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Is China on the verge of collapse?
| A bit of background: Property development is a very tricky business. It requires a huge amount of liquidity (cash) in order to actually build the homes. You need to make a staggering amount of purchases every single day for supplies, wages, equipment, you name it. In regular investing, you can borrow money to buy something you're sure will increase in value, but property developers can't do that.
| You need a ton of cash to get your payoff, and the slightest hitch can burn through that cash in the blink of an eye. It's no wonder that property developers go bankrupt as often as they do.
Real estate in China is DANGEROUS
| In the USA, real estate accounts for around 6% of the country's GDP. Some people invest in it. But in the West, there are plenty of other places to put your money: stocks, bonds, you name it -- tons of options. But in China, the stock market is a crooked joke, the banks work for the communist party, you can't get your money outside the country, so there's really only one place to invest for your future: real estate.
| As a result, real estate accounts for somewhere north of 10% of China's GDP. That means if something bad happens to China's housing market, the whole economy could be shredded, up to and including destroying the country's banking sector, with potentially disastrous implications inside China (especially political instability) and the world (who knows).
| Okay, so what's going on with Evergrande?
So like I said, property development is a really tricky business that needs a ton of cash. Evergrande, China's biggest property developer, started running out of cash. They were already deep in debt, and needed gobs of cash on an ongoing basis. So they started selling complicated (and unregulated) investment bonds to the public. Buy a coupon, basically, and be guaranteed your investment plus profit after a certain amount of time.
| Evergrande used the cash from those investors to fund its operations. Classic pyramid scheme. Unfortunately it didn't work, because they had so much debt from other sources (in addition to those investment tools) they couldn't even make the interest payments. Those consumer instruments are coming due, around $8 billion in bonds are coming due in a few months, and oh yeah they also have a mind-boggling $300 billion in debt on top of all that.
| There is a 0% chance they'll be able to manage the interest on all that, much less pay it off.
| So what happens next?
China's president, Xi Jinping, gives exactly zero fucks about billionaires or consumers. He will do whatever the hell he wants to do. At this point, China's entire banking system (already a tottering shambles to begin with) is at risk. As things stand, China's economy is struggling and unrest is growing. If millions of people lose their homes, they could take to the streets. Already China has the most expensive housing on earth (relative to people's incomes).
| It's a classic "too big to fail" situation, but a dictator has tools that American presidents don't have. Who knows, maybe he'll nationalize the housing market. Recently he shut down the private tutoring industry, worth well over $100 billion per year, because he didn't like it. Who knows? One thing for sure, whatever happens next will affect you, whoever you are, wherever you live. Stay tuned.
| They'll just print more money and do more currency manipulation to handwave the inflation away. No need to get excited just yet.
| I hope Xi starts to shut down everything, so folks here on the west stop kissing his ass, and then begin to realize that you can not trust a dictatorship, Blizzard got cucked by China, so did Tencent, the world should've noticed that China is not relyable in any way or form, and that in fact China is a problem, they have literal concentration camps, precisely lile the Nazis did.
| >>789013 Agreed on this. In the words of a very famous Hong Kong man; "DONALD TRUMP DON'T TRUST CHINA - CHINA IS ASSHOLE!"
| Although honestly I have a more pressing question. So many countries ESPECIALLY the US owe so much money to China. So if the Chinese housing market crashes (and if it's worse than 2008's since China has more invested in it than the US) and then the Chinese economy collapses - what's gonna happen to the world's economy as a whole in this case? Would this also make China become even more aggressive and begin all out wars?
| >>789059 I'm Brazilian, trust me, we would be in an even worse place, they are our biggest customer, but even so, this shithole of a country should've learn eons ago that, you shouldn't put all of your eggs in one basket. Most of our exports are grains, meat, food basicaly.
| The irony is overwhelming. I saw a thread a few months ago about the (probable?) economic-social collapse of the US in the near future, and here we are now, talkong about the collapse of China
Lmao
| >>789130 Indeed, by printing more money, its like you spreading it's value, therefore you need more money to conquer the previous value. Commies never managed to grasp what money truly is, also, the importance of goods and services, I've seen a lot of far lefties just going like "Let's just print more money! That will solve it!"
| This isn't the most interesting direction this thread could've gone in, but whatever.
If you print more money, you would expect to see a rise in inflation. This is because the money supply plays an important role in determining prices. If there is more money chasing the same amount of goods, then prices will rise. Hyperinflation is usually caused by an extreme increase in the money supply.
| However, in exceptional circumstances – such as liquidity trap/recession, it is possible to increase the money supply without causing inflation. This is because, in recession, an increase in the money supply may just be saved, e.g. banks don’t increase lending but just keep more bank reserves.
| this is very silly. First of all, when was the last time an industrialized country actually collapsed because of a bubble?
The idea that the high chinese real estate production is because of communism, not enormous urbanization, is also a big stretch. Real estate prices have also been inflating everywhere, just like other kinds of speculation like venture capital and stocks
I think the thing about inflation was referring to keeping the currency inflated to benefit exports
| However once inflation sets in, it is difficult to reduce inflation. For example, higher prices will cause workers to demand higher wages causing a wage-price spiral. Therefore, expectations of inflation are important. If people expect high inflation, it tends to be self-serving.
Not that any of this really matters. Inflation has almost nothing to do with any of this.
| >>789158
>The idea that the high chinese real estate production is because of communism, not enormous urbanization, is also a big stretch.
I don't think anyone in this thread made such claims though? Is this some kind of strawman-attempt?
| >>789154 I fail to see what we said goes against what you said, we spoke on general terms which you agreed, since you said inflation don't work this way only in exceptional cases.
| G/u/rls please stop this right now.
We all know Inflation = bad and it's over.
Can we keep talking about China's economic unstability?
Or if the chinese will revolt if they have the chance?
I said it's interesting that we talked about US collapse no long ago, and now China! Isn't that crazy Okuyasu?
| By the way, op, add a source. I've been following this story for a while. Another possibility is what happened to Japan's real-estate investment market
| >>789231 "*Facepalm*" you posted that as if we said some great absurd, then went on to pretty much say that 9/10 times, printing money= inflation.
| >>b0c5ac
You're putting the boot on your own head there, buddy. Whatever antagonizing you think is going on is entirely made up in your own head. I can't help you with any of that. I'm here to talk about Chinas financial problems and how it may affect the world.
| >>789279
I don't have a single source for the speculations posted earlier. This link will have to suffice for now:
https://wolfstreet.com/2021/09/15/what-a-collapse-of-chinas-evergrande-would-mean/
| They can always bounce back, unlike US or EU china has numbers.
While we speculate about it's downfall they'll probably jist rebuild/fix their problems with sheer manpower, like they always did before
| >>789365
It took a decade for Japan's real estate bubble burst to bounce back, and the 2008 financial crisis took like 8 years?
| >>789344 The guy offended me I offended him back that was all. And again, I don't get your "*facepalm*" but whatever, it was just an observation.
| >>789397 is china an island nation with mininal resources that relied on allies help, despite the fact they humiliated them not so long ago? Don't think so
| >>789598 It actually is, they don't have a whole lot of resources.
Are you trying to reference West Taiwan?
| We couldn't get lucky enough for China to collapse.
| >>789598
You need to work on your rhetoric if you want your point to come across. Why do you even talk like that?
| >>789630
I'm just going to call you the linguistics g/u/rl from this point forward.
Nothing against you, I just find it funny how curious you are about why people talk a certain way.
| Who gives a shit. I just hope CCP collapses
| >>789641
Haha, please don't call me that. Telemetry aside I enjoy the anonymity this board gives me. You're also putting me on the spot since my grammar isn't always perfect.
But I think that if you want to participate in a discussion you should articulate yourself clearly. Rhetoric is just as important as logic imo. Otherwise people might not respect or understand what you're trying to say.
| as a chinese i hope Evergrande fall
i think the reason why china house prices remain high is becos of these unscrupulous developers
Many house already lost their original use--[live]
they not a family`s home,but a financial product
| I'm not entirely familiar with this situation so correct me if I'm wrong but it seems that China is experiencing something similar to Japan in the late 80's, early 90's. Both countries had growing economies and were predicted to pass USA but ended up shitting the diapers because of a bubble which led to a period of stagnation
| Revolt or revolution in China is extremely unlikely. Unrest and unease is likely. The moment anyone in China tries to "cause" social unrest, they get sent to "work camps".
The CCP won't care, they'll just build more "factories" and export.
Nothing in China belongs to the people, the CCP owns everything and all products are worthless in China, since they're cheaply made.
Real estate is a joke, the CCP can just take it with "crimes" committed.
They're playing weak.
| I mean china is literally crippling their own gaming marked by applying obligatory restricitons of 3 hrs a week for those bellow 18, tencent already lost 25% of their actions, they are also now trying to reduce the the amount of "feminime men" in their media, ccp is a dicatory control freak, so lets hope they collapse already, their people would really appreciate it, also RIP hong kong
| I predict that ccp is currently creating propaganda plans to find a way to pin evergrande failure on foreign forces. When covid started people in china were fucking pissed at xi jing ping, it was the first time I EVER saw open criticism of him not immediately blocked. But once the ccp found a way to blame foreigners people calmed down (and those who criticized got visits from police)
| Xi jinping*
| >>790365 and this is why all my homies are mad at ccp, they are control freaks, anyone who say china is good place to live is either full of propaganda or very ignorant, they exploit their power
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| THE STORY: a massive property called Evergrande is facing severe financial problems, and may collapse.
WHY IT MATTERS: Some observers are calling this "China's Lehman Brothers Moment," referring to the collapse in 2008 of one of America's most respected investment houses, an event that came very close to bringing down the entire global financial system.