Global stock markets plunge as Chinese real estate giant Evergrande teeters on the brink of collapse

[NCC1701A]

 

sorry for using The Mail but everything else was behind a paywall. 

 

"Evergrande teeters on the brink of collapse with debts of more than $300 BILLION"

 

 

 

 

https://www.dailymail.co.uk/news/article-10009503/Global-stock-markets-plunge-Chinese-real-estate-giant-Evergrande-teeters-brink-collapse.html

 

"Has China’s Housing Crisis Finally Arrived?

The government seeks to avoid Evergrande Group becoming Beijing’s Lehman Brothers."

 

https://foreignpolicy.com/2021/09/15/china-housing-crisis-evergrande-real-estate/

OK class, what effect do you think this will have on Thailand's real estate market?

[MrStretch]

5 minutes ago, NCC1701A said:

sorry for using The Mail but everything else was behind a paywall.

Associated Press, Reuters, etc...never have a paywall.

 

China Evergrande contagion concerns rile global markets

 

https://www.reuters.com/world/china/china-evergrande-shares-plummet-default-risks-2021-09-20/

[NCC1701A]

1 minute ago, MrStretch said:

Associated Press, Reuters, etc...never have a paywall.

China Evergrande contagion concerns rile global markets

https://www.reuters.com/world/china/china-evergrande-shares-plummet-default-risks-2021-09-20/

thank you. i don't quote those "sources". the mail was bad enough. back to the subject at hand. 

[gazmo16]

It was predictable , the old saying of Boom and Bust. Of course those at the very top are rarely effected as their capital is spread around and they are paid in share options which have no doubt be liquidated already. 

[AussieBob]

Covid 19 has and will force a lot of changes in the world.  One day we that are still here in 2030 will look back and reminisce about all those changes.  Will one of those be the inevitable bursting of the Chinese property market that currently looks very similar the the US property market in 2008?  For decades many economists have said that the China economy was 'built on sand' and that eventually it had to collapse because ongoing massive annual growth is unsustainable when based mainly upon inflated property values. How many shopping centres and housing projects have been built in China that are essentially vacant.   Like her or not, Thatcher said it best when discussing alternative forms of Government:  “The problem with socialism is that you eventually run out of other people's money."

As with all things, the uber wealthy are aware of the impending changes before they occur. Is the recent Visa packages on offer by Thailand to wealthy foreigners, directly targeted at those Chinese millionaires that will 'take the money and run' before the Chinese economy collapses? 

[Convert54]

For sure it is likely to burst the bubble of expectations that Chinese investors will still be heavily into the Thai real estate market. Perhaps even put into jeopardy the servicing of local mortgages by way of dividends from the Chinese market.

[Convert54]

14 minutes ago, AussieBob said:

Covid 19 has and will force a lot of changes in the world.  One day we that are still here in 2030 will look back and reminisce about all those changes.  Will one of those be the inevitable bursting of the Chinese property market that currently looks very similar the the US property market in 2008?  For decades many economists have said that the China economy was 'built on sand' and that eventually it had to collapse because ongoing massive annual growth is unsustainable when based mainly upon inflated property values. How many shopping centres and housing projects have been built in China that are essentially vacant.   Like her or not, Thatcher said it best when discussing alternative forms of Government:  “The problem with socialism is that you eventually run out of other people's money."

As with all things, the uber wealthy are aware of the impending changes before they occur. Is the recent Visa packages on offer by Thailand to wealthy foreigners, directly targeted at those Chinese millionaires that will 'take the money and run' before the Chinese economy collapses? 

Will the CCP allow a cut and run?

[AussieBob]

8 minutes ago, Convert54 said:

Will the CCP allow a cut and run?

They are currently trying to stop it for sure - but even there the uber wealthy can get around things using 'creative' legal and financial arrangements.  Wealthy people do not move their money overseas in their own name - they use companies and investment funds etc. 

China warns of ‘malicious’ capital outflows as financial markets brace for US tapering | South China Morning Post (scmp.com)

[JamesE]

China's GDP growth over the past few decades has been driven by domestic spending on everything from infrastructure to housing blocks. Dozens (hundreds?) of new cities appeared out of nowhere and, like the empty spaces before, had nobody living in them. The impact in TLOS will be a lack of new buyers as the CCP seeks to bump up domestic investment under the threat of ending up like the several billionaires that stepped onto the wrong side of the line.

Luckily, there are all of three foreign nationals (maybe zero?) who own any property in China so the downstream effects in the west are probably going to be short lived.

[Poolie]

In answer to the op: None whatsoever.

[Hamosity]

I’m not sure “none whatsoever” will pan out. Unless that means the Thai RE market is as bad as its ever going to get. 
 

in the event Evergrande implodes under its mountain of debt the biggest losers will be these who have put their hard earned cash down on an (now never to be??)  unfinished apartment. 
 

But there could be some who are connected enough to get funds out of the motherland who get caught up in the ensuing blood bath. 
 

Agree with @JamesEthe Party will put the screws on those trying to export funds. At the very least that will exacerbate an already soft Thai market. 

[AussieBob]

10 minutes ago, Hamosity said:

I’m not sure “none whatsoever” will pan out. Unless that means the Thai RE market is as bad as its ever going to get. 
in the event Evergrande implodes under its mountain of debt the biggest losers will be these who have put their hard earned cash down on an (now never to be??)  unfinished apartment. 
But there could be some who are connected enough to get funds out of the motherland who get caught up in the ensuing blood bath. 
Agree with @JamesEthe Party will put the screws on those trying to export funds. At the very least that will exacerbate an already soft Thai market. 

The danger is not only for those who invested in over-inflated property in China, which is mainly the Chinese themselves, it is the potential flow-on as any collapse can lead to other collapses if/when panic selling kicks in. This is what happened in 2008 in the West - over-inflated housing underpinned a lot of bad debts, and when that 'asset value' was exposed and investors started selling short, the flow-on was that the share market crashed worldwide as everyone tried to 'get out' with as much money as they could. 

People in China were getting divorced so that they could each buy a property (only 1 each allowed), because the returns were enormous. Just like in USA, where it was propped up by Government policy (cheap homes for the poor), CCP policy has been encouraging for decades this type of investment and economic growth, all based upon those inflated property/asset values.  Is this the GFC that China is inevitably going to have - or can the CCP delay it yet again and somehow hold things together?

China started allowing foreign capital investors to put money into their country several years ago - the take up has been less than they wanted for obvious reasons.  Thailand was doing the same with better results, but that has slowed significantly since 2015.  China is now being exposed for what they really are, because Covid has made everyone re-assess them and what they have been doing - even Biden is moving away from them.  All Military governments are basically Socialists and Communists - there aint no democratic values in the military for obvious reasons.  As Thatcher said - 'Socialists (Military) always eventually run out of other people's money.' 

[Rookiescot]

Way I see it Chinas economy requires sustained growth we could only dream of in the west.

Now this was workable when credit from Chinese banks was easy to obtain. But that ended a couple of years ago. Since then the Chinese housing sales have dropped 20% in the past year alone. People cant get a mortgage. Businesses cant borrow.

Knock on effect is that a developer like Evergrande needed to keep building and selling in order to service the debt it had already accumulated. Its no longer able to do that. Its no longer able to borrow money either. Ultimately its going down.

The question is with debts of over 300 billion US dollars will it take some of the banks with it?

It is a remarkably similar position to what the west faced in 2008. Chinese banks are sitting on a lot of bad debt. If one domino falls you might see a lot of them falling over.

When banks are stressed they start offloading assets they hold in order to generate cash. Some of those are Thai government bonds. Value of them starts dropping. This will create issues for Thailand. I will cover that a bit more in a second.

The banks will also start calling in loans. Now a lot of countries around the world have become victims of Chinas debt diplomacy. Again a lot of that will be bad debt. Thailand will also be squeezed to pay back its loans. China will start asset stripping countries on a scale unseen before. It will have to react the same way as the west did in 2008. It will need to start printing money. The value of the Yuan will drop accordingly. Interest rates will need to be set to near zero. Companies will need to offload workers in order to find the cash to repay the debt they have. In short you are looking at economic meltdown. Something a country like China is ill placed to face. Recession is looming and because Chinas economy is built with ridiculous growth requirements it will collapse. The house of cards will tumble. 

What do countries do when they are facing economic hardships and ruin? They externalise the problem. Start waving the flag and blaming someone else. Given the CCP's history most likely it will be Taiwan and the USA which get the blame. Whether that ends up as an actual attempt at invasion I would guess will be 50/50. Hope I'm wrong on that because the west WILL get dragged into it.

Now for Thailand economic disaster in China will impact in several ways. No more loans. Pay back what you owe. Thailand will need to try and buy up those government bonds the Chinese banks are selling. It will however rapidly run out of money to do so. So Thailand will start printing money. Currency will drop. Investment from China will disappear along with tourism. China will not want money flowing out of the country.

Things like the Thai high speed rail will simply stop.

How much Thailands economy is wrecked by Chinas collapse is anyones guess. We dont know how much the Thai government, banks and infrastructure projects are exposed.

My guess is its going to be pretty bad. 

I am also wondering who the Thai government will blame for its economic downturn.

I hope its not us. 

[Poolie]

You people live outside of a far different China than I live within.

Evergrande is going nowhere.

[Rookiescot]

7 minutes ago, Poolie said:

You people live outside of a far different China than I live within.

Evergrande is going nowhere.

What makes you think that? With debts of over 300 billion dollars and no money to repay them?

 

[Fluke]

7 minutes ago, Poolie said:

You people live outside of a far different China than I live within.

Evergrande is going nowhere.

Phew, thanks to the reassurance , I was dreading a World economic collapse , thanks for saving the day 

[dj230]

big headline but it's all for views, global markets barely pulled back and recovered a lot of their losses from this news

im not a real estate guy so i have no opinons on how it will affect the real estate market in thailand but in terms of global markets i doubt it will have much effect

i have a source who has a source in china who says the chinese government is going to keep it contained in china, so anything not connected to china shouldn't be impacted. obviously things like commodities or companies connected to china's growth will be affected too

im not invested in china, never will

Edited September 22, 2021 by dj230

[Poolie]

2 hours ago, Rookiescot said:

What makes you think that? With debts of over 300 billion dollars and no money to repay them?

 

2 hours ago, Fluke said:

Phew, thanks to the reassurance , I was dreading a World economic collapse , thanks for saving the day 

Just watch what happens. I'm not saving anything, I'm just watching. You've read the Western press and believed it.

[Rookiescot]

31 minutes ago, Poolie said:

Just watch what happens. I'm not saving anything, I'm just watching. You've read the Western press and believed it.

OK so which press should I be watching?

[Poolie]

21 minutes ago, Rookiescot said:

OK so which press should I be watching?

Caixinglobal.com isn't bad.

[Rain]

On 9/20/2021 at 8:39 PM, Poolie said:

In answer to the op: None whatsoever.

...and the delusion of stock markets have little to do with real economies.

[Poolie]

49 minutes ago, Rain said:

...and the delusion of stock markets have little to do with real economies.

Wise words indeed.

[MrStretch]

11 hours ago, Poolie said:

Just watch what happens. I'm not saving anything, I'm just watching. You've read the Western press and believed it.

I think I'll put my "belief" in experts on the ground.  I have no reason to blankly disbelieve the Western press.  My tinfoil hat isn't that tight.

 

When Anne Stevenson-Yang lived in China in the 1990s and 2000s, she went on long weekend bike rides from her home near the airport, and she’d see the ghost towers: “an endless inventory of office parks and apartments, all empty.” She saw more developments mushroom after she moved to the US in 2014, when she made monthly work trips to China. As the co-founder of J Capital Research, which publishes reports on Chinese listed companies, she was intrigued by these projects. At first, she thought: If there were so many empty new buildings in Beijing—a city of high demand for housing and high incomes—what was it like in other places? On her travels through China, she saw ghost towns all over. She took photos and put them up on a web site, calling the images “Eye candy for pessimists.”

These unoccupied buildings, Stevenson-Yang realized, were the most visible signs of a swelling real estate bubble—the bubble that China has been attempting to control, and that has led to a danger of default by Evergrande, one of China’s biggest property developers. Over the years, Evergrande has run up around $300 billion in debt. In a 2017 interview, Stevenson-Yang called it “the biggest pyramid scheme the world has yet seen.” But Evergrande’s troubles were obvious even 10 years ago, Stevenson-Yang told Quartz. “It’s just been holding on, somehow, for 10 years.”

 

https://qz.com/2062541/this-researcher-foresaw-chinas-evergrande-group-collapse/?utm_source=YPL

[Poolie]

'Eye Candy For Pessimists' eh? Says it all, really.

[Rookiescot]

17 hours ago, Poolie said:

Caixinglobal.com isn't bad.

So we should believe a Chinese web site controlled by the CCP?

Not convinced about that.