Will Evergrande be China's Lehman Brothers?

[Counselor706]

China’s second-largest property developer may end up defaulting, a prospect that is sending shockwaves across global markets.

Evergrande is $300 billion in debt and warned investors that it may collapse if it can’t raise capital quickly. Shares of Evergrande’s stock plummeted on Monday by about 10% after falling by about 80% over the past six months.

There are concerns that a collapse of Evergrande, which holds 6.5% of China’s total property sector debt, could spell economic catastrophe similar to when U.S. investing giant Lehman Brothers declared bankruptcy in 2008.

While Evergrande was supposed to repay interest payments on some loans on Monday, officials in China have reportedly told the major banks they won’t be paid. A collapse could ricochet across the Chinese economy given how many firms Evergrande is tied to.

Source

 

[pecksniff]

Why does a Chinese company have a name like "Evergrande"?

 

[Rightguide]

Why does a Chinese company have a name like "Evergrande"?

It sells in the West.

 

[Rightguide]

One has to wonder if this collapse is due to the vast number of new Chinese cities, now called "ghost cities" that are uninhabitable and falling apart.

 

[pecksniff]

One has to wonder if this collapse is due to the vast number of new Chinese cities, now called "ghost cities" that are uninhabitable and falling apart.

AIUI, the problem with those cities is not that they are uninhabitable, but that there are no jobs there. Apparently, when the state planners decided to build them, the left hand did not pay attention to what the right hand was doing.

 

[Rightguide]

AIUI, the problem with those cities is not that they are uninhabitable, but that there are no jobs there. Apparently, when the state planners decided to build them, the left hand did not pay attention to what the right hand was doing.

The internal failures of central planning communism are legion and legendary. Reminds me of the Soviet Baltic White Sea Canal, there fucked up Marxist planning led to 250,000 dead construction workers and a canal originally envisioned to move naval fleets from one body of ocean to another, ended up strategically useless and only deep enough for shallow water barges.

In China, why would huge cities be built when nobody can afford to live in them and when they try, they fall apart two years later? The Chinese have faced one disaster after another in the last year or so. So much so. the CCP may be in trouble.

 

[bellisarius]

Throw in the melt down of their semiconductor sector, dam collapses, the Wuhan Flu, while more and more nations are telling the CCP to take their "Belts and Roads" initiative and shove it where the Sun doesn't shine and you can begin to see why the "Party" is getting desperate.

 

[pecksniff]

. . . while more and more nations are telling the CCP to take their "Belts and Roads" initiative and shove it where the Sun doesn't shine . . .

Who has told them that?

 

[Counselor706]

Dow plummets 614 points as fear of China contagion takes hold

U.S. stocks fell sharply on Monday as investors worried about contagion from China.

The Dow Jones Industrial Average fell by 614 points, around 1.8 percent. The S&P 500 fell 1.7 percent. The Nasdaq Composite dropped by 2.2 percent. The small-cap Russell 2000 declined 2.4 percent.

Investors are worried about financial and economic contagion from the potential collapse of a giant Chinese property developer—rather than viral contagion from coronavirus.

Many on Wall Street pointed to the potential failure of property developer China Evergrande Group as the source of Monday’s sell-off. Evergrande’s debt burden is the biggest for any publicly traded real estate management company in the world, according to the Wall Street Journal. The company has about $355 billion in assets and employs 200,000 workers. Many analysts say it is unclear whether the Chinese government will let Evergrande fail or act to support it so that it can continue to pay its creditors. Alternatively, the Chinese government could allow the company to default on bond payments owed to outside bond investors while preserving its ability to pay employees and trade creditors.

Source

 

[ishtat]

I think that it is inevitable that the Emperor Xi will have to put some sort of government support behind Evergrande's financial re-structuring. Investors will take a big hi,t which will not be popular inside or outside of China. On the other hand property purchasers might be pleased to see some of the steam taken out of prices.

One tool available to Xi however, is that the most egregious and corrupt behavior can be treated with a bullet in the neck. Imagine how life would have been different if that tool was available in the West - no Clintons or Trumps for a start.

Perchance to dream.

 

[Cubantripod]

AIUI, the problem with those cities is not that they are uninhabitable, but that there are no jobs there. Apparently, when the state planners decided to build them, the left hand did not pay attention to what the right hand was doing.

Because socialism/communism awards party loyalty over intelligence, skill and market forces. Venezuela has the largest oil reserves in the world. The state run oil company is run like a private company and was insulated from government. Chavez wanted to use it as his personal piggy bank. He fired hundreds of employees who had a combined thousands of years of experience and put in his cronies that drove it into the ground.

 

[pecksniff]

Of course, the American economy and government survived the collapse of Lehman Brothers.

(Now known as the Bank of Evil.)

 

[JackLuis]

The Chinese are finding out what a market economy means. Fortunatly they have Billions of dollars in reserves in the form of US Bonds. When they come calling for their payouts....is when the shit hits the fan!

 

[bellisarius]

The Chinese are finding out what a market economy means. Fortunatly they have Billions of dollars in reserves in the form of US Bonds. When they come calling for their payouts....is when the shit hits the fan!

They actually have a trillion in T-bills. Second largest investor in same. The problem is they don't dare sell them. Doing so would increase the value of their own currency and start putting them at a trade disadvantage.

All of Japan's based companies have, or are in the process of, pulling out. Same goes with the S. Korean companies. Samsung Heavy Industries has shut down their ship building yard and are leaving, the last of the big S. Korean investors. Many US companies are doing the same, the Wuhan Flu managed to expose their supply chain vulnerabilities.

As far as "market economy" goes, the real estate melt down is a direct result of new CCP policies. The markets are most certainly reacting but the proximal cause was the government itself.

 

[Champakian]

Even if they bail them out, China faces some serious demographic problems/pressures
due to their past policies vis-à-vis its one-child edicts plus their rather
paranoid suppression of the middle-class.

I think their rising militarism is a symptom of this confluence.

Like North Korea, they now have to have an enemy,
an injustice, and a uniting cause.

It would be a very bad time to be living in Hong Kong or on Taiwan.

This could also be why the Hermit Kingdom is being a good puppet
and launching missiles at Japan and why the Aussies want to nuke up,
the latter which tickles me because of the French (Eminence) Affront...

(Need I say that our politics put a serious deadline on their actions
because it seems that the current administration is so weak, not
just internationally, but domestically, that they could be
swept out of power and replaced with more resolve.)

 

[bellisarius]

Even if they bail them out, China faces some serious demographic problems/pressures
due to their past policies vis-à-vis its one-child edicts plus their rather
paranoid suppression of the middle-class.

I think their rising militarism is a symptom of this confluence.

Like North Korea, they now have to have an enemy,
an injustice, and a uniting cause.

It would be a very bad time to be living in Hong Kong or on Taiwan.

This could also be why the Hermit Kingdom is being a good puppet
and launching missiles at Japan and why the Aussies want to nuke up,
the latter which tickles me because of the French (Eminence) Affront...

(Need I say that our politics put a serious deadline on their actions
because it seems that the current administration is so weak, not
just internationally, but domestically, that they could be
swept out of power and replaced with more resolve.)

Most likely. I'm sure you noticed that they've started a program of trying to entice the female population into having 3+ children, all in the interests of a 'good citizen' don't ya know. Yet in spite of the propaganda campaign and various incentives their fertility rate continues to fall and is currently hovering around 1.3. So the population bubble of military aged men is moving up the age tree and will soon be to old for military service. When they relaxed the 'one child' policy they did/have experienced an increase in the birth rates but that bubble is 10-15 years away from being eligible for military service (unless they pull a Hitler Youth trip out of desperation). They know that they have a finite window of opportunity for adventures of the military bent.

Yet another unintended consequence of trying to manage everything top down.

 

[Champakian]

Oh, I think they're already Hitler Youth-ing through the schools
and the absolute control of social media and culture as
witnessed by the no effeminate man movement...

One only wonders how they feel about gays.

 

[bellisarius]

Oh, I think they're already Hitler Youth-ing through the schools
and the absolute control of social media and culture as
witnessed by the no effeminate man movement...

One only wonders how they feel about gays.

Private schools and tutoring (both in person and on-line) were huge growth industries until some months ago when the government shut them down. Apparently they were teaching too much of the 3 R's and not enough government indoctrination. Criminal organizations are quite intolerant of competition.

Their largest age demographic is the 30-34 year old group and the numbers fall off dramatically after that. Generally speaking 35 years of age is considered the upper limit for military service.

Make no mistake, they still have a shit load of people, just not a big a shit load as they had before and it's going to continue to shrink.

 

[WillJ8787]

The internal failures of central planning communism are legion and legendary. Reminds me of the Soviet Baltic White Sea Canal, there fucked up Marxist planning led to 250,000 dead construction workers and a canal originally envisioned to move naval fleets from one body of ocean to another, ended up strategically useless and only deep enough for shallow water barges.

In China, why would huge cities be built when nobody can afford to live in them and when they try, they fall apart two years later? The Chinese have faced one disaster after another in the last year or so. So much so. the CCP may be in trouble.

I guess you haven't been to Detroit?
Or any mall or shopping.district that are abandoned across the US?

 

[Champakian]

Private schools and tutoring (both in person and on-line) were huge growth industries until some months ago when the government shut them down. Apparently they were teaching too much of the 3 R's and not enough government indoctrination. Criminal organizations are quite intolerant of competition.

Their largest age demographic is the 30-34 year old group and the numbers fall off dramatically after that. Generally speaking 35 years of age is considered the upper limit for military service.

Make no mistake, they still have a shit load of people, just not a big a shit load as they had before and it's going to continue to shrink.

It's funny how our government's recent policies accelerated a reverse
from the public indoctrination centers to home and private schooling.

 

[bellisarius]

I guess you haven't been to Detroit?
Or any mall or shopping.district that are abandoned across the US?

Anything inside of 10 mile road in the Detroit area was a shit hole back in the 1980's and that was before all the plant closures.

 

[Champakian]

Wasn't the abandonment of Detroit driven by Leftist ideology
which chased Capital away in favor of poverty programs?

 

[Champakian]

Malls were killed by advancing technologies.
They weren't built and then subsequently left vacant...

 

[bellisarius]

Wasn't the abandonment of Detroit driven by Leftist ideology
which chased Capital away in favor of poverty programs?

Pretty much. "Tax the rich!" *chuckle*

 

[WillJ8787]

Anything inside of 10 mile road in the Detroit area was a shit hole back in the 1980's and that was before all the plant closures.

Built by Capitalists....when the money runs dry....abandoned it....blame lefties for it. Lol!

Good one!