was seen by many people as less risky than their Plinko Game Stock Market.
It's all crashing down as the Chinese economy starts to deflate from a wicked mix of demographic decline, trade sanctions, and corruption so large that it can't be covered up any longer.
So while Evergrande is the big news they aren't the end of this merely the beginning. Country Gardens, the largest property developer in China, is also publicly struggling with up to 1.4 Trillion US dollars in debt to a mix of both State owned and Asset Management Companies, the latter often referred to as "Shadow Banks" or "Shadow Finance" because it's all so secretive.
So Evergrande and Country Gardens, really their entire real estate market, have managed to pull Zhongzhi Enterprise Group into crisis, one of those Asset Management / Investment Companies I was talking about, and put another 180 Billion USD or so at direct risk while exposing China's entire 2.9 Trillion dollar trust / investment industry to a domino effect.
Since China's Real Estate market is 30%, and seen estimates as high as 60%, of their entire GDP it's collapse would be a financial problem unlike anything the world has ever seen. By way of comparison the Real Estate market in the US contributes between 17% and 20% of it's GDP.
The whole situation is WILD and its entirely possible that we're going to watch the Chinese economy entirely implode on itself over the next 12-18 months. I'm not cheering for it to happen either, because just like '08 it's going hammer ALL economies, not just China's.
Assuming Chinese bankruptcy is similar to US style in generalities, I wonder if this is just a restructuring that will convert debt to equity and otherwise continue similarly, or if the org is so deep in that they're getting sold off for parts.
surprising absolutely no one.
TLDR Global News explained this event about 1 year ago including some predicted possibilities. I got some idea on what's happening even though I don't really do economics.
DRS GME to stop global financial fraud