In the long term, the bursting of China's property bubble is probably good news, affordable housing is in the interest of everybody except property developers.
In the short term, though, this is likely to trigger a domino effect of other property developers defaulting and a lot of pain for everybody who (thought they had) bought property with them. The real tests are whether China will allow the Chinese entity to go bankrupt (and not just the HK one), and what's going to happen to foreign shareholders and ordinary Chinese citizens who trusted these companies with lots of hard-earned money.
One unpredictable ripple effect will also be on the crypto markets: there have been persistent rumors that Tether is heavily invested in Chinese property developers in general and Evergrande in particular.
> affordable housing is in the interest of everybody except property developers.
it is, but it's also complicated as the problems are quite a bit different in China then in the US
the reason there was a bubble in China was because they sold (barely) affordable (apartment owned, not rented) housing to a huge amount of people while not producing it. Like they financed it similar to a snowball system. Group B buys housing but pays for the housing bought by Group A then Group C pays for Group B etc. But at some point it fell apart and people realized the housing they should have gotten "soon" isn't being build (or stuck in a partial state) and the company has no money anymore. (Kind oversimplifying the whole thing.)
To top that off there are (state build) ghost cities which have cheap appartments and acceptable building build quality, the problem is there is nothing there, no jobs(!), no supermarket, bus, people, "anything", if you are unlucky even electricity might be cut of in parts of it, (also I guess for rent not apartment ownership). (But there are also enough examples of western media reporting about ghost cities messed up because turns out just a few years later it wasn't a ghost city anymore.)
And to make that worse it's not just Evergrande. It outside of the areas with a lot of central government focus there where many cases of houses building companies which had money issues trying to pretend everything is fine by cheeping out on building cost to a point where houses build that way are basically unusable. Through from the outside it looked like there is still progress. Issue with that is, it is really hard to guess how bad it is, pro-china media most times doesn't mention it and if it says it's a rare exception and/or videos are fake, anti-china media says it's bad to a point it's everywhere, and you find little in between. And both sides are known to lie a lot.
Ghost cities are a good example of how simply building housing is not a perfect solution. If the housing is somewhere where people don't want to be then it is worthless and also useless since no one can make use of it if they can't make a living there.
The Ghost City concept is actually a great one, but it has the "you opened the bedroom door while someone is dressing" visuals problem.
If you can plan and work on a longer term, you can do things like staging multiple phases of development.
They can build the subway station that opens up into a dismal swamp today, and watch the YouTubers laugh. But in 3 years the swamp is scheduled to be paved, in 6 years there will be 10,000 housing units in walking radius, and in 10 years, the Work Factory will have opened nearby and you have a sprawling community of 60,000 people surrounding a subway station that would be logistically difficult and expensive if you tried to build it in after the fact.
Very curious how these opportunities for housing were marketed to the masses? These ghost cities you describe, I can see how the new housing can be presented as a life-changing opportunity, with nice images/videos but the reality is...a ghost town, facade of a city.
China is still urbanizing rapidly. Just like GP said, it won't be a ghost city for long. It depends though on how long the investor can hold out, and whether or not the new city is doomed from the start.
CCP planning is just different. TBD if it's doomed to fail like the Soviet Union, or if it will make it through a crisis like this. It's also hard to tell what will ultimately call a crisis; just thinking back to 2008, a lot of the story is only figured out in retrospect (eg how critical Bear Stearns was).
Many things wrong with that statement. There is a reverse migration from cities back to countryside, since the wages in the city have fallen, jobs have disappeared, rent is still expensive, and it's harder to justify living in the city when you can only save a few hundred dollars a year from a job.
Thus, empty retail stores in major tier 1 cities. Empty apartments in Dongguan and Shenzhen. Small crowds at malls.
From what I heard that is a somewhat "recent" trend while most ghost city cases I heard of outdate that trend by month potential over a year.
I think a lot of people living in the west without ties to china haven't realized that there are many huge but sometimes subtle changes in China in the last view years.
Kangbashi is up to 100k now, at least, but they designed for a million, so it is still pretty empty. As soon as coal becomes big again, maybe it will fill up.
Empty retail stores in major tier 1 cities wasn't unusual even in good times. Nor were empty apartments in tier 1/2/3 cities as well as small crowds at malls. Actually, I would be hard pressed to use these signs as good or bad news, since they are so normal.
Anecdotally, there’s a great episode of the journal[1] that does not lend too much credence to the idea that the reverse migration movement is anything but a temporary stay away from home.
I think it’s much too early to really say the trend is sticking.
They are marketed as investments, not housing. The majority of people buying these "Homes" never intended for themselves or anyone else for that matter, to live in them in the first place.
> In the long term, the bursting of China's property bubble is probably good news, affordable housing is in the interest of everybody except property developers.
I unironically think a property bubble pop is a great way to defeat the demographic slump in the long term.
That and the recent crackdown/reforms on private education makes me think the party is aware that property bubbles and education costs are a liability
When I was little it was still married-with-children by default, probably at relatively young age, and people had to decide not to have children. That was in part helped by the lack of widespread use of contraceptives. The norm in my primary school was two or three kids per family. I remember only one classmate with no brothers or sisters. Of course zero children families were not represented in there.
Now the default is single-no-children and you have to make an explicit choice to marry (you used to be nudged into it by society) and to have kids, by stopping to use contraceptives and to do all the things that long time singles are used to do.
Cost of housing, living, parenting is also an issue but I think that the default mindset is more important and sets the conditions for higher general costs: if on average people can spend all their money for themselves, the society and the market adjust and people who have to spend time and money also for kids are at a disadvantage.
If the default is changing in China too, their population is going to shrink no matter what.
> When I was little it was still married-with-children by default, probably at relatively young age, and people had to decide not to have children.
Don't ignore selection bias. When you're a kid, almost everyone you know is a child, and so almost every adult you know is a parent.
I don't know how old you are, but most of those societal changes - no need to marry and contraception - have been in place for decades. I'm in my early 30s and I wouldn't say staying single and not marrying is the "default" - yes, there's more people doing it, but I still know a lot of people who have coupled up and got married. I don't think I know anyone who's completely checked out of the idea of a relationship yet - the single people are still dating, often with the expressed desire of finding someone.
I have 2 kids, and the main reason people I talk to aren't considering a third is cost. Cost of an extra bedroom, cost of a larger car, incredibly high childcare costs - there's a very large real reduction in living standards that comes from going from 2 to 3. Compare that to my parents generation, where 3 or more siblings was the norm. I suspect a large part of falling birth rates isn't that loads more people are living child free lives, but that the people choosing to have kids are having fewer of them.
My feeling is that it's heavily friend-group or clique dependent, or potentially geography-dependent (metropolitan vs rural).
I'm also in my early 30s, but the majority of people I know are not married. I know about the same number of people who are polyamorous as married despite not running in those circles.
I know I'm an outlier because the stats don't hear anything close to that.
I will say that in the major metros, marriage still feels relatively uncommon. I think I've been to one wedding in several years, and it was a work acquaintance more than a friend (I was surprised to be invited, really). Most of the people I knew that were married were in their late forties and beyond.
> I don't think I know anyone who's completely checked out of the idea of a relationship yet - the single people are still dating, often with the expressed desire of finding someone.
I think it's important to delineate between people who want a relationship and people who want to get married. Relationships can exist absent a marriage, and marriages can exist absent a relationship. Some people don't want to be single, but don't want to be married.
That's the demographic that I've seen growing. I don't see people pulling away from relationships so much as marriage. Marriage comes with so much baggage, and a lot of the traditions are based around historic assumptions that don't hold true anymore.
The taboo of living together as a couple before marriage has largely disappeared. As a result, there's less incentive to get married as a matter of "moving forward" with your life.
Prior generations experienced marriage as a transformative event, whereas for my wife and I, it was a nice day, but our lives went back to normal afterwards.
Add in the fact that even a small ceremony is expensive, and it's no surprise that many people are putting it off or foregoing it entirely.
The "west" and china have _very_ different demographic pressures.
For example china famously had(has?) the one child rule. This meant a deliberate shift in how children were raised (all your eggs in one basket)
> Now the default is single-no-children and you have to make an explicit choice to marry (you used to be nudged into it by society) and to have kids, by stopping to use contraceptives and to do all the things that long time singles are used to do.
I suspect you probably want to look deeper into the causes of that more. Yes contraceptives have a role to play, but they are not automatic, they require a deliberate choice, sometimes daily (https://www.statista.com/statistics/573210/contraceptive-use... granted this is for the UK, and doesn't account for people not taking it. The point is that younger women are taking pills daily)
Why are people not having kids? the answers are more complex than you seem to be suggesting.
If you look at the historical birth rate through the 20th century (hard to find data before 1950, but not impossible), the birth rate hovered around 5 children/woman or 35 children/1000 population. These numbers drop immediately and precipitously starting in 1960, the year "the pill" became publicly available.
Lots of people, young and old, take pills every day. People forget and unwanted pregnancies still happen, but a) that's not suggestive that the pill doesn't work or that it isn't responsible for a significant drop in realized fertility (the birth rate data makes that clear), and, b) the medical advances and cultural shift the pill enabled (casual sex is okay, sex outside of marriage is okay, children outside of marriage still pretty undesirable for most people) also paved the path for emergency contraception and the widespread acceptance and availability of abortion (to the extent that we now end the lives of 73 million unborn per year - that's a top-20 country, by population, per year).
In summary, is it more complex than "the pill did it"? Yes, but not much more. Birth control (of all types) is responsible the bulk of the reduction in birth rate.
This is only true if you don’t think women having full personhood is “not much”. Cheap, effective contraception came on the market around the same time that women started gaining legal rights, which is also when women were no longer forced into marriage and started to have independent careers of their own, whereas before the main option was motherhood, especially prior to social welfare systems supporting the elderly. It’s not a coincidence that we’re seeing backlash “men’s rights” movements now that a non-trivial fraction of men are learning that they aren’t worth settling for now that social pressure isn’t doing most of the work for them.
> to the extent that we now end the lives of 73 million unborn per year
This is overstating it considerably: it’s about 900k in the United States and 13M globally.
The answer isn't to go back to women requiring a husband.
The problem is that companies were allowed to capture all of the value of women's emancipation, to the detriment of everyone.
Women joining the workforce should have meant two people working 20 hours per week instead of one person working 40. Instead, two person households are working 80 hours and one person households are struggling to get by.
You can clearly see two peaks in the last 40 years. Given that the last peak comes after liberalisation of the morning after pill, it breaks the correlation between availability and birth rate.
> end the lives of 73 million unborn per year
I'm assuming your joining 48hr contraceptive with <28 week abortion, otherwise those numbers would mean that (I'm assuming the USA) every woman in the USA alive would be having an abortion at least every two years. Given the number of clinics capable of carrying that out, I find that number difficult to prove.
The peak in the 60s occurs a while after the pill was made available in the UK and begins to trend downward before it was made more easily accessible.
Contraceptive measures are not an explanation in and of themselves. They provide no information regarding the "why".
I'd argue that the reduction is more specifically reflective of people's willingness to have children in times of economic hardship or declining living conditions; perceived or otherwise.
The pill was not readily available (absent a reason pregnancy may be harmful to the mother) in the UK until 1967, and not to unmarried women until 1974.
Agreed, from everything I've seen the catalyst for this [low birth rates] is birth control and women's rights. Both gave women choices [a good thing]. When they use these choices it creates large demographic shifts. Enough time has passed that 2-earner households are required for a similar QoL, which makes children more expensive.
Birth control + abortion + IVF are what makes fertility rates a choice for those with the wealth + health to choose them, but like you (I think) I wouldn't actually call the existence of the choice the root cause of declining fertility. Instead, the lack of choice covered up the fact that many people would not choose to have children in our society, which is the root cause of falling fertility rates and a failure of our society. As well, there is structural bias against the choice to have children, because birth control is extremely cheap & accessible compared to IVF - if we imagined a population overall neutral on having children, the higher availability of birth control compared to fertility increasing treatments would bias it towards less children anyway, the same way that a tax on cigarettes leads to less people smoking.
Why don't people choose to have children? Part of it is cultural, aggressively anti-child beliefs. A big part of it in my generation is depression about the future - many people feel the future is hopeless because the government is not doing enough about climate change and we seem to be getting closer and closer to a large war. Most of my friends would express that sentiment when asked why they don't want children. A big part of it is financial & health related - a lot of people don't feel comfortable having children unless they are in perfect health & quite wealthy, because of proto-eugenicist ideas that are just accepted as part of our culture. Some of this is individually rational choices: if no one will provide you with appropriate financial & medical support for the full-time, critical-to-society job of raising children, some people accurately believe their standard of living will drop dramatically if they have a(nother) child.
All of these issues can be solved. The government can act on climate change and de-escalate tensions rather than preparing for war in order to let people have hope for the future again. The government can make IVF and other fertility increasing treatments free to the end user and otherwise as accessible as possible to lower the barrier to entry as much as possible. The government can choose to compensate people for the critical-to-society job of making & raising children, ensuring that having children is not a financial burden compared to not having children, & structure healthcare + educational outcomes such that people do not feel they and their children's lives will be worse after having a child, or at least that that isn't a true statement in terms of personal standards of living.
Western governments choose not to do these things because they don't need to, because they can rely on other countries having widespread lack of choice + poverty & instability to push young people to emigrate to the West & keep Western demographics very healthy. This solution works (at the expense of poorer countries), and while it can't last forever it can last for a very long time from our perspective. Eventually though, countries will need to solve the fundamental problem or accept widespread decreases in wealth & standards of living as population decreases.
> If the default is changing in China too, their population is going to shrink no matter what.
yes, that might actually be _the_ biggest incoming issue china has (through much much less because of housing prices).
Basically by combining one child politics with various cultural and economic effects lead to a very strongly favor for having a boy over a girl. Combine that with natural reduction in birthrate due to reduction of poverty and some other factors it lead to a situation where China isn't just approaching a shrinking of population size but more like a collapse which could easily lead to various social and economic emergencies (like collapse of rent system, collapse of health system, problems to feed all elderly people etc.). Given the current "moral" direction of their government I wouldn't be surprised that if they don't find a better solution they might either start a war to kill many of their young and mid aged single men and/or start to mass euthanizing old people, at least if sick and/or poor. They even have the perfect excuse wrt. of they PR represent that: "hey we just copied Canada why are you complaining".
> start a war to kill many of their young and mid aged single men
That would be stupid, one thing the regime is not. Easier is to allow immigration of brides from Vietnam, Laos and Cambodia. Also, they can simply promote mechanization of agriculture. Right now, ~20-30% population is in agriculture that can be reduced to 2-5%.
this regime, aka Xi Jing Ping's reign is pretty stupid. He has had failed projects after failed projects for 10 years now. Also, dictatorships don't care about unemployed young men, look at Putin, sending waves of unequipped untrained men to their death.
China already has human trafficking of women from Laos and Cambodia. Birth rate still dropping.
Maybe I missed something as a European who doesn't always see what's happening over the great pond, but the sentence "hey we just copied Canada why are you complaining" confuses me.
Did I miss Canada embarking on a policy of euthanasia?
I know that the treatment of native people had quite a few scandals in recent decades, did you want to allude to that?
Without wanting to make light of that situation, I think it is rather different in scale to what you propose.
Thank you. I have responded to you, since you were one minute earlier. I won't repeat the whole comment that I had written and lost due to my phone running out of battery, but still wanted to at least add part of it with thanks for the information.
This kind of euthanasia (voluntary, with a review board, like in Switzerland) is something I feel should be a human right, though I'm not sure about the intricacies of the Canadian system.
I think one should be very much aware of the extreme chasm between this and the kind of euthanasia committed in the early half of the last century in the third Reich, and not confuse them because of the common name. From the grandparent comment, I had assumed they meant to imply that Canada had implemented something closer to the latter.
> sure about the intricacies of the Canadian system.
It's not as bad as what I believe China might do if worst comes to worst.
But from what I have heard the Canadian system has issues, with cases of especially permanent sick+poor people being in some cases constantly "nudged" to say good by even if they still have a strong will to live. Through I'm not sure how wide spread such issues had been and if they where fixed.
The reason I mention it is because china would also claim it's fully free choice, then if that isn't enough start nudging and then if that isn't enough go further.
Not saying some people shouldn't have the right, but the way the Canadian system works can be horrific. Especially when it comes to people who should be receiving support, aren't receiving support, so end up being encouraged to die instead.
While I agree with that shrink part, you must be living in a bubble for the family part.
Literally all my colleagues in past 5 jobs (that few hundreds guys) have kids if they are over say 35. All colleagues of my wife. All of our friends. I cover western (Switzerland) and eastern Europe here. Same for Swiss colleagues and foreigners. Folks with nannies or family close but also raising their kids just by themselves, like us.
2 kids are standard, 3 are actually slowly becoming a norm. 1 is rare and more related to medical issues rather than an actual decision. From my own personal experience being raised as a single child, it sucks in many ways and will affect you negatively for rest of your life, regardless of all the love you received from parents (which of course helps but doesnt mitigate this).
Surely there must be some downsides to siblings too. I also don't celebrate being an only child, but it didn't turn me into a misfit either.
And to your anecdotal evidence, let me respond with anecdotal evidence... aren't we constantly hearing news about declining birth rates and an aging population? I have heard this from Korea, Japan, the United States, generally about Europe and specifically about the Netherlands.
I am curious what country and industry you work. Most developed countries and some major developing ones have less than 2 children per couple in their data. The data is probably correct thus your anecdote would be an exception. Thus makes me wonder what industry is so exceptional?
It used to be that deciding to conceive made parents get their child into schooling and a lifelong career. Instutions were built and maintainted to support inflow of children and stable corporations were kept alfoat by a growing populace.
Making conception optional for sex has knocked over most of the stability there was in the west and people are scrambling to replace it with electronics and authority.
Tack on top of that, these country wide changes were not made by local governments, but by factories and corporations gradually dragging in the tools to break our society. And immigration on top to plug the gaps.
Something's gone terribly wrong with the West and there's no weasling out of it. It's time to stand up.
> Instutions were built and maintainted to support inflow of children and stable corporations were kept alfoat by a growing populace.
It's absurd to attribute the failure of modern capitalism to demographic flows or contraception.
Western corporations were relatively stable only because the rate of technological disruption was lower and, more importantly, the rate of overall financialization of the economy was so much lower. Capital moved very slowly, and financial instruments were few, often strictly regulated. Most capital was in steady manufacturing and agriculture business, rather than in volatile service industries. That made for a view of the economy where businesses were an institutional part of society, with roles and responsibilities and connections to locality.
Once technological disruption and financialization accelerated, unshackled capital steamrolled society into doing what it's best for capital pretty much all the time, demographics be damned. Part of the push towards later and later parenthood is due to the increased specialization necessary to tech-intensive capital-fuelled businesses, requiring longer and longer training times and complete dedication for several years on top of that - all to earn unstable jobs that disappear very shortly, thanks to more and more automation.
Yes, something is broken in the West: the needs of capital have trumped the needs of people for two generations, and now we're paying the price for it. You won't fix this through demographic tinkering, but through societal and political change. In fact, increasing demographic pressure on Western societies, at this point, is courting disaster.
And there it is. This narrative that immigration hasn't been a constant and deciding factor in the development of the West (and pretty much everywhere else) is so wild. Stability of an insular population is the absolute exception of history.
I doubt that's going to help. The decades of property bubble has changed the mindset of the people. Just look at Japan, it's property bubble burst was decades ago, but till now, are there any signs of turnaround? Young people have enough trouble just to get a shelter and feed themselves, and now you want them to have kids which add more pressure onto what they are already struggling to coup with. How likely is that?
But Japan has a population crumble, a long LONG tradition of home price devaluation (earthquakes destroy everything, why build super high quality stuff and why maintain, after 10 years your protection is more fragile or obsolete) and prices are extremely low.
In China, they had a speculative bubble sure, but what s gonna kill the market is that in 20 years a lot less young people will exist to even buy the houses, like in Japan.
Well yeah, once you go down in standards of living low enough, the math flips over in favor of having children again. Because at that point, the mortality rate of children is high enough, you need extras just in case. And then someone’s gotta work your fields just to survive, after all. So the more the better just from the financial and survival standpoint alone.
To greatly simplify, it basically makes it so that it makes sense to have children on the far ends of wealth and poverty, and much less sense to do so in the middle.
Yeah, it's gonna be very hard to get the genie to go back into the bottle, people won't forget that real estate is very powerful for financial speculation, and that even if the bubble bursts again and again you have plenty of years with amazing returns.
At least the same hasn't happened with food and drinkable water yet.
The problem gets deeper: This may sound insane, but I would argue that the productivity is way too high.
There is too much stuff, which is too cheap, which makes it too hard to make money by actually producing anything. This it turn splits the economy into two groups:
One that doesn't have money, live scrapping the bottom, and typically in debt.
The other that does have money, with no good opportunities to invest, which causes bubbles.
Don't worry, the unfortunate side of the "split" could just start a side-hustle! Maybe another podcast, or OnlyFans account. Everyone has a story to sell, and if not, just make it up! "Content creation" to create need for a marketing-made spontaneously mass-produced something, anything, as parasitic load on dopaminergic parasocial relationships. See? Growth finds a way! Super healthy, totally not an indicator of things getting catastrophically unbalanced.
Already, at capacity attention, over capacity exploitation. Infrastructure debts, planetary debts #YOLO
I wonder, when we're finally getting AI enhanced productivity end to end, will we realize how deep we dug ourselves in?
The wrong kind of productivity is too high. Too much consumer crap, much of it disposable. Not enough no-compromise blue sky R&D and research into physics fundamentals.
Evergrande is in the first group here, fruitlessly producing something of no real value, as there is too much of it.
The second group are those who invested in Evergrande itself, or the housing it built.
It sucks for everyone.
It sucks for Evergrande, as sooner or later it had to go bankrupt.
It sucks for those who invested in the housing, as it's clear that if they actually tried to sell or rent out the housing they would end up with some paltry sum.
It sucks for those who invested in Evergrande, as they're going to lose money.
It suck ls for those who can't afford a place to live because of the inflated prices.
I think there are really no winners here. No middlemen filling their pockets. It was a loss for everyone.
> It suck ls for those who can't afford a place to live because of the inflated prices.
Wouldn't a bubble pop help these people?
Wouldn't the ruling class on the opposite end of the leverage chain have benefited greatly with stacks of cash? The fun party is over now, but at least profit was successfully extracted from others. The extreme losers being people on the other side of the chain, paying mortgages on property that will never be built.
I wonder how much of the world's growth is squeezed by these kinds of inefficiencies.
Property speculation keeps prices high, and people paying off mortgages in dead-end jobs. Education costs force parents into difficult decisions to move out of HCOL areas where they likely have higher-value jobs. Energy and Water costs spike while providing no societal benefit.
The West is obsessed with keeping these in place, the rising East seems better placed to change economic inefficiencies. Not sure how it'll play out but I feel like Western society is being pillaged by the PE crowd who can take advantage of the above.
> the rising East seems better placed to change economic inefficiencies
lol wut? china changing ineffeiciencies? this must be winnie the poo propaganda. china is corrupt as all hell and much of their building material is of dubious and shady quality. japan and korea are stagnating, and much of SEA is still struggling to modernize and combat their own structural inefficiencies.
PE is a cancer, but I'd be curious to know how much of a stake foreign firms have in those orgs.
You've got to admit, it'll be interesting to see how this plays out.
Eastern countries with more direct government intervention, strong-arm leaders like Modi, Winnie the poo vs waning Western powers.
China didn't bail out its property gamblers, the West bailed out its banking gamblers. The West excels at high-level corruption. It's not bribing an official down a back alley, it's done Manhattan high rises and Mayfair team rooms.
Depends if you think bailing out the banks was the wrong choice overall. The last time the Great Depression happened we got a world war out of it.
It's true that perverse incentives were created out of that, but I would ask if the financial industry is still making these mistakes like NINJA loans. Considering how we just got out of inflation without a recession, the US economy seems pretty structurally sound today.
How is the East better positioned when this article is about a massive failure due to property speculation? It just took a different and exaggerated form in China due to the rightly perceived shakiness of Chinese stocks and the limitations on land and property ownership. If this development cements in the minds of the Chinese populace that buying an extra apartment as an investment is no longer a safe place to store their money then who knows what's going to happen next. If you can't keep your money in stocks and you can't keep it in real estate then how do you invest for your future? This is an even more pressing question due to their rapidly aging populace with the prospect of little to no support from their children and non-existent grand-children.
The real-estate market in the West may be bonkers but at least someone in their prime earning years can invest in stocks if they can't purchase a home. That has its own risks but with a little knowledge you can mitigate them and with patience you can wait them out and even benefit from them.
I don't think that the Chinese are forced to buy property because of the perceived shakiness of the stock market. Rather it's a cultural norm that's embedded itself in their psyche.
Also, I disagree that using houses as your store of wealth to fund healthcare is a sane policy. People should be paid for work.
They're not compelled to but they don't want to invest in stocks due to bad experiences in the past. Now there is a bad experience with investing in real estate.
You have to store wealth somewhere otherwise you'll constantly be losing wealth. Ideally, one could simply bank their savings without it losing value while also investing in a variety of other assets rather than putting everything into stocks or real estate but that's not the world we live in at the moment.
If you believe people should be paid for their work then you should also believe that the money they are paid for their work should not be bled away from them.
> In the long term, the bursting of China's property bubble is probably good news, affordable housing is in the interest of everybody except property developers.
The effect of China's property bubble was an oversupply of houses, leading to unnaturally low property prices.
The long term effect will be a consolidation in the property branch, leading to less supply and higher property prices.
Whether this is good or bad I don't know, but it certainly will not lead to more affordable housing than right now.
Was there an oversupply in actually built properties in places people want to live? My understanding is that property prices in major cities are still massively unaffordable
What does it matter? All the people who bought apartments in the middle of nowhere as an investment now want to buy the apartments in real cities => thus more demand.
> affordable housing is in the interest of everybody except property developers.
Property developers are the answer to affordable housing. We cannot have affordable housing without building millions of new housing units. It's the home OWNERS who are dragging their feet to try to artificially inflate their property values
This bubble makes up large parts of the world wide pension schemes. Without rents to enslave the younger generations, the wealth will be extracted by other means, aka prices rising or services getting ever more expensive. There is no escape from this.
This is true. The (ironic) lack of control of property holding to sell moronic. Well, technically it is the lobby industry which helps no citizen when they push back for measures that avoid accumulation of properties causing the market to concentrate loads of money on real state for obvious reasons.
In my city, they tried to implement taxes for those who own more than two properties and it would be more expensive for properties that had no one living. The result is that the proposal was quietly removed from the voting in a Friday night before a weekend followed by long holidays.
When large groups of assets and securities go to zero, it always has a a ripple effect on markets across many other assets. That was the story of Bear and Lehman in 2008-9.
Tether is by far the largest counterfeiter of USD and has already been shown to be backed largely by nothing.
The introduction of Tether coincided with the hijacking of the Bitcoin GitHub repo by the for profit company Blockstream.
Blockstream's Samson Mow had close ties with Tether and El Salvador dictatorial President who made Bitcoin a national currency on exchange for billions of dollars of free Tether dollars.
Tether is not and does not need to be backed by anything other than US intelligence agencies. There is no proof of this other than the fact that the larger USD counterfeiter is allowed to exist and control the price of the hijacked Bitcoin chain with the ticker, BTC.
I don't like Tether myself, but it's definitely not counterfeiting. To counterfeit something, you need to pass it off as the real thing. Tether is not the real USD, it's just a currency made to be worth around the same amount as a dollar, and the value often hovers around $1, but it's not always $1.
Another real world example is the Hong Kong Dollar. Just because it's pegged to the USD, does not mean it's counterfeit.
> While Evergrande is listed in Hong Kong, almost all of its assets and the vast majority of its more than $300bn in liabilities are in China.
> In theory, the ruling could pave the way for liquidators to attempt to seize control of some Evergrande assets in mainland China, since Hong Kong has a mutual recognition agreement on insolvency and restructuring that applies in some parts of China.
> However, it is not clear how far mainland courts will accept the Hong Kong winding-up order.
In short, this headline is wildly overstated. This is a minority jurisdiction that is overreaching. There is no way that Mainland Chinese courts will respect the decision. Frankly, I would say the same if a giant French property developer happened to be listed on the Amsterdam Stock Exchange. If a Dutch court ordered them to liquidate, I cannot believe the French gov't would allow it. (To be clear: I am not an EU hater here. Vice versa would also be true.)
My prediction: China with directly or indirectly nationalise Evergrande. Most bondholders (especially foreigners) will be wiped out. Most of the unfinished buildings will be completed in 2-5 years.
> China with directly or indirectly nationalise Evergrande. Most bondholders (especially foreigners) will be wiped out. Most of the unfinished buildings will be completed in 2-5 years.
I'm willing to take that bet!
My prediction, a bit different, not that much.
1) nationalized. Yes
2) foreigners will be wiped out. Yes.
3) Huge backlash and more foreign money will leave China
4) China will backtrack a bit to appease ( a bit, but not enough)
5) Most buildings won't be completed. China doesn't have the funds anymore to build property like x years ago. The elite already took out their money. Civilians lost their "investment" and won't buy real estate like they did in the past.
6) Property declines further. Others like Evergrande will fall.
7) property becomes "cheap" ( relatively)
8) population declines
9) property becomes even cheaper
... Etc
The thing I consider differently and shapes my narrative, is that it seems that China made a huge construction bet on population growth. And it seems that bet was wrong.
So they don't want to finish those buildings, since it would drive prices down quicker.
---
A lot of buildings were already abandoned and were never going to be build.
There's an elite group that can borrow money in China and they don't need much collateral for it. So they construct 25%, cash in and are gone. Perhaps this practice isn't common for Evergrande though.
But those buildings were abandoned because no one was willing to put in the 75% required to complete it ( which is a similar story, not the same though)
Source of this practice: a friend had to setup one of his client's division in China for a couple of weeks a couple of years ago.
> Most of the unfinished buildings will be completed in 2-5 years.
Many things wrong with that statement. Chinese local governments are overloaded with debt - 12.6 TRILLION https://www.reuters.com/markets/asia/china-orders-local-gove.... National government has refused to supply local governments with more money, in fact it has limited some local governments to what they can build. Local Governments have zero incentives to add more inventory to an already bloated real estate supplies. A lot of these unfinished buildings were left unfinished for a number of years, is already left to ruin, and unsalvageable. Tofu dreg building qualities means it's easier to demolish these buildings.
As I understand, most of the debt issued by local gov'ts is RMB-denominated. The PBoC can easily assume (large) parts of this debt without large negative economic impacts. Other countries have done similar in the past by creating "bad banks" that are financed by the central gov't or central bank.
How could central bank finance such a debt without igniting the inflation? Especially in a country with already expensive money and pretty large interest rates.
Central banks can print money. And most countries, even developing ones, can support more money printing than people understand. I am not advocating for crazy money printing, but printing 5-10% of GDP for a single year to clean-up a big financial mess isn't so bad.
Did you know that Indonesia has an explicit monetary policy to monetize a certain portion of their national debt each year? The finance minister (Sri Mulyani) is well respected, so foreign bond buyers were not upset by it. It did not "ignite" inflation. Also, look at quantitative easing by US, UK, EU, and Japan.
Quantitative easing in US, UK, EU, and Japan happened during the economy balancing on the brink of deflation. I.e. when capital from the developing world was actively escaping into the developed world, when the developed economies were bathing in cheap capital and firms could borrow at zero or even negative percent, and the economy grew massively and required quantitative easing for simply avoid inflation.
We can see how money printing works when the economy isn't growing respectively, the inflation hits as it happened in EU, US and Japan now.
> Did you know that Indonesia has an explicit monetary policy to monetize a certain portion of their national debt each year?
No, I don't. The only sources I found tell the opposite.
Just as serious is the problem of poor quality concrete used in many buildings in china. Due to corruption, many new buildings have been built of concrete made with normal beach sand. Sand with salt causes iron to corrode and the concrete becomes brittle. It is commonly known as tofu dreg. Lots of buildings have already collapsed. If the bubble burst, and the property market collapses, it will hopefully make houses more robust in the future.
It is always crazy to me the ratio of damage done to benefit received by people committing crime and fraud. I don't know how much one could possibly pocket using such scheme, but I'm certain that compared to the destruction of the entire project it is not that high of a percent.
Clearly, I'm just astounded by the magnitude of destruction people are willing to commit. It's like stealing a loaf of bread from your neighbor and then burning down his house to cover up the crime.
That's a great way to put it. I'm always amazed at how small the bribes can be.
When I hear stories with some quote similar to "then the senator granted them the mining rights to an $800M mine on public lands for a 3-night stay at Sandals." I'm mad about the corruption, but I'm also mad at the politician for being dog shit at realizing how large their bribe should be.
Interesting. It's unclear how you liquidate the parent company without liquidating subsidiaries (who is going to buy Hengda RE?) and it seems like legally the HK decision should be binding:
> Hong Kong and the mainland city of Shenzhen — where Evergrande is based — have a mutual insolvency recognition agreement, but it’s “effectively inoperative”
This is freeing the Chinese business of its obligations of $25B in foreign debt.
Presumably that makes for a better business.
Who knows. Evergrande could easily be worth less than -$25B. No one wants to buy a business worth negative money. But it's definitely worth less negative money now.
If evergrande is the parent company, I don't think a restructuring of its own debt affects the debt of its subs, so the chinese sub would still be liable for the funding it borrowed from the parent unless it is itself restructured.
If you borrow money from a bank and that bank goes bust, you still owe the full balance based on the initially agreed repayment schedule, it is just that your loan is now an asset contributing to the recovery of the bank's own creditors.
I'm very naive about all of this, can I ask what this means?
Evergrande has been ordered to liquidate, on paper this means that the Chinese subsidiary Hengda must also liquidate, but China's just... not going to liquidate Hengda? So instead of Evergrande's creditors dividing up Evergrande+Hengda's assets only Evergrande's assets are going to be liquidated? If that's right, how does that work? Does Hengda get bought and the purchase price distributed to creditors? Does China just tell Evergrande's creditors "too bad"?
>the implications for the company’s vast business in mainland China are unclear.
>Hong Kong and the mainland city of Shenzhen — where Evergrande is based — have a mutual insolvency recognition agreement, but it’s “effectively inoperative” and courts in the city are “extremely unlikely” to recognize the offshore liquidator, Silvers said.
What we have here is a complex set of semi-international legal issues on the other side of the world. I don't trust HN commentary on the subject. It seems very undecided for now and will be a sticky situation for China, Hong Kong, and foreign investors.
South China Morning Post is trying to figure it out.[1] "A Hong Kong court on January 29 ordered the liquidation of China’s property giant Evergrande, but the firm said it would continue to operate in a case that has become a symbol of the nation’s deepening economic woes." "Given that most of the company’s assets are onshore, we do not think that offshore bondholders would receive substantial recovery proceeds from the liquidation. In addition, it is unclear whether the Hong Kong court’s liquidation order could be enforced onshore; there has been some mutual recognition of bankruptcy proceedings between Hong Kong and mainland courts, but the enforcement is difficult in practice." Reads like their reporter called up the usual suspects for comments.
There's nothing at all about Evergrande in China Daily, which means there's no official position yet.
I am also trying to figure this out. I created a prediction market at Manifold whether a mainland Chinese court will recognize Hong Kong-appointed liquidator. Please make your bets and comments if you have insight!
A little bit, maybe, but probably not entirely. The joke is that debt investors have no memory. For example, Argentina has defaulted many times in recent memory but was still able to market a 100-year bond in 2017 (which it has already defaulted on).
Wow, I had no idea. There are very few entities in the world whose 100-year bonds I would entertain (maybe Switzerland?), and Argentina would certainly be near the bottom. I can't believe they sold two and three-quarter billion dollars'[0] worth!
This is more a sign that the bond rating process remains broken despite some superficial reforms after the 2008 financial crisis. The major rating agencies gave that Argentine bond a B rating which allows many institutional investors to buy, despite the reality that it's obviously garbage. Then when the next default hits the fund managers can blame their losses on the rating agencies. Nothing changes.
In what sense did the rating agencies do a terrible job here? First B is a junk rating, not investment grade. Secondly if you get paid 7.9% for six years plus a market price of 30 cents on the dollar you get back more than 75 cents on the dollar, which would have been comparable to the performance of US 30 year Treasury issued around the same time. People do realize that if the principal is not paid back then whether there is one year or 90 years left on the bond term is irrelevant, right? In other words if you suspect the default risk is high you might as well buy the 100 year instead of the 10 year to get compensated by the higher premium.
Rating agencies have to comply with the SEC registration rules. There are currently 10, but only 3 dominate the market for large bond issues. In theory anyone could start a new one but in practice it would be difficult. The most recent company to obtain registration was Demotech which did it in 2022 but the company had been around since 1985.
Chinese equities suffered a US$3.4 billion outflow from non-resident portfolios in the last month of 2023, while Chinese bonds only had a marginal US$189 million inflow for the same month, according to preliminary data from the Institute of International Finance (IIF) released on Thursday.
That said, once foreign bond buyers realize how much foreign creditors get back from the Evergrande debt (0 cents on the dollar), pretty sure foreign bond purchases will drop fast
"Global investors raised their holdings of Chinese bonds for a fourth straight month, capitalizing on a lucrative currency swap strategy to continue their gradual return to the world’s second-biggest debt market.
They bought 181 billion yuan ($25 billion) of local yuan bonds on a net basis in the country’s main interbank market in December, taking their total holdings to the highest since April 2022, show Bloomberg calculations based on clearing house data."
All of this is besides the point that foreigners are buying China's bonds, as @loeg has stated. They are essentially swapping out riskier equities for the safety of bonds which is by and large what is often taught to do when the economy isn't booming, only to switch back into equities when the downward cycle is over.
It's curious why any FDI happened, except small amounts of speculative investment. Property rights in China have always been highly precarious. It's a huge economy but the game is arbitrary and rigged.
In the UK, its basically HMRC first, then banks/building societies. If there is anything left, everyone else gets a share.
The last one my company dealt with, we got about 10% of our exposure back. So we got £1,000 instead of the £10,000 that was owed. We then got to write that off as a loss.
This monster is in a different league to anything I've dealt with but the principles here would largely be the same but with less transparency and more money wandering off for a chat with shady characters. I suspect that the rules I might follow may be joined by some rather more complicated ones, when the sums involved are large enough and the corporate structures are complicated enough.
Maybe we are, but I'm not really sure 'seniority' is a great word to describe it. The term usually implies ranking due to duration. But it's really just a ranking prescribed by law. Often the shortest term lenders who are facilitating the bankruptcy process are first!
Except when it's politically advantageous to change the rules. During the GM bankruptcy and bailout in 2009, President Obama gave his supporters in the UAW a sweetheart deal which allowed them to recover more than the other unsecured creditors. This set a terrible precedent and undermined the rule of law.
Discharge can happen under both 7 and 11 which are the most common in the US. Chapter 7 is the equivalent of what is being discussed in this particular case.
Liquidate doesn't mean destroy, it means finding assets of value, dividing them up if that gets better value, and selling them to pay off as much debt as possible.
if Hengda is a going concern by it's self, then it might be sold off to a bunch of people to raise cash, or shares of it given to creditors to sell off them selves.
but then there is the concept of senior and junior debtors, and the like.
If the subsidiary is performing (not saying it is the case here), it's unclear to me how you could even force its liquidation. Financially, shits fly upward, not downward. Losses will contaminate the parent company not the child companies (unless the sub has a structural dependency on the parent). You may have to sell the sub at a heavy discount, which means less recovery for your debt holders. But you would get sued by the debt holders or any minority interest of the sub if you tried to liquidate a healthy sub.
A subsidiary is just an asset like any other. When liquidating company, it's assets are split between creditors to pay back the debt.
Granted, it's very weird to have the parent die. Normally you have subsidiaries to isolate risk, and even if the problem is the parent I imagine you'd cool the books to shift the debt to a sarificial limited liability subsidiary that can go bankrupt so the business can continue.
Depends on how they operate. Selling subsidiaries as going concerns or handing their shares to creditors of the parent are often options.
It's in no way a given that a subsidiary is insolvent just because the parent is.
This isn't unusual. E.g. when Commodore went bankrupt several subsidiaries continued to operate as long as they had stock, and the UK subsidiary even tried to organize a buyout of its parent.
Even then, depending on jurisdiction (and I have no idea about the specifics in China) balance sheet insolvency may or may not be sufficient for bankruptcy.
E.g. in particular in situations where there is any way to justify that they will not become cash flow insolvent. If they can somehow make a reasonable case that their assets will appreciate in value faster than their debts will come due. Thought it might put additional constraints on their spending.
Note that I'm not arguing that they're a going concern - I have no idea, but given they're presumably dependent on Chinese property prices for their assets valuation it does sound dicey - just how it might be possible for them to justify not winding up the subsidiary.
No it's the financial holding, they fuck the investors and that s it: they can ignore it as long the 3 city judges in China let them (but everyone will run out of patience eventually: nothing can save this dead horse).
> HK is sort of what NY is to the US. It is a peripheral region with some minor degree of autonomy but because it just so happens to house the Chinese version of Wall Street this means it’s judiciary is a little bit special when it comes to dealing with insolvency and other corporate issues.
This means that it very likely means liquidation in China as well.
I have looked at the comment and this person is clueless. What matters here is jurisdiction, and Hong Kong is certainly a different jurisdiction. Political independence of Hong Kong is immaterial.
If you want some actual information I recommend "Cross-Border Insolvency between Chinese Mainland and Hong Kong: The Past, the Present, and the Future" (2022). https://ssrn.com/abstract=4100844
Technically, I think replacing NY with Delaware may be a better comparison - specifically with respect to the Delaware Court of Chancery in which most large US companies litigate business issues.
Not really, if a company goes bankrupt in the City it is bankrupt. There’s no distinction, where’s as here most people believe the Chinese entity will continue to operate as a separate company.
Evergrande is a massive property development company. Real estate makes up a massive (20-25%) portion of China's GDP, as well as a very large portion of individuals' net worth. The expected impact is a cascading housing crisis where homes that people have already paid for don't get built, the company bankrupts, and millions of individuals (or their banks) each lose hundreds of thousands of dollars per unbuild home.
In downtown Los Angeles directly across the street from Staples Center/crypto where the Lakers play and a stone's throw from The Palm steakhouse is an imposing yet unfinished skyscraper. The idea was retail on the bottom, hotel in the middle, and $$ residences higher up
It has languished incomplete-- basically rotting-- in part because of EB-5 financing trouble + Oceanwide.
It's expensive to finish, expensive to demolish and the hellish post-covid/high-interest commercial real estate landscape means it will likely remain there for a while
It's just been sitting there because of EB-5 financing trouble. Especially in post-Covid commercial real estate environment
Residential is the way forward. Many projects and formerly commercial buildings are getting the apartment conversion treatment, complete with bullshit interior dead spaces to meet regulatory requirements.
> complete with bullshit interior dead spaces to meet regulatory requirements.
At least in NYC, the requirement is that bedrooms need to have a window. Are there more requirements than that? I've had kitchens w/out windows in NYC. Bedrooms needing windows doesn't seem very BS to me.
That's going to be a tough liquidation. Who wants to buy a half-finished building abandoned during construction due to lack of a market? Such things have negative value.
Anyone with the means and ability to take over a project is going to know what they’re getting into before signing any papers or handing over any money :)
Yep. And the presumption during construction was creating a usable building, so it's not necessarily all that risky. The risk is in monetizing that floor space.
I somehow think the ccp might look favourably and ignore some liabilities if someone else becomes the new bag holder, you know, saving their RE industry and stuff
Is there any guarantee what you buy will ever be fully funded and finished? Sounds like a nice hole to pour your money into and never see it again. I guess you could move in without utilities if your floor is finished
Pushing the string! Can't win against demographics, young folks can't find jobs [1] and China got old fast [2]. 30% of GDP is domestic real estate that is about to fall off a cliff [3].
They do. it is said that when two people get married, they suck all the savings of the parents from both sides of the family (mostly men's side), as well as the savings of the bride/groom (mostly man), to put down deposit for one house. then it's up to the man of the house to take care of 4 parents, as well as the wife and kids. And you can imagine what happens when the man realizes the house they bought will never be finished, and is worth 50% what they bought
The parents are typically living in farming community, with old/run down houses. Which the children dread moving back to, since there is no money nor future.
There has been evidence that it has been occurring, but China is notoriously hostile to citizens who default on financial obligations, so I would expect with liquidation proceeding you'll see a lot more folks decide to stop making payments than those with a more activist appetite previously.
> ANZ’s senior China economist Betty Wang believes the scale of the problem is much bigger. She estimates that 1.5 trillion yuan ($223 billion) of mortgage loans, or 4% of banks’ total outstanding mortgage loans, could be affected by the movement.
> “What concerns us is if more home buyers cease payment, the spreading trend will not only threaten the health of the financial system but also create social issues amid the current economic downturn,” she wrote in a report on Thursday.
I remember reading a couple of analyses that suggested they were shifting a lot of the debt out of China, on to international investors, so thay'd be taking the hit. I guess they completed that process.
Edit: should have read the piece - it seems this is exactly what they did - dangled (or at least, failed to deny) the prospect a government bailout, to offload the debt to international speculators.
Long time comin. Sounds like its only going to hit the non-china stuff though? How does that compare in terms of value? I would wager without much special insight that the bulk of their worst underwater assets are in china.
I cant help but recall a 2015 Peter Theil interview with Tyler Cowen [1] where he talked about the black magic predictive power of company names. Hard to unsee a company called "ever bigger" getting overextended.
That is two words or a phrase. Also, it is understood to refer to the names of people and not all countries are known to be liberal as some in the legal equality of incorporated entities - maybe alethonym or an orthonym. More practically, in the US the SEC could take the initiative and at least extend https://www.sec.gov/news/statement/lizarraga-statement-names... to some of the absurd ticker names especially given the desire to focus on humorless freeway postings.
Since we're at "quoting wikipedia" levels of pedantry, may I point out that your article calls this a "Compound" not a "Compound word". And the statement "group of words that is not a compound is a phrase" requires that there exists a "group of words that is a compound". "If they are joined with a space (e.g. school bus, high school, lowest common denominator), then the result – at least in English[1] – may be an open compound." Here, the word "they" refers to "words", and the article does not say that such a group of words is an "open compound word".
So that is two words, that together form a Compound.
More explicitly, from the definition for "Word" [1]: "For example, ice cream, air raid shelter and get up each are generally considered to consist of more than one word (as each of the components are free forms, with the possible exception of get), and so is no one, but the similarly compounded someone and nobody are considered single words."
It’s an open compound word composed of individual words that aren’t used singularly, in that the meaning is changed if they are interpreted individually or singly. This isn’t an adjective phrase in this case. I don’t know who you’re trying to convince but the person I responded to is simply mistaken or ignorant of compound words and how they are used, interpreted, or referred to. The fact that open compound words are made up of parts that would be multiple words if used in a different context doesn’t change the facts of my original statement, but I do appreciate you taking the time to elucidate the point further. Nothing you have written here contradicts anything I wrote. Open compound words are considered single words lexically because the entire compound word fulfills the role of a single part of speech in a given sentence.
We are now up to three wikipedia links and in none of those documents is the phrase "open compound word" used. An "open compound" is a group of distinct words. A "compound word" is a compound made of two more words that have been joined together to make a single word. There is no such thing as an "open compound word".
The person you responded to wrote "That is two words or a phrase". You replied "In a word: no. Specifically, it’s a compound word (singular)."
In this, the evidence you yourself have provided says you are incorrect. "nominative determinism", if it is a compound at all, is an "open compound", not a "compound word". It is an "open compound", and as such is made up of two words. The person you are refuting is correct. You are correct in identifying it as an open compound. You are incorrect in claiming that it is a single word.
The use of ad hominen discredits claims and turns off readers. Nominative determinism is not a compound word as compounds are formed by combining free morphemes and the suffix -ive is bound.
It’s not an ad hominem to suggest that someone is wrong or mistaken about a point of fact when that’s the context of the discussion.
Determinism is a distinct concept, and while related to nominative determinism, in the sentence I used, I don’t think it’s accurate to say that the word nominative is an adjective modifying determinism because nominative determinism is itself a distinct concept that functions singly as an appositive after an independent clause and a colon.
I’ll admit that you are free to disagree on this point or any other I have made, and I wouldn’t consider you wrong to do so. My remarks regarding what you posted in response another person in the thread were meant to contrast our views on this matter. Clearly, it’s implied that these are my views, and it’s okay to be wrong, and I’ll admit that I may be considered wrong myself by you, but to say so isn’t an ad hominem because we were both making truth claims with the unstated assumption that we each believe ourselves to be right. It’s not an insult or claim for/against you personally or regarding your character. It’s just how I view your claims on this topic as evidenced by your comments.
It just seems needlessly pedantic to derail an entire thread to call someone out for supposedly miscounting words when it’s literally beside the point I was making, but I respect your difference of opinion.
With very few exceptions, English compound words are stressed on their first component stem; yet, stress appears both on the first syllable of NOM-uh-nuh-tiv and the dih-TUR verb portion.
Yes, an open compound word, not two words in this technical context. Not a phrase, per se, which seems odd to me also, but in this linguistic context, words, uh, have meaning. /s
From the Wikipedia link I posted above, especially the last quoted line:
> Compounding occurs when two or more words or signs are joined to make a longer word or sign. If the joining of the words or signs is orthographically represented with a hyphen, the result is a hyphenated compound (e.g., must-have, hunter-gatherer). If they are joined without an intervening space, it is a closed compound (e.g., footpath, blackbird). If they are joined with a space (e.g. school bus, high school, lowest common denominator), then the result – at least in English – may be an open compound. A group of words that is not a compound is a phrase.
It’s worse than that. They have unfinished projects with units that have already been bought on mortgage. You have people making monthly payments for unfinished apartments (and I don’t mean just unrenovated, which is expected).
That guy who was banned from trading in Hong Kong in 2016 for shorting the stock in 2012 must feel vindicated, at least.
Many of them aren't second homes. The ones in the ghost cities sure, but Evergrande has (had?) more legit projects that were designed as actual housing. In any case, given that the mainland stock market is pretty much known as a sham, real estate has been the only investment option for much of the middle class. Investors "eating" their losses basically means huge widespread social upheaval in China. Imagine everyone being equivalent to their 401k going belly up, that wouldn't be pretty.
There is much about China that I don't understand, but I'm curious about the ownership in the "ghost cities".
Given the ability of the CCP to significantly control major industries and movement of people, is it not possible that someone might buy an apartment in a "ghost city" while living in a rural area or renting in another city, expecting that people and jobs would flow to the city once it was completed?
Basically I don't really understand all the details, nuance and different corporate and governmental players involved in the "ghost city" phenomenon, but I'd almost expect that the government could make a "ghost city" into a "real city" in no time, by shutting down factories in one city and opening them there, or by changing internal migration restrictions.
>Given the ability of the CCP to significantly control major industries and movement of people, is it not possible that someone might buy an apartment in a "ghost city" while living in a rural area or renting in another city, expecting that people and jobs would flow to the city once it was completed?
>Many developments initially criticized as ghost cities did materialize into economically vibrant areas when given enough time to develop, such as Pudong, Zhujiang New Town, Zhengdong New Area, Tianducheng and malls such as the Golden Resources Mall and South China Mall.[15] While many developments failed to live up to initial lofty promises, most of them eventually became occupied when given enough time.[6][16]
>Reporting in 2018, Shepard noted that "Today, China’s so-called ghost cities that were so prevalently showcased in 2013 and 2014 are no longer global intrigues. They have filled up to the point of being functioning, normal cities".[17]
>Writing in 2023, academic and former UK diplomat Kerry Brown described the idea of Chinese ghost cities as a bandwagon popular in the 2010s which was shown to be a myth.[18]: 151-152
Kangbashi is never filling up like they planned, simply because coal is no longer booming like it once was. You can only do so much when the trend you were hoping for doesn’t pan out. It’s a district designed for a few million holding up at 50k or so.
Tianjin will always have a few ghost districts and skyscrapers. They eventually fill up after a decade or two or are razed for something else. It was like that when I first visited China in 1999 as well.
The Chinese government isn’t as powerful as you think it is, nor as centralized. All of these ghost cities (more like ghost districts) are local government driven, so the central government doesn’t care much to fill them. The local governments can push state activity there, like as happened in Ordos (city) and kangbashi (ghost district of city), but they can’t really control the rest of the economic activity needed to make it a thriving place. In Ordos’s case, the downfall of coal is going to depress the city no matter what, the central government won’t bother to save them.
Few real people buy homes knowing with certainty they would remain empty.
People speculated on new development, future growth, and induced demand. For some reason, people online like to make them martyrs or idiots. lots of schadenfreude.
The reality is a lot more mundane. They were just a risky investment bubble that popped.
> “The finest line of poetry ever uttered in the history of this whole damn country was said by Canada Bill Jones in 1853, in Baton Rouge, while he was being robbed blind in a crooked game of faro. George Devol, who was, like Canada Bill, not a man who was averse to fleecing the odd sucker, drew Bill aside and asked him if he couldn't see that the game was crooked. And Canada Bill sighed, and shrugged his shoulders, and said, 'I know. But it's the only game in town.' And he went back to the game.” — Neil Gaiman
The bigger question is if China is going to prioritize local debt holders over overseas debt holder (everyone should take a massive haircut though), and what happens to the apartments they've sold but not built yet (since Chinese banks have lent money to people to buy those).
Is there that much chinese debt owned by overseas investors? I'd always thought the chinese deliberately insulated their financial system as much as possible to avoid foreign influence over their economy.
They might not be very liquid, and there might not be a market for them at the current "market price" (China will often suppress real estate sales to prevent market prices from dropping).
Does anyone know a good source (news site, podcast, blogger) for info on china? Politics, economics, housing, etc.? Preferably something from a more asian centric source?
People's Daily for the Party's view and SCMP for a slightly less biased view.
There isn't really such a thing as free press covering China well, particularly in Asia. The closest thing was the Hong Kong press, but that got muzzled a few years back. RSF currently rates only Taiwan and South Korea as countries with free press in Asia, and those are not going to have the most unbiased view about China. https://rsf.org/en/region/asia-pacific
(RSF lumps Oceania in their Asia rankings, I wouldn't call Samoa or Australia Asian countries)
Somehow your only suggestions from HN have been the official propaganda paper of the CPC and a newspaper owned by Alibaba.
The news source you're looking for is Bill Bishop's Sinocism. It's a paid Substack. I haven't found any other news source that really gets into the nitty gritty of China happenings.
There is usually a bloomberg reporter on Twitter giving weekly summaries like these [1]. It used to be someone else but it looks like it is this account now.
Definitely. And country garden is bigger and more focused on properties in non-tier 1 cities than Evergrande, and has 4X more unfinished buildings than Evergrande, which means the collapse will be even greater
> Months after China Evergrande ran out of cash and defaulted in 2021, investors around the world scooped up the property developer’s discounted I.O.U.’s, betting that the Chinese government would eventually step in to bail it out.
One thing investors should always be clear about with the CCP - as a foreigner you will always be screwed over if it benefits the CCP. The CCP is extremely hostile, even having strained relations with other Communist Countries [1].
> After two years in limbo, and with over $300 billion in debt, Evergrande was ordered by a judge in Hong Kong to liquidate, a move that will set off a race by lawyers to try to find and grab anything belonging to Evergrande that can be sold.
This will not pay out foreign holders of I.O.U.'s, because of this:
> There isn’t a lot left in Evergrande’s sprawling empire that still has value. And any assets that are valuable may be off limits because property in China has become intertwined with politics.
I hope this is a lesson to investors.
I ultimately feel sorry for the people who invested into housing and who are now stuck with mortgages they must continue to pay despite having no property. T
> Financial markets in mainland China and Hong Kong — a city that has for years been an entry point for foreign investment — have received such a blow that officials are scrambling to find policy measures like a stock market rescue fund to shore up confidence. On Sunday, they moved to stop short selling, a practice that allows investors to bet against a stock.
The CCP over-stepped and took Hong Kong, which should still be under partial UK control and therefore an attractive entry for foreign investment. The CCP caused foreign investment in Hong Kong to be withdrawn and got this ball rolling.
This is just the beginning. Almost all provinces in China are now broke and the economy has taken a very significant down-turn. Property is one of their largest investments and I am not aware of a financially good developer operating in China. There appears to already be talk of restrictions on bank withdrawals to prevent a run on the banks.
> which should still be under partial UK control and therefore an attractive entry for foreign investment.
As a brit, much as my colonial arse would love this to be true, the lease expired and Britain never had any real control over HK post handover. The only power we had was economic, and we've well and truly fucked that. the UK of the 80/90s is not the UK of today. For better or worse.
> This blueprint would be elaborated on in the Hong Kong Basic Law (the post-handover regional constitution) and the central government's policies for the territory were to remain unchanged for a period of 50 years after 1997.
We should have simply never have handed it back over to China and allowed Hong Kong to remain independent. From what I understand, it was some compromise that involved the Royal Family.
> As a brit, much as my colonial arse would love this to be true [..]
I'm not going to paint a picture that British colonisation was all good, but some Countries had it better. In recent times the people of Hong Kong and Burma (Myanmar) have begged for British intervention.
> [..] the UK of the 80/90s is not the UK of today. For better or worse.
I would love to disagree with you, but I can't. I suspect most Countries are in precisely the same place, where the average person feels as though things have gotten worse.
I think the way to solve it would be to take a near-term economic down-turn and solve our fundamental issues: the interest on debt alone is astronomical, local governments need cleaning up (if only people knew the half of how corrupt they are), large investment into local security (military, NHS, energy, food, manufacturing), etc, etc. The next 20-40 years would be miserable but we would emerge strong.
point one is correct, there is theoretically a mechanism to make sure that HK is democratic. The problem is there is democratic, and "democratic". What china is doing is within the terms of the agreement.
However it's a lease, not freehold. a lease reverts to its original owner. There was no practical or legal way to make HK independent.
Neither China nor Russia are communist countries for very long time. Folks here with more experience can describe better than me what actual regime there is, to me it seems like some mixture of brutal capitalism and regulated markets, dictatorship of the elite, all drowning in corruption. What labels they put themselves on doesn't really matter, does it.
> Neither China nor Russia are communist countries for very long time.
The Soviet Union is since 1922 [1] and basically still exists today under the leadership of Putin. The CCP is since 1921 [2] and is still in power today. Both have 100+ years under their belts.
> Folks here with more experience can describe better than me what actual regime there is, to me it seems like some mixture of brutal capitalism and regulated markets, dictatorship of the elite, all drowning in corruption.
It's what communism always looks like. At some point all systems are setup to incentivize the individual in order to ensure production happens. Over use of socialism almost always results in some percentage of the population choosing to do nothing to support the society they benefit from. It's why ideas like UBI will never work. The only other way to ensure production happens is to use the stick rather than the carrot.
> What labels they put themselves on doesn't really matter, does it.
Almost a "real communism has never been tried!" type argument.
How can you have both brutal capitalism and regulated markets? Those are normally presented as opposites, as in, "we regulate markets to soften the impact of raw capitalism".
China isn't really a capitalist country. It's more capitalist than it used to be in the 70s, but as this refusing-to-liquidate nonsense shows, the basic rules of capitalism don't really work there. China ignores many things that are required to really do capitalism properly:
- IP rights aren't enforced
- Other kinds of property rights aren't enforced (see the ARM subsidiary that simply declared independence)
- Staying out of private business (see Ant Group)
- Many companies and industries are state owned
- Industrial policy is still the standard in China (compare to the USA)
- Markets aren't informed (rampant censorship, bad data)
1.) Why did it take Evergrande 3 years to liquidate? In western countries, liquidation happens in a few months. One should note that Evergrande did not get that big by itself; obviously it had the support of CCP elites to secure huge bank loans. Therefore, when it went bankrupt, the delay was to allow these elites to pull money/liquidable assets out of Evergrande. Thus after 3 years, Evergrande probably has pretty bad mark-to-fantasy assets left. This bodes very ill for creditors. Foreign creditors account only for $25B of the $300B liabilities for Evergrande. https://apnews.com/article/china-evergrande-property-liquida...
2.) This event implies that most of the Chinese real estate developers are bankrupt/insolvent. excluding for Li Ka Shing's portfolio most likely.
3.) Evergrande's assets are mostly comprised of lands in China. This means, most of the lands will get returned to local governments, which will increase land inventory massively. This will accelerate the real estate price decline in all parts of China, on top of the 30-40% drop we're seeing in Tier 1 cities, on top of the 50-60% drop we're seeing in non-Tier 1 cities.
4.) What does this mean for China's 3 pillars of economic engine (real estate, consumer spending, export)? real estate comprises of 25-30% of Chinese economy, so the economy will be forced to mark to reality these assets, and will take a huge hit. Consumer spending is tied to real estate engine, since most of the citizens' wealth is in real estate. Thus we are seeing consumer spending decline and downgrade substitution patterns. Case in point: recent $1 McDonald burger deal was causing shortages in China. Haidilao has been focused on a cheaper version of their hot pot, which costs $10. $1 bread shops are spreading across China.
5.) If real estate and consumer spending is crashing, then China can only rely on export, and thus the trend of dumping abroad will continue. Especially cars and solar. Europe is in the middle of looking into applying tariffs to Chinese EVs. US is already set with heavy tariffs on Chinese EVs. Note that Chinese export to US and Europe has dropped 10% and 20% y/y.
> This bodes very ill for creditors. Foreign creditors account only for $25B of the $300B liabilities for Evergrande.
I'm sorry - but any foreigner who lent Evergrande money thinking this wasn't a huge risk is a moron.
> This will accelerate the real estate price decline in all parts of China, on top of the 30-40% drop we're seeing in Tier 1 cities, on top of the 50-60% drop we're seeing in non-Tier 1 cities.
According to "official" sources - property prices aren't even down 5%. Where are you seeing that they're down 30-40% in Tier 1 cities?
It would take the median couple >7 years saving 100% of post-tax income to afford a downpayment on the median 100 m^2 condo. If you assume even 3% interest - thereafter - the monthly payment would be >80% of their COMBINED post-tax income.
China's property prices have astounded me since 2000 - and yet they continued to rocket higher for a solid two decades.
People are NUTS in the US at Price to Income levels of 4:1 - when this is some of the lowest Price to Income for housing in the world. We consider places like Vancouver and London and Sydney ludicrous bubbles - and yet they are usually below 10:1. China was at 11:1 in 2000 and climbed to 17:1 by 2020: https://lipperalpha.refinitiv.com/2020/06/chart-of-the-week-... Places like Shanghai have ratios of 38:1 and higher.
> any foreigner who lent Evergrande money thinking this wasn't a huge risk is a moron.
Or they are very smart while investing your money. Check your country's pension fund, see who manages it and what they invest in. Or better yet, don't.
i live in shenzhen and i would love it if prices dropped 30-40%. i'd buy an apartment immediately lol. i've been checking real estate prices every once and a while for about 5 years now ready to buy if something shows up at a good price in an area i want to live in
the reality so far is that prices have pretty much stayed flat for the past 4-5 years. there hasnt been any significant fall anywhere within like 1 hour of me in shenzhen
Pre-owned housing prices in Shenzhen fell by nearly half from their peak in 2020 after holding up over the past two years of plunging new-home values amid slumping demand and a liquidity crunch for developers.
Meanwhile, according to Leyoujia store transaction data, second-hand housing prices in Shenzhen in the fourth quarter of 2023 were around 65,000 yuan per square meter, down 12% from 2022, and 22% lower than the all-time high in the first quarter of 2021. The transaction prices in some areas and real estate have already returned to 2018, and the drop compared to the highest point was as high as 30% to 40%.
The vast majority of Evergrande's outstanding foreign debt is from >2012.
BlackRock, HSBC, and UBS poured in about $3B of the $25B in 2021 alone...
And, I'm sorry - if you didn't see a risk doing that in 2021 - you're gonna lose all your money sooner or later.
In BlackRock's case - it was primarily for 401k-ers for exposure to Chinese bonds. I think the US should've made it illegal - and probably will soon - to offer a product like that.
Why anyone in the US would want exposure to Chinese bonds that don't even have good yields for "diversity" is incredible. Up next - Russian and Venezuelan 100-year bonds at 0% interest!
2012 was the year that Andrew Left publicized why he was shorting Evergrande stock, which he got banned for in 2016. I would say 2010 was when Evergrande started popping up in the news as possibly insolvent, 2000 is too early.
The Kremlin has been saying that if the $300 billion worth of Russian Central Bank assets that were frozen in response to the invasion of Ukraine are confiscated (e.g., to give them to Ukraine), the Kremlin is going to respond by confiscating assets in Russia held by Westerners.
What does that have to with bonds the government might refuse to pay out (or western governments might ban you from receiving payments even if they don’t)?
Not sure why anyone would actually trust official numbers from China. China still claimed 5% gdp growth last year. pretty laughable.
Also, you can just watch what multinationals are doing. They have retail numbers from their Chinese stores. And it's pretty clear Japanese and Taiwanese and South Korean and American and European multinationals are all withdrawing.
"Existing homes near Alibaba Group Holding Ltd.’s headquarters in Hangzhou have dropped about 25% from late 2021 highs, according to local agents."
"Even as of March, before a fresh slowdown, more than half of tier-2 and tier-3 cities saw existing-home prices fall more than 15% from peaks,"
"residential housing prices in tier 3 cities dropped by nearly 20%."
EDIT: Again, to get the real numbers, you need to have access to Chinese real estate agents. And these folks aren't going to be posting articles for everyone to read. Or if they post a video in anger, it will get taken down.
Nice stats but people want housing condition to improve not degenerate to other countries lows. Should we thank our western overlords for sparing us from those conditions? No.
And looting all the remaining assets in the process. Not to mention trying to extract as much as possible from mortgage holders who bought uncompleted houses and have to continue paying even though they’ll never get anything in return.
Do you have any education in finance, securities, law, economics, etc.?
E.g. Your Edit stating that China banned short selling. They didn't ban short selling. They banned borrowing of shares that are "restricted" to short sell.
> There are a number of ways of achieving a short position. The most fundamental method is "physical" selling short or short-selling, which involves borrowing assets (often securities such as shares or bonds) and selling them. The investor will later purchase the same number of the same type of securities in order to return them to the lender. If the price has fallen in the meantime, the investor will have made a profit equal to the difference.
I have to disagree with Haidilao comment, which I have visited several times in different cities, it is packed with people, when people queuing outside, and I don't see the price is cheaper than previous year.
Maybe when prices have dropped if they are converted into dollars. I am not sure should we use dollars to measure everything to should I use Yuan for China.
Some insights I didn't knew/consider, especially 2 and 3.
Can I ask the source of how you gained those insights?
Interesting to note: they have higher debt levels than the US ( GDP wise). If GDP would go down, that would mean a vicious circle and they wouldn't be able to "fund" their way out with low risk.
You would have to know mandarin (to read through government economic reports), and have access to Douyin videos. And these videos get taken down by the authorities fairly quickly
There's probably a dozen people reading this thread who know enough Mandarin to handle a few short Douyin videos if you could provide us with links.
Though as a platform it lends itself well to amplifying extreme claims backed by speculation that play into people's fears, so unless the accounts in question have a history of well-sourced factual reporting, I'd be rather skeptical.
Thanks, I much prefer text over video anyway, and now even people who can't read Chinese can join in on the fun, though Google Translate struggles a bit with the 暴雷 slang https://en.wiktionary.org/wiki/%E6%9A%B4%E9%9B%B7#Verb
Over the last few years on HN, I've observed an increase in posts expressing a negative bias towards China. These posts consistently echo similar concerns with every distressing news about Evergrande or China. Occasionally, these accounts intentionally flout guidelines by using their profile for ideological battles [1].
Admittedly, I could have framed the question more politely about the origins of his aversion.
if you're actually interested in reality, that it's not controversial to a western crowd predisposed to sinophobic sentiment is precisely what should be setting alarms off
Depends, are you one of those overseas Chinese police that threatens Chinese citizens abroad with their families' life in China unless they cooperate and stay silent on social media?
No I'm not. I'm just asking if you have first-hand experience with the Chinese regime or if your aversion comes from somewhere else.
You indiscriminately share links from the internet, including sinophobic YouTube videos, to reinforce your arguments. However, when presented with a counterargument supported by similar sources such as the IMF or other news outlets, you dismiss it as CCP lies.
I think if it had happened two years ago, this would have been the result, because at that time Tether was mostly in Chinese bonds (rumor has it), and Tether supported a large part of total bitcoin trade volume.
However, it is possible that they have spent the last two years rotating out of Chinese bonds into T-bills. In fact, it's pretty likely that they have tried to do that; the question is how well they've been able to.
It was suspected that a lot of USDT is backed by Evergrande notes, though they have denied it. Evergrande liquidation may cause a USDT liquidation and cause USDT to lose peg. There are often idiots that will drag the rest of crypto including bitcoin with it, though.
They haven't told anyone anything. Optimists have assumed the unknown/missing part of their "collateral" is Evergrande bonds rather than having gone up their team's collective noses.
Isn't the point of USDT that the vast majority of its holders are locked out of USD? They can liquidate to BTC but it is unclear that they can actually get USD out.
It would be nice if the market worked that way and every coin helped each other out as a "crypto team" to beat out fiat together, but the reality is BTC holders are probably going to be spooked and not give you much BTC for your USDT.
And then everyone gets spooked of crypto as a whole and sells for fiat.
Basically whenever "shit" happens all of crypto goes down.
I don't think this is responsive to my comment. You wrote:
> it's more likely people will get spooked of crypto and sell [USDT] for USD.
I don't think (the vast majority of) USDT holders can sell for USD fiat -- because they are locked out of the US financial system for one reason or another. That is, actually, the reason they are holding USDT instead. They can (try) to exit via BTC, and maybe they can cash out for some other fiat currency. Just not USD.
De-pegged (I means really de-pegged, not a transient .97c a dollar on exchanges like it happened) means it's not fulfilling its promise, hence the trust is lost.
Also, Tether would try to save face, by honoring USDT redemption at 1$ as long as they can, which drains their reserves. So if they aren't able to do it anymore, it means that they don't have anything left, and USDT is now worthless.
These things are highly non-linear and bank runs can kill a bank in no time (and tether is functionally a bank).
Sure. People disinclined to trust Tether's word are already out of USDT. Clearly, a lot remain. Some of those people might attempt to profit from arbitraging a de-pegged Tether (maybe at $0.97 rather than $0.50 but it's the same principle).
We said we were 100% collateralized, actually it's only 50% but you can trust us that it really is 50% collateralized this time and we aren't lying again. Transact with trust!
Tether is an unaudited black box, so no one really knows what their reserves are composed of. Tether's also been caught lying about their reserves numerous times [1], so it would be insane to think they're a credible store of value. Given their history and opaqueness, it's reasonable to assume shenanigans.
