China economic worries.

Melanchthon

A major Chinese property investment fund is likely to go to the wall soon with liabilities of 300 billion.

https://mobile.twitter.com/Reuters/status/1439811556792049674?s=19

What's boards predictions? Going to be recession 2 electric bugaloo, a damp squib, or possibly a reduction in property prices globally, or even more spiking property prices in the 1st world as Chinese money flees to safer pastures

listermint

I don't know. Didn't Ireland have 118 billion in foreign liabilities in 2008. I'd assume china can handle this figure all on its own....

Melanchthon

https://www.boards.ie/discussion/comment/117916341#Comment_117916341

Presumably it's risk of contagion and worries that this company is actually a more accurate gauge of the Chinese markets.

Ideologically can the Chinese government bail them out ? They are still communist in a way.

listermint

True. I suppose they may just cut it off and isolate it entirely. Hard to see where the contagion may lie within a psuedo communist but effectively somewhat capitalist system.

lisasimpson

They not on their own in trouble over there. Many of these firms bought football clubs over in china and are now in trouble themselves. Hence you dont hear of chinesse clubs trying to buy big names in the last couple of years compared to previous years before that.

It will all depend on the ripple effect from this fallout how it will effect china as a whole

circadian

I'd be surprised if we don't see a global recession off the back of this. If we're lucky it won't be as bad as 2008 but the reality is, we only know of the $300 billion Evergrande are in debt and we have no idea how much of the rest of the Chinese property market is heavily leveraged in the same way. I'd say it's a lot worse than it appears on the surface. Remember that the Chinese property market makes up somewhere between 20-25% of their Economy.

Citizens don't really have investment options so property is how they invest and that is with the impression that the Chinese boom will continue indefinitely so buying a sub standard property for a price that is hugely inflated and waaaaaay over the average income purchasing power compared to western nations then we have a problem.

Then we get to other places that are exposed. Canada and Australia are two countries I would expect to be massively exposed to this, they're in serious trouble if the Chinese property market crashes. They may have weathered 2008 well, but that was because China did and their property markets are saturated with Chinese investment.

I'm unsure of EU/US exposure but I'd say it's not good.

Then we have the current run of speculative bubble in western markets. So many companies stocks went through the roof on pure speculation rather than delivered products. Just like the 1920's, everyone and their dog was buying shares (and now crypto) so I find it hard to see how the US markets in particular won't crash as people try to liquidate anything they have to prevent loss. Let's not forget governments are printing money and pumping it into economies to try and keep everything moving during the pandemic, this is not sustainable and in the long run could be the point where everything falls apart, currencies are going to get fucked and governments will then try to control cryptocurrencies which will be interesting to see how that plays out.

So yeah, I think we're headed for a crash. If we're lucky it won't be as bad as 2008 but the reality is we're in a perfect storm at the minute. For me, I'll hold onto my stocks/crypto. I haven't bet insane amounts of money in get quick rich schemes and as long as I have a steady income through this I'll probably average down on some of my investments.

timmyntc

Evergrande may go to the wall - the CCP will step in and pay debts to chinese citizens, foreign investors will be left hanging.

The Chinese economy is not as reliant on derivatives/stocks as Western ones, so Evergrande failing or a downgrading by credit agencies isnt the end of the world for China - but the ripple effects on the rest of the world could be painful.

Kermit.de.frog

https://www.boards.ie/discussion/comment/117916470#Comment_117916470

You can't really isolate it. Investors are already turning their attention elsewhere naturally thinking this is the tip of the iceberg.

It depends on what banks these developers have their hands in the pockets of at the end of the day.

The west should be reasonably sheltered from an Asian banking crisis in the same way Asia was to a large extent sheltered in 2008.

The quickest way to lance the boil is to let those that are over leveraged and exposed all fail in a disorderly debt restructuring across the economy. No bailouts, no assistance and prosecutions where required.

This is the most painful way for everyone but it fixes the core problem with a fast adjustment and it sends a really big message to other funds, developers, banks for the future.

But, I'd expect political expediency to get in the way as usual and extend the pain.

Extend and pretend.

timmyntc

https://www.boards.ie/discussion/comment/117918458#Comment_117918458

The CCP would be all too happy to let greedy private enterprise fall on its sword - this wont be the downfall of China unfortunately, but western investment funds might be exposed quite a bit. I'd expect pensions to take another hit

LasersGoPewPew

Another Chinese property company's shares plunged by 87% yesterday due to the unlikelihood of meeting its debt obligations, although its market cap was only 13.5 billion USD as of a few days ago. This could be the start of a domino effect across Chinese real estate companies. Hopefully not.

https://www.bloomberg.com/news/articles/2021-09-20/chinese-property-developer-halts-trading-after-plunging-87

Wanderer78

fcuk knows, we ve no idea how exposed the global financial system is to this, so we ll just have to wait and see, but since we ultimately swept our own financial systems issues under the carpet, id be very surprised if there isnt a few ripples

Danzy

The Chinese property sector is one of the bug mysteries, how leveraged is it, how unsustainable, what do the accounts really say.

China will readily absorb this but are a slew of others lined up, lot of its people will be wiped out financially.

Will it be the thing that makes Western investors sweat and reduce investment in the country.

circadian

Can't believe this isn't a hot topic right now, we are potentially on the cusp of a global recession.

Yurt2

China has an underdeveloped, volatile, and woefully under-audited financial services market. The 2015 stock market spooked the average retail investor and with capital controls, the only place for a Chinese family to park their wealth is seen as property. There is a strong cultural predilection towards property ownership - parents will throw money at a high-profile property development even if it doesn't make sense so their son is a viable marriage prospect (no property, no marriage for the most part).

I've seen some crazy overvalued developments in second-tier Chinese cities over the years (high prices somewhat make sense in Shanghai or Shenzhen), and these are not wealthy families buying them. Often, three generations of wealth plus huge loans will go into buying into these schemes for the 'family heir' (usually a male).

lisasimpson

https://www.boards.ie/discussion/comment/117921333#Comment_117921333

There was a chinesse bank holiday the last couple of days and holidays in a few other Asian countries so its from today onwards the ripples will start to be seen

circadian

Evergrande has been ordered to demolish 39 blocks on their landmark development.

Also been downgraded and looking like bankruptcy soon.

zom

The Chinese: a great bunch of lads! After disappointments in investing in US Dollar and in overvalued propertiess, they finally got someting they REALLY can squeeze us all on:

https://asia.nikkei.com/Spotlight/Datawatch/China-hoards-over-half-the-world-s-grain-pushing-up-global-prices

You may have a good laugh on thousands of their empty estates, you may joke about their billions (correction - TRILLION!!) of US Dollar debt, but if wont be that funny anymore if you see your grocery bill soon..

marieholmfan

https://www.boards.ie/discussion/comment/117922076#Comment_117922076

The current leadership of the CPC doesn't care about people with money to invest.

Astartes

https://www.boards.ie/discussion/comment/118421885#Comment_118421885

That's an interesting play given how much food China imports.. They had a failed harvest last year due to covid and flooding. They have to hoard all they have because otherwise the Mandate of Heaven is up the swanny, so to speak.

https://www.boards.ie/discussion/comment/118432759#Comment_118432759

Hopefully the mandate of heaven will move on soon.

zom

Mandate of Heaven? Wish we have oue own:

https://www.reuters.com/markets/europe/world-food-prices-hit-10-year-peak-2021-2022-01-06/