Evergrande is the second largest of China's real estate companies, with assets estimated to be worth 2.3 trillion Chinese Yuan, or 147 billion US dollars. Now consider the following. Evergrande is in debt in excess of 300 billion US dollars. Worse, those debts were issued at eye watering Interests rates in excess of 13%. As property markets are one of the few places in the Chinese economy individual retail investors can park their money a huge number of Chinese citizens and banks have exposure to the securities issued on Evergrandes debt.
And Evergrande is now Bankrupt, unable to service the interest on its debts let alone repay them. Worse, as their balance sheet started to bleed red ink, they all but forced their own employees to start buying up the debts out of their own pocket. Promising healthy interest rates as they went. Those debts are now worthless and all employees of the company are now on strike. Riots have broken out and the Chinese Communist party is promising the harshest punishments for the executives.
Meanwhile, financial markets around the world are routing as the contagion spreads. Nobody knows how much exposure the Chinese Banks have to this, nor what exposure the Western Banks have to it. It is assumed though that everyone is caught up in this, and depending on how the Evergrande Debt was structured, we are looking at a meltdown on par with Lehman Brothers.
This could end up being Lehman Brothers 2.0 and signal a crash. China is not going to be able to handle the recession a full collapse Evergrande will cause. It'll be real interesting to see just how badly the Western markets are exposed.
The CCP will absolutely try and absorb all the losses and cover it up as much as possible.
Good call on the thread. Today and tomorrow the US markets are going to be red and choppy. They are holidays in China and havent kicked us in the dick yet due to their market closures. Wednesday through Friday are gonna be economic collapse porn. I'm stoked.
Are you ready for not stagflation but recessiflation
I've read a good number of not-Zerohedge-favorite analysts who are saying that best case China's GDP shrinks <1% because of this. Best case. Best case is a pretty shitty case for China and everyone else
This won't be an epic meltdown on the level of Lehman, Many reasons for it but it would require a lot more firms with similar debt structures to realise they can't service the loans.
Still will be fun to watch. Lehman was more of a canary to other problems inherent in the system. It was when the Insurance firms started to drop that things really went wild.
My policy is "never believe anything that is happening in China." Because of Chinese proclivity to lie about everything (and their enemies' prerogative to lie about them) all China-related news is suspect.
Dissident rightists still won't admit they memed the corona lockdowns into reality because they believed social media posts about Chinese dropping dead in the middle of the street
Chinese construction and real estate sector is leveraged to the tits so hard it would make Bill Hwang blush. While Evergrande is probably the worst offender, it certainly isn't the only one that is on shaky footing. I am not saying that meltdown is inevitable, but the potential for major collapse is there, especially when you consider the Chinese art of corporate bookkeeping.
This is table from r/wallstreetbets, so take it with a shovelful of salt, but in general, there is potential to be a lot more firms with similar situation if Evergrande panic truly sets in market.
My thoughts are that Xi will let Evergrande fail. If they get reorganised by bondholders, great. If not, he steps in and divides its assets among SOEs to provide continuity for those who have paid Evergrande for houses. Other developers will get more support once Evergrande has been seen to fail. Kill chicken scare monkey etc etc.
You are kidding right? Or are you so far gone down the rabbit hole that you don't think China can just bail this out?
Also, why would they? If the firm has already BUILT the infrastructure they don't give a single shit about foreign loans they took out to do it. The bridge/apartment/subway is still there.
China can print more cash if really required anyway, they don't need any US influence here.
Edit: I thought this was in The Bidness, apologies keep on with your hot takes A&N autists.
Because the US is China's bitch. We have Senators and Congressmen actively simping for them (Chris Murphy of Connecticut literally China is "not responsible for Covid), and General Milley breaking the chain of command to assure the ChiComs assurance that we won't fight them. The current Regime's loyalties lie everywhere but its own alleged constituents.
China can print more cash if really required anyway, they don't need any US influence here.
Why would they wreck their economy with inflation when they can just rely on their US vassals to bail them out? As the Afghanistan debacle showed, burgers will now give out free money and weapons to their enemies for no reason.
Sorry for the spergouts, but it seems like everyone in power is either satanically malevolent or was nursed from lead baby bottles as a child.
It's Clown World. Every outcome is always, without fail, more sky-splittingly retarded than the most sky-splitting retardation any mortal can conceive.
Chinese construction and real estate sector is leveraged to the tits so hard it would make Bill Hwang blush. While Evergrande is probably the worst offender, it certainly isn't the only one that is on shaky footing. I am not saying that meltdown is inevitable, but the potential for major collapse is there, especially when you consider the Chinese art of corporate bookkeeping.
This is table from r/wallstreetbets, so take it with a shovelful of salt, but in general, there is potential to be a lot more firms with similar situation if Evergrande panic truly sets in market. View attachment 2554080
www.latimes.com
