As China's property giant Evergrande veers toward collapse, its unpaid debts spark protests
By - AppyWappy
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You are probably seeing the first signs of the Flash Crash. Evergrande was using debt to invest, to build buildings. When the credit dries up, there is no money to complete construction. None of these contractors or investors will see their money again, it is gone.
Worst part is, they take money from people upfront for unfinished houses, then use that money to get more leverage and start new projects. The existing projects languish in “under construction” state for years.
So they keep starting new projects, sell unfinished houses and repeat it over and over again. This is why there are so many unfinished apartments, and now they don’t even have the money to finish all the unfinished apartments, which have already been sold and paid for.
They also have a ton of unfinished apartment in inventory, 100s of thousands of them.
One of 2 scenarios:
1. Government/someone bails them out, does a fire sale of their unsold inventory, which floods the market with cheap houses crashing everyone else.
2. The company burns to the ground, completely fucking millions of people who have paid for houses in advance, country is littered with unfinished houses everywhere which god knows who will finish. Millions more have bought “financial assets” from the company and they are fucked too.
sounds like a ponzi scheme
More like a bonsai scheme.
They are still victims
If only there was a word for "taking people's money to finish repaying the money you just took from someone else a while back"?
I'll take "Ponzi Scheme" for 500, Alex.
Sounds like you "Madoff" with their money.
So, either way, the people get fucked and some dude sets off into the Sunset with a shit load, or a yacht load, of the people's cash? I don't see the problem here. This is the way. Right?
I don’t think anyone is going to go away with a boat load of cash.
Last time they had to bail out a real estate company, with much less debt ($20 billion or so) the CEO of that company “tripped and died” during a hike on a vacation.
China does not fuck around
As an entity within China, they are effectively an agent of the CCP. I would guess the CCP “officially” takes over the projects and finishes them.
Unsure of the long term implications of this though.
May be they will break the company into pieces and sell to other developers and ask them to finish the projects.
Evergrande has been trying to sell its inventory with a 30% discount since 2020 without much luck though.
So those pieces will have to be sold very cheaply to get any buyers.
Unfinished apartments that are already paid for is more challenging. Why would any developer want to finish unfinished projects which people have already paid for and there is no money in it for them.
>Unfinished apartments that are already paid for is more challenging. Why would any developer want to finish unfinished projects which people have already paid for and there is no money in it for them.
Don't chinese buyers have insurance/bank guarantee for a finished apartment? I dont think prepay schemes like that are allowed without proper security in EU at least.
The current executive team disappears and is replaced in a weeks time.
Evergrande has less than 1.5M units under construction. That's not even .5% of China's market.
So under both scenarios those who bought housing upfront will receive an unfinished product.
They get an empty concrete box in the sky.
“An empty canvas, just waiting for your finishing touches.”
They get nothing
Much of China was buildup over the last decade as quickly as possible cutting as many corners as possible...
They essentially built Potemkin cities lmao
So puts on Evergrande?
this thing is down like 80% already.
So it's a value buy?
$HTZ Part 2 Chinese Boogaloo
What I want to know is if this means Chinese investors will be forced to fire sale their Canadian holdings?
Didnt cross my mind that their real estate crash could jump the ocean.. thx for sharing!
Because of foreign banks investing in this is the reason it reaches beyond just china
It could infect much more than real estate. If margin calls come they sell anything and everything to raise cash. The more liquid and high dollar the faster it goes. Tesla, Apple, Amazon, Google are very large weights in the QQQ and SP500 so if they get hit hard to provide cash the market drops triggering other margin calls and the cascade begins. Remember the hedge funds and such might be leveraged 20x so it doesn't take much drop for them to need to raise cash creating a self fulfilling fall. The shorts will need to be covered if the longs lose value faster and if GME is really short over 100% it could squeeze to the moon creating more pressure on the other stocks.
the dippest dip!
Lol yeah, but the stuff over here is probably not technically “legal” and hidden from the ccp, so probably well hidden through shells from here to Panama in the first place. Which means they only sell if they need money, but probably not enough to sink the market at all.
Hopefully it means real estate.
Not keen on having to fork over $1.5 million just for a 4br house in the suburbs.
Cries at 700K 2br condo 😭
Laughs in 2.2mln 18,000 sq. Ft. Estate with helicopter pad
Where tf are you getting that much house for cheap? Is it still in the US? 2.2M gets you a livable apartment in New York
it's called the Midwest. ppl sacrifice way too much money and QoL just to say they live in a big city.
People sacrifice so much QoL just to have more living space. There’s so much to enjoy in big cities, so much diversity of food and jobs and culture and backgrounds, and many of the west coast cities have incredible weather and nature.
Yeah and you pay $2300 rent a month for a 1 bedroom apartment.
Right, even more than that, it takes a special kind of stupid.
I mean it’s not necessarily stupid, I live in the city because I think it’s worth it. It just depends on your finances and what’s important to you. I lived in Ohio and Oklahoma for 26 years and I’m pretty content leaving that behind.
JFC, yes I put a large amount down but the mortgage on my 4,000sqft home on five acres is under $2k/mo.
The dumpster behind the Wendy’s I work at is FREE
And the equivalent job pays 150% more which is more than you’d need to offset the living cost difference.
Most people YOU know are netting 150% more. Tell every middle class family that no longer lives in Williamsburg that the cost of living isn't atrocious, and doesn't just apply to rent.
NYC has people netting 200k and in 10 years have 15k saved to their name, or people born with a silver spoon and are unaware that it isn't like that for everyone. I feel like with your comment you fall in the latter, what was the interest rate on your student loans again?
If you know, then you might be living in the bronx, or crown heights /flat bush, forest hills / corona Park. By time you get to the wonders of nyc, it takes you an hour train ride and the only difference between that and being in the burbs is a 4% city income tax.
>And the equivalent job pays 150% more which is more than you’d need to offset the living cost difference.
Can confirm that it *does not offset the difference enough*. Still requires room mates to meet the demands of the landlord that you make X amount above the rent.
City living is dogshit, you spend all your money on rent and have nothing to show for it because you own nothing. When you live in a big city either you spend all your time working and then you have no time to do anything or you don't constantly work then you have no money to do the things.
Living space is so much more than how big your house is. I’d rather live in a shack in the woods than a shack on the 16th floor of a building.
QoL in big cities? Smog, traffic, crime, bad schools, drugs, roaches, mices, noise. You call that quality of life?
Drugs are good tho
Smog? What is this 1962?
Stacy, you’re a fat ugly bitch with bad breath.
I am not fat!
Some people don’t want diverse food and friends. Maybe they like the few things they like and don’t want to broaden their horizons. There’s absolutely nothing wrong with that.
Ehhhh… Given recent behaviours I’m not so sure lack of diversity horizons and culture is a good thing.
There’s not? A lot of that sounds wrong.
Yeah but the Midwest fucking sucks. It's not even pretty in the middle of nowhere like out west, it's just corn.
Yea... Beautiful beautiful corn...which affords more than you can apparently. Get your ups bud...
You can find all that food in most decent-sized Midwest cities. Culture? Every city has museums. Plus we have these things called airplanes. They cost like $100-250 to almost every major city.
You can find some good food in the dumpster behind del Frisco's after they close. And that's what I need to do to have a decent steak in my $3000 a month basement apartment
Haha. Funny. The answer to culture is museum :D
So tell me what it is to you. Theater? Music? What do you think they don't have in a midwest city?
Well I guess it's a good thing the house I'm talking about is 20 minutes from downtown Denver
Agreed. I left the city area but even in places like Florida prices are rising fast. Getting something like 18,000 sq ft would be impossible here for anything close to even 10M. Like you said things are probably still in cheap in more rural Midwest areas.
In the Chicago burbs you can get 10k+ SQ feet on a lake with a dock and boathouse for about 1.2M. it's about an hour drive or train ride into the city, but the burbs are very affordable. And you're still close enough to hit the city for the cultural benefits without much of a commute.
I hear this shit all the time as someone who lives in a high cost-of-living city.
There's a reason that some places cost more than others. It's not to say "i live in a big city". It's because it's a better place to live, hence the free market making it more expensive. The midwest is cheaper because less people want to live there, because overall people think it's not as good as a place to live.
you are more than free to continue thinking that
Great reply, that's why people are moving out of the city's except the young who are willing to live with 5 people to afford the rent
I'd say it's a pretty major indictment of the Midwest that there's cheap af homes out there and people still refuse to live there
This particular house is in the suburbs of Denver. I do have other properties that are significantly more per square foot (west LA area, an island home near Seattle, Aspen, etc.) But those of you who are only after owning one property are being played for a bunch of suckers and chumps by thinking you HAVE to live in one of like 10 areas.
And you're willingly proving those playing you right
South of Austin here, far enough i can go but don't have to pay them taxes. That's my sweet spot.
Used to own a rental place in Buda. Perfectly lovely little suburb that hipster douchebags would thumb their noses at in favor of something 1/4 the size because it wasn't close enough to 2nd Street or Congress.
Stupid people gonna be stupid
Buda grew over 100% from one census to the other.. Californians moving here in droves unfortunately. I'm in the same County tho.. Love it where i am.
Yup. Pretty much all of Southern California. Median home value has exceeded 800k.
On the contrary, Chinese real estate too risky, time to buy Canadian!
Said the Chinese.
I think the people who have international RE holdings aren't poor enough that they would have to liquidate their domestic holdings over a crash. If anything there should be a surge in demand for intl properties as more Chinese lose confidence in their home RE market
This ^ is the likely outcome.
Leverage is a sword that swings both ways.
They shouldn’t even be allowed to hold property. If they buy tax them insane rates. That’s ridiculous, they’re not even living in the homes
I think there’s a dangerous slope to blanket saying “Non-citizens shouldn’t be able to buy residential property” but I think there should be a *hard* no rental, full-time occupancy requirement as part of it, and have it require at least a work visa of some kind.
Short term probably yes... however long term prolly gonna make the problem much worse. Since now they Reeeally won't trust their own economy to invest in. If houses dip you better buy my friend.
fuck, i will buy the shit out of Canadian real estate. It's fucking annoying when you want to live there but can't afford to buy shit while people who don't live there are gobbling everything up.
How do you buy some lands fill of maple syrup?
lets fuckin hope so. Fuck em all
these condo developers have been ponzi's in asia for as long as I can remember. The general rule is go with a big ponzi or risk losing all your deposits or even more (some developments give discount for paying in full ahead of completion). Like some other commenters mentioned the ponzi must grow and grow, so first developments only finish when new developments get funded.
Buying pre-construction in Asia / Central America / South America is just begging to get fucked. So many horror stories.
the discounts to pre-pay always bring in suckers, but like in all ponzis not everybody is a loser
"Some of these suppliers had put up their own homes as collateral in loans to cover their work for Evergrande, confident that “such a big company” could not possibly fail to pay. Now they are under pressure from both the banks and their workers.
The entire construction supply chain had been using Evergrande IOUs instead of cash for years, said Cai, a supplier from Wenzhou who asked to be identified only by her last name."
The fact that so many people went with an obviously shady scheme like that shows that Evergrande sure as shit isn't the only company that does such skullduggery
I think we are about to find out that the Chinese love to go skinny dipping.
They aren't and they aren't even the most leveraged Chinese property developer.
That said, it's really not as bad as it sounds. These are far from the most overleveraged companies to exist and the only fact this is an issue is that CCP is forcing leverage out of their financial system.
Fully expect this to have a rather boring end just like the rest of the "this could finally crash the chinese bubble" events we have had in the last couple of years.
> The entire construction supply chain had been using Evergrande IOUs instead of cash for years, said Cai, a supplier from Wenzhou who asked to be identified only by her last name."
I read in one story that a paint supplier was being paid off in condos to be delivered in 2024. If that’s the case for a fucking paint supplier then things really don’t sound good.
This will definitely have a ripple effect. Question is how big
About THIS big.
No *this* big!
Lehman style subprime all over again . Except no gov. Bailout
China doesn’t have to worry about democracy and convincing a Congress. China can just act. Don’t forget about that.
That doesn’t mean they will act rightly.
Most of the time with financial markets it’s just about acting and restoring confidence. Without getting too metaphysical, it doesn’t matter what the system is as long as we have confidence in that system and believe it to be functioning.
It also needs money, and if everyone is broke then markets dont work, unless they just jpow their problems away
This aspect is forgotten too often
Simpsons has an accurate depiction of what will happen...
This will reach further than its borders.
Maybe, but it's definitely not in China's best interest. Hopefully they will do something to prevent any collateral damage from happening. I do think China wants to make an example out of Evergrande tho
This is going to fall apart really hard and take down a lot of medium size and small companies with it. Property for capital debt swap won't work if those companies ran out of working capital. Then again it might only effect China. International exposure EFTs will sell off a little. Maybe the house of cards is bigger than I think it is. I love the bear porn. Chinese real estate sector collapse just seems very regional in nature. I think this will spread to neighboring countries. 20% USA stock market correction.
Bro china owns so much international real estate. Everything is interconnected.
This is a myth. Germany owns more foreign R/E than China.
People just like to blame China for high housing costs in Canada and Australia and New Zealand because they don't want to look in the mirror.
You can't blame China for high housing costs when domestic buyers make up >90% of the market...
Yes but German foreign investors are okay because they don't look like the Chinese.
In China, it is so rare for people to protest that either this is staged or it is really really bad if it's real.
when it comes to one's livelihood, people will protest regardless whether you're under communism or capitalism.
Oh I fully understand. I was born and raised in a communist country. The only time there where "protest" were IN FAVOR of what the government was doing. when I came to the US, I was surprised protesting AGAINST the government was a thing. All I ever saw was protesting for the government agenda.
All I'm saying is, if it is staged, the Chinese government wants to showcase the evil of capitalism and how it is hurting the common people and press on their agenda of not helping these monsters and eradicating them. If it ain't stage, then the problem is super duper bad and social unrest will be unprecedented because in these countries, it is rare to have protests.
>the Chinese government wants to showcase the evil of capitalism
They failed at this the moment they implemented capitalistic attributes into their economy after epic failure of "The Great Leap Forward" program in the 80s.
Mao must be twitching in his grave as he witnesses his nation go the opposite direction of his vision.
Gave? They've got him on display...
>Gave? They've got him on display...
I am aware that they not only have Mao on display, but they also continue to glorify Mao's name. This doesn't change the fact that if Mao were alive today, he would definitely not agree to how China has injected capitalistic attributes into the economy.
Mao has always hated capitalism. In fact, upon his ascension, he destroyed every capitalistic fabric in the system and rebuilt a commune system. He illegalized any kind of privatization, those who refused were imprisoned/tortured to death in jail. Those who complied, died due to famine.
It was only after Mao's death that the CCP were desperate to change the situation that they finally allowed privatization (This also resulted in China's rapid economic rise 'holy fuck capitalism works, what a fucking shock!).
Mao would have never agreed to this because Mao's vision only includes a pure communist system, he also knew that the road to this path will be destructive but necessary to achieve his vision.
My grandfather is an escapee from mainland during the Mao era, that's why I know this.
lol for real. American still believe China is commies(?). CCP is a dictatorship for sure but Chinese economy is capitalism with Chinese characteristics.
...except, if everyone who has depended on those capitalistic attributes for savings and retirement suddenly loses all their money, then they'll be able to point to that as the evil of capitalism.
capitalism has a lot of downside tbh and those downside is what births socialism.
nonetheless, capitalism is still a better system than communism in my honest opinion. i could be wrong though
It's not staged. Protest of dozens or hundreds of people over localized economic or NIMBY issues - like land disputes, concerns over polluting projects, unpaid wages and so on - are actually fairly common in China. So long as it isn't directly directly against the government, some level of demonstrations are generally allowed. Openly go against the central government and you'll get quashed real fast, but for local issues protests are not uncommon.
This is accurate as another communism escapee.
Lmao wtf r you talking about? When Tesla lowered the prices of their cars in China, there were weeks of protest because no one saw it coming, especially the people who signed the day before
The CCP has always been given a pass for all previous and current misdeeds as long as they can claim economic prosperity for most.
When people are screwed financially, they will definitely protest.
It really isn't that rare.
[Wikipedia: Protest and dissent in China](https://en.wikipedia.org/wiki/Protest_and_dissent_in_China)
[A specific example from Wikipedia](https://en.wikipedia.org/wiki/Wukan_protests)
Compared to how often it happens in the US?
In China crowd control is rows of tanks.
When it comes to real estate, they'll absolutely protest.
There's so much doom and gloom about this I'm sure it's gonna somehow go completely opposite and moon.
there was also so much doom and gloom during lehman brothers' collapse and those who bought the lehman brothers' dip, definitely didn't go to the moon
Yah, I sold my BABA shares for nominal profit on Friday since it’s unsure if the Chinese government will bail out Evergrande.
There were reports of the government pumping money into the Chinese economy but nothing directly pumped into Evergrande. So, either the government will step in last minute or it’s preparing for Evergrande to default. If the latter, then it probably won’t look pretty for Chinese stocks tomorrow.
When are they not artificially pumping the economy?
When they tanked my EDU shares 😂
Apparently you haven't seen what happened in 2008.
Gravity is a hell of a thing.
Sir Isaac Newton
Stonks on apple right?
I think lesson of 2008 is not to let a contagion take down the whole system. If there’s a crash, I think it’ll come from something new we haven’t predicted.
There’s an argument that China is so desperate to maintain strong growth every year that they’ll firehose cash money and use the full weight of the CCP to prop it up.
I have no problem believing that to be true. I have no proof either, but that sounds totally within their character to do.
Hello hyper inflation
>There's so much doom and gloom about this I'm sure it's gonna somehow go completely opposite and moon.
"Be greedy when others are fearful" definitely worked out for those who bought the dip on lehman brothers stock
different story though if you bought the crash on the major indices.
Yeah China will be fine long term imo I’m waiting for a bottom on the big China stocks
A house of cards. I wonder what else will collapse if this turd goes down.
Considering that these schmucks have been paying contractors in IOU's and nobody batted an eye, I'd bet good money that this sort of tomfoolery is common practice in Gyna
Like Buffett says "when the tide goes out we'll find out who's been swimming naked."
Could be the Chinese party, whatever it's called.
Did you know that in China the military doesn't belong to the government but to that one political party whose name I can't remember
From property giant to poverty giant 😛
How do you say $ROPE in Chinese?
If it’s bad for China it is good for the rest of the world prove me wrong.
I'm glad I took my L on Chinese stocks a few weeks ago and got the fuck out of there.
You can't have a legitimate stock market with a government like China.
there used to be an unwritten rule here for no chinese stocks after the period of chinese netflix / chinese tesla / chinese twitch / chinese pornhub / chinese ______ .. maybe a couple years ago probably the newer "investors" never experienced that
Like our Government is any better. Ya got the Feds own members buying the stocks they are bailing out with taxpayers money. Corruption is worldwide and will bring it all down eventually.
Yeah there’s a big difference between business in authoritarian dictatorships and democracies. Without a shadow of a doubt it’s better to be over here.
No doubt...but we are quickly devolving into Authoritarianism.
>Corruption is worldwide and will bring it all down eventually.
We will remember these times as the golden age of International Socialism.
You have no idea what the fuck you are talking about.
Oh so you mean that didn't actually happen? Weird!!! I have read it a few times now. OK tell me what the real story was then?
Our government and financial system is much better.
I will not invest in Chinese stocks. Screwed once and that will be the last time.
Hopefully this brings down the cost of places in Vancouver. Really don't want to spend 650 k on a one bed condo
This is more the result of western countries sticking to infinite QE.
People lose their homes they prepaid for, so they protest to get free housing in a camp.
Protests in China, hmmmm. Maybe time to dip buy this one.
With momentum of this cluster F inbound to some possible swan event, I'm biasing to cash preparing to pick up some favorites for cheap in the coming weeks/months. On the flip side, condolences to those with Chinese holdings....put holders, however, should be printing.
I guess this is the end...
I found the CEO
People act like this is the end of the world. $300 billion is all that's at stake. Reminds me of the trillions lost over the Greek debt default. It would have been cheaper to just give them money then suffer Stock crash after Stock crash.
It's not the one, it's the others that'll follow.
So the smart money in China should just pay off the debt. Crisis averted.
Please explain where you got that BS number
A $13 billion hedge fund blew up earlier this year and it caused market wide volatility and massive liquidations.
And you think this evergrande stuff is limited to just their liabilities.. . . ..
They are the trigger like AIG the last time around.
Soooo what stocks do I short?
Does anyone else feel like 'Looper' might not be that far off?
If China defaults on a loan, do ghost cities get repossessed and sold off?
What if [Abe was right?](https://youtu.be/AKIo10C8HME)
Will AMC investor be in this situation with Shitadel.
For moral reasons i would never invest in a chinese company…If you want to get a better understanding of how deeply ccp has infiltrated western democracies and especially canada and its real estate market, i recommend you read Wilful Blindness, How a Network of Narcos, Tycoons and CCP Agents Infiltrated the West by sam copper, Silent Invasion: China's Influence in Australia and
Hidden Hand: Exposing How the Chinese Communist Party is Reshaping the World by clive hamilton…
One thing I've noticed about Detroit is that they don't know anything about rock and roll or rap music
How does one bet against it? What are you shorting if you don’t have access to international stocks ?
Shit will hit the fan everywhere driving USD up, driving bond prices up.
Calls on TLT?
This stock is already down 80% think this ship has sailed. Everything I'm hearing is that everyone's expecting the worst and the stocks are already in free fall. I guess the real opportunity might be to hope this isn't nearly as bad as we expect and buy some of these up dirt cheap, but personally I wouldn't touch these stocks.