The Chinese housing bubble has finally crashed, Evergrande stock in a freefall

Godzillarich(aka tf2godz)

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Basically, a housing company by the name of Evergrande cannot pay back its $300 bn debt. This could have damaging effects on the economy not just in China but all over the world.

Who had global recession on the 2021 bingo card?
 

McElroy

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Just sold most of my stocks today. Last week was already terrible. Incoming course correction.
 

TheMysteriousGX

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Not to give props to the Chinese government, but they're probably gonna let the company face repercussions for fucking up.

Kinda wish we'd've done that the first time around
 

Agema

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Basically, a housing company by the name of Evergrande cannot pay back its $300 bn debt. This could have damaging effects on the economy not just in China but all over the world.

Who had global recession on the 2021 bingo card?
This has been a long time coming, but China would not let a major company fall if it didn't think it could contain the damage.

Also, China is not the financial centre that the USA is or even close - the global impact will be much more modest.
 

Gergar12

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Okay to those libertarians who predict a recession every year. No that's not how the economy works. Fuck gold, it's not that useful compared to other metals. As for this, it's about time, and either the government steps in and injects the company with cash making them worst off in the future since they can't do this forever, or the housing market crashes, and real estate speculators go bankrupt, and young people in China, and hopefully around the world can buy a house.
 

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And the Dow dropped 600 points. Something something globalism something.

Not to give props to the Chinese government, but they're probably gonna let the company face repercussions for fucking up.

Kinda wish we'd've done that the first time around
And let rich people face the consequences for their own mistakes and short-sightedness? That's COMMUNIST!
 
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Godzillarich(aka tf2godz)

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Not to give props to the Chinese government, but they're probably gonna let the company face repercussions for fucking up.

Kinda wish we'd've done that the first time around
There's a theory going around that the CCP knew this was going to happen and are trying their best to deflect blame on the company because there is no way they can stop the recession from happening now. They can pretend they had nothing to do with it.

In fact, Xi maybe even trying to take advantage of the situation to change Chinese Society, considering the new decrees that came out a few weeks ago.
 

Dirty Hipsters

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Maybe that means Chinese speculators will stop buying up housing in California as a way to move money out of China and the insane prices will drop a little so I can buy a house.

But probably not though.
 

Agema

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There's a theory going around that the CCP knew this was going to happen and are trying their best to deflect blame on the company because there is no way they can stop the recession from happening now. They can pretend they had nothing to do with it.

In fact, Xi maybe even trying to take advantage of the situation to change Chinese Society, considering the new decrees that came out a few weeks ago.
Warnings about a dangerously overheated property market in China have been doing the rounds for a long time. They actually go back pre-financial crash: I don't know whether this is a continuation of the same problem, or whether that was an old one that was resolved and this is a new one.

From what I read years ago in terms of the original mid-2000s problem, Chinese people wantin to save had very few places to put their money. It was hard to invest in stocks and shares, and the banks had interest rates lower than inflation. (This was characterised by some commentators as the government stripping workers of their savings and putting them into the public pocket.) With so few places to store their money effectively, a popular one was property: it was noted that a lot of residential buildings in cities were conspicuously underpopulated. If a construction boom is based on second (/third) properties people don't want for any reason other than to store their savings, it's a bubble.
 
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Dwarvenhobble

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Basically, a housing company by the name of Evergrande cannot pay back its $300 bn debt. This could have damaging effects on the economy not just in China but all over the world.

Who had global recession on the 2021 bingo card?
Hearing about this. Holy fuck is the company scummy. So scummy the Chinese government comes out as the good guys here, no really.

So the Chinese government put in a 3 strike debt / loans policy for companies in China. The first 2 strikes each lower the amount of loans allowed to be given to companies based on their existing debt levels with the 3rd cutting them off from any more lending. The Chinese government, the company apparently soared past all 3 strikes meaning it couldn't borrow money from banks.

So they started trying to get money from customers by asking them to pay the full deposit on their houses before they were even finished building them or risk losing the property. So they too customers money years in advance before their homes were even built.

But that wasn't enough so they sent a memo round staff basically saying we need help keeping afloat and so if you will lend the company money it will secure your job and your friends / fellow workers and team mates jobs too as it will be a temporary thing waiting for some deal to go through or something (most likely). So it borrowed money from it's own staff.

Now it's going bust so it not only owes Customers homes it owes them money along with Banks and it's own employees who it asked to give it loans or take out loans on the companies behalf to get round the Chinese Government regulations........ holy fuck.
 

Godzillarich(aka tf2godz)

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Hearing about this. Holy fuck is the company scummy. So scummy the Chinese government comes out as the good guys here, no really.

So the Chinese government put in a 3 strike debt / loans policy for companies in China. The first 2 strikes each lower the amount of loans allowed to be given to companies based on their existing debt levels with the 3rd cutting them off from any more lending. The Chinese government, the company apparently soared past all 3 strikes meaning it couldn't borrow money from banks.

So they started trying to get money from customers by asking them to pay the full deposit on their houses before they were even finished building them or risk losing the property. So they too customers money years in advance before their homes were even built.

But that wasn't enough so they sent a memo round staff basically saying we need help keeping afloat and so if you will lend the company money it will secure your job and your friends / fellow workers and team mates jobs too as it will be a temporary thing waiting for some deal to go through or something (most likely). So it borrowed money from it's own staff.

Now it's going bust so it not only owes Customers homes it owes them money along with Banks and it's own employees who it asked to give it loans or take out loans on the companies behalf to get round the Chinese Government regulations........ holy fuck.
It's quite impressive to make the Chinese government look like the good guys. Although I would add that companies like this are owned by government officials so I doubt no one knew what was going on. Although the faction that's loyal to Xi is not the same as the ones that run the business sector. (I've heard the Communist Party itself has multiple factions that hate each other but I am no expert.)
 
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TheMysteriousGX

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100% true. You don't get that many ambitious people together without having a faction or 7
 

Agema

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It's quite impressive to make the Chinese government look like the good guys. Although I would add that companies like this are owned by government officials so I doubt no one knew what was going on. Although the faction that's loyal to Xi is not the same as the ones that run the business sector. (I've heard the Communist Party itself has multiple factions that hate each other but I am no expert.)
There are always factions. You do occasionally read about high ranking Chinese officials disappearing from politics very suddenly - if this isn't being on the losing side of an internal faction squabble nothing is.

The link between business and the state may be unclear. In a country like China with an authoritarian single party government, many top private sector people will join the CCP for political convenience because it can grease their ascent, not because they are allied with and invested in the aims of the CCP. This is similar in concept to political lobbying in Western countries: most businesspeople throwing money at politics don't really care who runs the country as long as they make life easy for their business.
 

Godzillarich(aka tf2godz)

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So CCP are basically taking control of the company, I'm not an expert on Market so I don't know if this is a good or bad idea. But seems to indicate that evergrande IS to big to fail. so much so the Chinese government is taking it over to save it
 

Seanchaidh

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So CCP are basically taking control of the company, I'm not an expert on Market so I don't know if this is a good or bad idea. But seems to indicate that evergrande IS to big to fail. so much so the Chinese government is taking it over to save it
It could just mean that they have use for the tangible assets.
 

Gergar12

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So CCP are basically taking control of the company, I'm not an expert on Market so I don't know if this is a good or bad idea. But seems to indicate that evergrande IS to big to fail. so much so the Chinese government is taking it over to save it
They can't do that for every real estate company. Or else their economy is less efficient, and fewer houses are going to be built.
Also if housing costs keep going up, and up, all it's going to do is create income inequality, and ferment distrust, and hatred among the working, and lower classes in China.
 

Dwarvenhobble

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They can't do that for every real estate company. Or else their economy is less efficient, and fewer houses are going to be built.
Also if housing costs keep going up, and up, all it's going to do is create income inequality, and ferment distrust, and hatred among the working, and lower classes in China.
It's China, they can and will if the government there wants to.

They are or were trying to take full control of the Alibaba group (Chinese Amazon)