China's 2nd largest real estate developer has defaulted
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  China's 2nd largest real estate developer has defaulted
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Author Topic: China's 2nd largest real estate developer has defaulted  (Read 825 times)
Crumpets
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« on: September 17, 2021, 02:13:35 PM »

Haven't seen a thread for this yet.

2008 Wall Street with Chinese characteristics.

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exnaderite
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« Reply #1 on: September 17, 2021, 05:12:33 PM »

I made a thread on the Economics board.

https://talkelections.org/FORUM/index.php?topic=463065.0

This will NOT become a Chinese Lehman Brothers, because the CCP knows that a Chinese version of 2008 will lead to them dangling from nooses on the lampposts in Tiananmen Square.

What will likely happen is a controlled bankruptcy of Evergrande where bondholders (i.e. mostly Chinese state-owned banks) eat the losses, and state-owned enterprises take over the company's worthwhile assets. At least, that's the plan. On the one hand, the CCP can't allow a Chinese version of 2008. On the other hand, it can't simply bail out companies that acted recklessly because they assumed the Party has their backs.

https://threadreaderapp.com/thread/1438944431734919175.html

However, the long-term effect of the bankruptcy of this and other Chinese developers is that China's consumer spending, banking, and construction sectors will suffer a hangover for years to come.
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Vosem
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« Reply #2 on: September 17, 2021, 07:18:48 PM »

This will NOT become a Chinese Lehman Brothers, because the CCP knows that a Chinese version of 2008 will lead to them dangling from nooses on the lampposts in Tiananmen Square.
An odd assertion, given that nothing of the sort happened in the United States, which has widespread civilian arms ownership (unlike China) and various openly active dissident movements, including the militia movement, which enjoy substantial sympathy within the military and local police.

It doesn't seem like a 2008 with Chinese characteristics is being forecast by many, but it seems the reason for this is just that Evergrande is more isolated from the rest of the economy than Lehman Brothers might've been (although how this could possibly be true makes no sense to me), not because the likelihood of revolution is greater in China than in the United States.
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exnaderite
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« Reply #3 on: September 17, 2021, 09:09:46 PM »

An odd assertion, given that nothing of the sort happened in the United States, which has widespread civilian arms ownership (unlike China) and various openly active dissident movements, including the militia movement, which enjoy substantial sympathy within the military and local police.

But the US has avenues to which to express dissent and seek redresses, such as an effective legal system and a mature civil society. China has none of that, which means the only way to express dissent is through violent means. That's why China's own official figures indicate it spends more on "preserving stability" at home than on its military. The leadership fear their own people more than any foreign adversary, and allocate funding accordingly.

This is what happens when an economic collapse happens to a long-standing dictatorship:

https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

Quote
It doesn't seem like a 2008 with Chinese characteristics is being forecast by many, but it seems the reason for this is just that Evergrande is more isolated from the rest of the economy than Lehman Brothers might've been (although how this could possibly be true makes no sense to me), not because the likelihood of revolution is greater in China than in the United States.

https://www.reuters.com/world/china/disgruntled-china-evergrande-investors-crowd-headquarters-protest-2021-09-13/

Quote
With more than $300 billion in liabilities, the developer has become one of the most systemically important companies in China. On top of its obligations to WMP investors and bondholders, it owes about $147 billion in trade and other payables to suppliers and received down payments on yet-to-be-completed properties from more than 1.5 million home buyers as of December.
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PSOL
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« Reply #4 on: September 17, 2021, 11:27:50 PM »

Just a gash that will coagulate and harden to a scar over time. China’s economy will weather until at least the 2040s, which gives them time to outlast the FAANGs and Tesla from collapsing under their own debt.
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Meclazine for Israel
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« Reply #5 on: September 18, 2021, 01:36:29 AM »

What does it mean for China's consumption of Australian minerals, Fe Ore, coal, lithium, copper?
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CumbrianLefty
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« Reply #6 on: September 18, 2021, 05:30:13 AM »


This is what happens when an economic collapse happens to a long-standing dictatorship:

https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

Certainly such a rapid fall of Suharto's regime was predicted by almost nobody.
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WMS
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« Reply #7 on: September 18, 2021, 09:10:12 AM »


This is what happens when an economic collapse happens to a long-standing dictatorship:

https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

Certainly such a rapid fall of Suharto's regime was predicted by almost nobody.

It made my Southeast Asian Politics college class much more interesting, for certain.
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exnaderite
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« Reply #8 on: September 20, 2021, 02:23:29 AM »

Evergrande's stock resumed its crash in Hong Kong. Its bonds are trading for as low as 20 cents per dollar, and the bonds of other major Chinese property groups have also fallen sharply.

Buried in the article:

Quote
Two Evergrande executives, who asked not to be identified, told the Financial Times that the group’s operations could be taken over by local governments and large state-owned developers on a “region-by-region basis”, but added that such a complicated rescue would be a “last resort”.

“Banks must extend our loans,” one of the executives said. “If they stop working with us, we will die right away. How is [the government] going to deal with so many unfinished [property] projects and handle so many retail investors?”

https://www.ft.com/content/d94b4689-b488-4d1b-b107-0843170736ea
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PSOL
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« Reply #9 on: September 20, 2021, 09:44:54 AM »

Nationalization time…
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Agonized-Statism
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« Reply #10 on: September 20, 2021, 11:18:38 AM »

Just a gash that will coagulate and harden to a scar over time. China’s economy will weather until at least the 2040s, which gives them time to outlast the FAANGs and Tesla from collapsing under their own debt.

Probably. This might be one of those moments that historians will mention when talking about the end of China's economic miracle, that and the West getting wise to just how unequal trade deals with China have really been. If this demographic collapse will really be as disastrous as some are speculating, that will be the nail in the coffin.
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Utah Neolib
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« Reply #11 on: September 21, 2021, 08:26:14 PM »

well, there goes a decent portion of china’s economy
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exnaderite
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« Reply #12 on: September 22, 2021, 04:15:30 PM »

It's (probably) official:

https://asiamarkets.com/imminent-china-evergrande-deal-will-see-ccp-take-control/
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dead0man
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« Reply #13 on: September 22, 2021, 06:59:59 PM »

Quote
Those exposed to Evergrande’s USD bonds and Evergrande shareholders are likely to be hardest hit by the China Evergrande deal.
and Royal Canadian Bank is the second largest bondholder?  eeeks
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Santander
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« Reply #14 on: September 22, 2021, 07:18:43 PM »

Quote
Those exposed to Evergrande’s USD bonds and Evergrande shareholders are likely to be hardest hit by the China Evergrande deal.
and Royal Canadian Bank is the second largest bondholder?  eeeks
Why is that a surprise or an "eeks"? RBC is a leading capital markets player and has a fortress balance sheet. Even if their position got wiped out, it wouldn't a dent in their balance sheet. If anything, now is the time to buy bonds at a discount (which many banks and funds have been doing) and back the Chinese government's motivation to put things back in order.
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