Is China's economy about to come off the rails?
Discussion
Article in the Spectator about worlds largest property investor in serious trouble and cannot make it's debt/interest repayments.
https://www.spectator.co.uk/article/is-china-s-deb...
https://www.spectator.co.uk/article/is-china-s-deb...
Video here (from an IT youtuber) and how it can have wider implications not just IT - https://www.youtube.com/watch?v=sWWeRZ9NNWI
The CCP are purposely trying to surgically lance their housing bubble as they want to forestall a Lehman's moment using three red lines policy as well as many other housing policies. Something like a quarter of all urban housing is empty while their population is due to peak next year and their birth rate is very low (even by official figures 
) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.
China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Edited by speedy_thrills on Tuesday 21st September 14:33
speedy_thrills said:
The CCP are purposely trying to surgically lance their housing bubble as they want to forestall a Lehman's moment using three red lines policy as well as many other housing policies. Something like a quarter of all urban housing is empty while their population is due to peak next year and their birth rate is very low (even by official figures ) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.
China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Indeed…mortgage (or Chinese equivalent) of 17 x wage as an average, with some city’s seeing x45 and with 20% of urbane family’s owning more than one property.) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Edited by speedy_thrills on Tuesday 21st September 14:33
There have been the China doomsters around for some time, I've read some of this stuff before about the new build ghost towns, unfinished bridges to nowhere and whatnot.
Reading the above link the debt problems do seem to be quite extensive now. But there does seem to be a lot of debt in Western economies too when you start digging into it. Excessive debt is somewhat of worry, but it does seem to be just how capitalism and fiat currencies works, create vast amounts of new money from thin air so that you can get real stuff like new buildings and cities from nothing essentially. It all seems like a bit of a game when the debt is basically just data in a computer and is only really a concept that exists in our own minds, not something tangible. Globally there is an awful lot of debt and it's growing seemnigly exponentially, but we all basically owe it to each other... At some point you would think that there will need to be some huge debt write-offs across the board in order to keep the capitalism show on the road.
Anyhow, I imagine that if this Evergrande is deemed too big to fail then the Chinese government will bail it out.
Reading the above link the debt problems do seem to be quite extensive now. But there does seem to be a lot of debt in Western economies too when you start digging into it. Excessive debt is somewhat of worry, but it does seem to be just how capitalism and fiat currencies works, create vast amounts of new money from thin air so that you can get real stuff like new buildings and cities from nothing essentially. It all seems like a bit of a game when the debt is basically just data in a computer and is only really a concept that exists in our own minds, not something tangible. Globally there is an awful lot of debt and it's growing seemnigly exponentially, but we all basically owe it to each other... At some point you would think that there will need to be some huge debt write-offs across the board in order to keep the capitalism show on the road.
Anyhow, I imagine that if this Evergrande is deemed too big to fail then the Chinese government will bail it out.
garagewidow said:
Have they learned nothing from the west?
Liquidate,repackage and sell on.
They learnt plenty. For one thing how to milk American retail and institutional investors for hard cash in exchange for obvious junk.Liquidate,repackage and sell on.
Chinese 'investments' have been notorious fraudy garbage for ages but that doesn't seem to stop people chasing a quick buck. After all half the market these days is fraudy garbage, and amazingly profitable when your timing is good/lucky.
Just a shame about the damage when it all inevitably unwinds.
MrMan001 said:
Maybe I’m old fashioned and out of touch, but I’m not sure how much the rails can come off the economy of a nation that does such a large amount of manufacturing, at least not in the near future.
You can’t see the rails falling off a country where people buy multiple properties at 17-45x their wage each, these properties are then left empty with the expectation of accumulation of equity by property price increase.20% of urban households have exposure to more than one property. These aren’t people just getting a mortgage, this is people maxing as many credit cards as possible, getting multiple personal loans and getting the whole extended family to chip in.
What do you think happens when property price increase slows or reverses?
Liokault said:
You can’t see the rails falling off a country where people buy multiple properties at 17-45x their wage each, these properties are then left empty with the expectation of accumulation of equity by property price increase.
20% of urban households have exposure to more than one property. These aren’t people just getting a mortgage, this is people maxing as many credit cards as possible, getting multiple personal loans and getting the whole extended family to chip in.
What do you think happens when property price increase slows or reverses?
Declare bankruptcy and move on I guess (probably no coincidence personal bankruptcy laws are beginning to emerge in China), it’s just a failed investment. If they’re really manufacturing over a quarter of the World’s goods then I think they’ve got a fairly secure base for their economy. Unless the western world as a whole is going to start building things at scale again (Germany and the USA being the lone exceptions), I can’t see pretend money moving around on computers doing much to derail China. However, I’m no expert economist.20% of urban households have exposure to more than one property. These aren’t people just getting a mortgage, this is people maxing as many credit cards as possible, getting multiple personal loans and getting the whole extended family to chip in.
What do you think happens when property price increase slows or reverses?
Edited by anonymous-user on Tuesday 21st September 17:04
pquinn said:
garagewidow said:
Have they learned nothing from the west?
Liquidate,repackage and sell on.
They learnt plenty. For one thing how to milk American retail and institutional investors for hard cash in exchange for obvious junk.Liquidate,repackage and sell on.
Chinese 'investments' have been notorious fraudy garbage for ages but that doesn't seem to stop people chasing a quick buck. After all half the market these days is fraudy garbage, and amazingly profitable when your timing is good/lucky.
Just a shame about the damage when it all inevitably unwinds.
MrMan001 said:
Liokault said:
You can’t see the rails falling off a country where people buy multiple properties at 17-45x their wage each, these properties are then left empty with the expectation of accumulation of equity by property price increase.
20% of urban households have exposure to more than one property. These aren’t people just getting a mortgage, this is people maxing as many credit cards as possible, getting multiple personal loans and getting the whole extended family to chip in.
What do you think happens when property price increase slows or reverses?
Declare bankruptcy and move on I guess (probably no coincidence personal bankruptcy laws are beginning to emerge in China), it’s just a failed investment. If they’re really manufacturing over a quarter of the World’s goods then I think they’ve got a fairly secure base for their economy. Unless the western world as a whole is going to start building things at scale again (Germany and the USA being the lone exceptions), I can’t see pretend money moving around on computers doing much to derail China. However, I’m no expert economist.20% of urban households have exposure to more than one property. These aren’t people just getting a mortgage, this is people maxing as many credit cards as possible, getting multiple personal loans and getting the whole extended family to chip in.
What do you think happens when property price increase slows or reverses?
Edited by MrMan001 on Tuesday 21st September 17:04
One guy of ten guys or a thousand guys or even ten thousand guys losing a million USD isn’t going to upset the cart, but millions of individuals losing everything…that’s going to ripple out.
Just the idea that property can lose money is going to hurt a country where so many have so much exposure.
Liokault said:
speedy_thrills said:
The CCP are purposely trying to surgically lance their housing bubble as they want to forestall a Lehman's moment using three red lines policy as well as many other housing policies. Something like a quarter of all urban housing is empty while their population is due to peak next year and their birth rate is very low (even by official figures ) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.
China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Indeed…mortgage (or Chinese equivalent) of 17 x wage as an average, with some city’s seeing x45 and with 20% of urbane family’s owning more than one property.) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Edited by speedy_thrills on Tuesday 21st September 14:33
It's the demographic situation that really caused the Chinese government to move I think. They realised that they have a massive over-supply based on the fact that for every year going forwards they will have a declining population. Building made sense when they had a growing and increasingly urban population.
Edited by speedy_thrills on Tuesday 21st September 18:19
speedy_thrills said:
Liokault said:
speedy_thrills said:
The CCP are purposely trying to surgically lance their housing bubble as they want to forestall a Lehman's moment using three red lines policy as well as many other housing policies. Something like a quarter of all urban housing is empty while their population is due to peak next year and their birth rate is very low (even by official figures ) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.
China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Indeed…mortgage (or Chinese equivalent) of 17 x wage as an average, with some city’s seeing x45 and with 20% of urbane family’s owning more than one property.) and on the trajectory they are willing to admit it would mean a population halving in 80 years (probably sooner though.) They are trying to make society more family friendly ("common prosperity") to encourage people to have families and unwind decades of damage done by their one child policy and a lack of housing affordability.China's goal is to increase consumption and advance their economy, they realise they'll never do that by allocating capital to unneeded residential investment.
Edited by speedy_thrills on Tuesday 21st September 14:33
It's the demographic situation that really caused the Chinese government to move I think. They realised that they have a massive over-supply based on the fact that for every year going forwards they will have a declining population. Building made sense when they had a growing and increasingly urban population.
Edited by speedy_thrills on Tuesday 21st September 18:19
I don’t think out housing market is sustainable, but it’s not comparable to Chinas.
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