Evergrande is going Belly Up.

[Strangelovesurfing + 737]

4 hours ago, turbguy said:

How much do you think Yellowstone National Park would bring on the open market?

For Sale: Giant tract of land, beautiful geysers, amazing vistas, bison, bears oh my!

Super-volcano.... wait what?...

[Strangelovesurfing + 737]

Evergrande's chart the last few years is just bonkers. 2020 low of ~$130B up to ~$370B in 3-4 months then  down to $200B and sinking 6 months later.

Evergrande has an electric vehicle arm that was valued at $80B once upon a time yet never produced a single vehicle.

Apparently it's normal for property developers in China to branch out into whatever business they feel like diving into. As a person who's been involved in the construction industry all my life I can attest, that's totally insane. Property developers are more like speculators in mindset and values, not very conductive to manufacturing.

 If this is indicative of other developers/conglomerates in China watch out.

Edited September 20, 2021 by Strangelovesurfing

[turbguy + 1,553]

17 minutes ago, Strangelovesurfing said:

Evergrande's chart is just bonkers the last few years. 2020 low of ~$130B up to ~$370B in 3-4 months then  down to $200B and sinking 6 months later.

Evergrande has an electric vehicle arm that was valued at $80B once upon a time yet never produced a single vehicle.

Apparently it's normal for property developers in China to branch out into whatever business they feel like diving into. As a person who's been involved in the construction industry all my life I can attest, that's totally insane. Property developers are more like speculators in mindset and values, not very conductive to manufacturing.

 If this is indicative of other developers/conglomerates in China watch out.

Bailout!

I can sense it.

Just watch

[Strangelovesurfing + 737]

1 hour ago, turbguy said:

Bailout!

I can sense it.

Just watch

They're going to do something but what?

Xi wants to get the economy "balanced" but how is this done without massive disruption?

Even if Evergrande's situation is rectified that won't fix the rot in other conglomerates, guaranteed this is the tip, a giant tip, of a giant iceberg. Having property developers be the linchpins of a country's systemically important conglomerates boggles my mind.

The perpetual motion property machine is sputtering out.

https://www.vice.com/en/article/epn3bp/china-demolition-building-kunming

https://www.reuters.com/world/china/unfinished-evergrande-apartments-central-china-buyers-seek-answers-2021-09-17/

According to Reuters, people are worried the government will blow up unfinished Evergrande buildings just like the Vice article shows. Chinese people buy apartments, even empty ones, because they are seen as a safe 'store of value' that also confers social status. What happens when this psychological link is broken?

Big opportunity here if you can figure out the right moves. A long term Australian dollar short is looking mighty tempting @Wombat

Edited September 20, 2021 by Strangelovesurfing

[ronwagn + 6,290]

Surfer, thanks for the graphs.

[ronwagn + 6,290]

Another story on Evergrande

https://news.yahoo.com/china-expert-pain-evergrande-saga-202657436.html

[ronwagn + 6,290]

Another good story on Evergrande. https://www.theepochtimes.com/china-evergrande-is-under-threat-what-does-it-mean-for-the-chinese-regime_3535450.html 

And from the left wing Atlantic on China's predicament. More on the ethical issues of dealing with them.

https://www.theatlantic.com/international/archive/2021/09/us-china-human-rights/620112/

Edited September 21, 2021 by ronwagn
add

[ronwagn + 6,290]

On 9/20/2021 at 4:07 PM, Strangelovesurfing said:

For Sale: Giant tract of land, beautiful geysers, amazing vistas, bison, bears oh my!

Super-volcano.... wait what?...

The Bureau of Land Management has lots of land that could be sold off. It is not all needed and we could make a lot of money to pay toward our huge debt. 

[frankfurter + 562]

great propaganda !  all of you remind me of the fable of the 2 blind men who describe an elephant from their direct contact, one at the head, one at the tail.  great stories here. keep em coming.

ronwagn maintains allegiance to the epochtimes. with sources like this, who needs to study the lessons of Goebels and Nurmberg?

 

[frankfurter + 562]

5 minutes ago, ronwagn said:

The Bureau of Land Management has lots of land that could be sold off. It is not all needed and we could make a lot of money to pay toward our huge debt. 

agree. Alaska is an option. Partition Alaska and sell it to Canada, Russia, China.

In prior posts, ronwagn has disclosed his daily dose of meds is very heavy. He admits he would not survive without them.

😀

[notsonice + 1,266]

Evergrande?

rough seas ahead, sailors take warning.

In my book , all bets are off. Evergrande is causing a giant market upheaval in China which will cause a downturn in China...Recession in China ......more than likely. The effect on all commodities is already happening. Oil and Gas will get hit in the 3rd and 4th quarter. Dollar will stay strong

 

 Prices for Iron ore down sharply in the past 2 weeks

from fastmarkets 

 

Paul Lim

 September 21, 2021

 08:39 GMT

 Singapore

 

Plunging iron ore prices, Evergrande and the global steel supply chain

The collapse of the iron ore market and market turbulence over Chinese property developer Evergrande Group are adding to the economic woes caused by the Delta variant of Covid-19 for much of this year.

It is hard to find bright sparks in the months ahead for the ferrous supply chain, which has been buffeted repeatedly in a short span of few months, starting with Chinese Premier Li Keqiang's comments on overheated commodity markets and promises of stronger action on "questionable market practices" in July.
Iron ore crash
The Chinese government’s move of extending pollution controls and steel production caps across China is causing iron ore to flirt dangerously with the $80-per-tonne prices last seen in March 2020 not long after Covid-19 first broke out.
This has reduced the value of iron ore to just a fraction of that for coking coal and ferrous scrap – complementary steelmaking raw materials in blast furnaces and electric-arc furnaces.
Iron ore prices have fallen to just 1/6 of those for coking coal and 1/5 of those for scrap.

Edited September 22, 2021 by notsonice

[Strangelovesurfing + 737]

Update on Evergrande situation, little bit of rumors about nationalization by Beijing, nothing concrete yet.

From CNBC - 

China asks local officials to prepare for ‘possible storm’ if Evergrande fails, WSJ says

Jesse Pound

Chinese authorities have told local officials to prepare for a potential demise of heavily indebted property developer Evergrande, The Wall Street Journal reported Thursday.

Local officials described the signals from Chinese authorities as “getting ready for the possible storm” and said the government told them they should only step in at the last minute to prevent spillover effects from Evergrande’s demise, the WSJ report said.

The report indicates that the central government may still have a limited appetite for bailing out the company, despite the global implications. Fears about Evergrande not being able to make interest payments have grown in recent weeks and were seen as one of the causes for market sell-offs around the world Monday.

The company resolved payment on a local bond on Wednesday, helping to boost Asian markets. However, it is unclear if the company will pay interest due Thursday on its offshore bonds.

Bloomberg reported Thursday that authorities in Beijing told the company not to default on those dollar-denominated interest payments.

Evergrande is a conglomerate company that grew to massive scale amid a debt-fueled building boom in China. The high level of corporate debt has created concern in Beijing, leading to China place restrictions on lending that, along with a decline in housing demand, appear to have hurt Evergrande.

CNBC reached out to Evergrande for comment. 

Read more about this story at The Wall Street Journal.

[notsonice + 1,266]

3 hours ago, Strangelovesurfing said:

Update on Evergrande situation, little bit of rumors about nationalization by Beijing, nothing concrete yet.

From CNBC - 

China asks local officials to prepare for ‘possible storm’ if Evergrande fails, WSJ says

Jesse Pound

Chinese authorities have told local officials to prepare for a potential demise of heavily indebted property developer Evergrande, The Wall Street Journal reported Thursday.

Local officials described the signals from Chinese authorities as “getting ready for the possible storm” and said the government told them they should only step in at the last minute to prevent spillover effects from Evergrande’s demise, the WSJ report said.

The report indicates that the central government may still have a limited appetite for bailing out the company, despite the global implications. Fears about Evergrande not being able to make interest payments have grown in recent weeks and were seen as one of the causes for market sell-offs around the world Monday.

The company resolved payment on a local bond on Wednesday, helping to boost Asian markets. However, it is unclear if the company will pay interest due Thursday on its offshore bonds.

Bloomberg reported Thursday that authorities in Beijing told the company not to default on those dollar-denominated interest payments.

Evergrande is a conglomerate company that grew to massive scale amid a debt-fueled building boom in China. The high level of corporate debt has created concern in Beijing, leading to China place restrictions on lending that, along with a decline in housing demand, appear to have hurt Evergrande.

CNBC reached out to Evergrande for comment. 

Read more about this story at The Wall Street Journal.

it does not look like the Chinese authorities are dealing with Evergrande at all. They have had plenty of time to come up with a reasonable plan so the collapse does not effect the Chinese economy and does not end up with civil unrest. I expect heads to roll, literally. In the past the Chinese authorities arrest, jail for long periods and execute those who give the authorities a black eye. Their typical solution will not stop a greater market disruption. Evergrande is a slow moving Lehman Bros

[SUZNV + 1,197]

They will bail out the bonds or mortgage nominal in China Yuan for sure.

For USD bonds, I see no reason for them to bail out. Xi is heading towards Mao direction, aka nationalized finance and top tech sector, deflate the bubble,   because the private and financial sector are his arch political enemy who control the  private economy sectors and cities such as HK, Shanghai and there will be a Communist Party Summit October 2020 which Xi want to be the first one since Mao to have another 10 years term. 

If China private financial sector and real estates is up, then Xi's rival will have more ammunition for next year election. That's why Xi locked HK last year and bashed any Chinese IPO in the US. Why would XI cares about foreign investors in a private deal while his theme is currently anti the West and  "common prosperity" which asked the Chinese corporations CEO  listed on the US to donate billions of USD.

Contrarily to popular believes, China reserve USD has running low because they got stuck in inefficient BRI loaning out and lots of the USD they got from export to the US came back to buy US assets or real estates around the world.

Currently Evergrande promised they will pay upcoming USD bond yield with coupons, not cash, which is fun to watch. I hate to say that I agree with Soros about investing to China now. 

[Strangelovesurfing + 737]

@SUZNV Here’s a couple YouTube videos which parallel your thinking.

The top link is from Stoic Finance. He goes over many of the troubled Chinese developers and predicted commodity knock on effects. Evergrand indeed is the iceberg tip if that amount of debt exists elsewhere in the system. Spoiler alert! It’s a breathtaking catalogue of apparently insolvent developers.

https://youtu.be/Y8v9O9wHzoI

These next clips are from Steven Van Metre, self styled ‘Bond King’, his analysis is same as yours about foreign debts being defaulted on but domestic being paid. The second link has him reporting a nationalization to protect domestic creditors.

https://youtu.be/x8QfKas1g9Y

https://youtu.be/FDJZQNmyylw

Edited September 24, 2021 by Strangelovesurfing

[notsonice + 1,266]

7 hours ago, SUZNV said:

They will bail out the bonds or mortgage nominal in China Yuan for sure.

For USD bonds, I see no reason for them to bail out. Xi is heading towards Mao direction, aka nationalized finance and top tech sector, deflate the bubble,   because the private and financial sector are his arch political enemy who control the  private economy sectors and cities such as HK, Shanghai and there will be a Communist Party Summit October 2020 which Xi want to be the first one since Mao to have another 10 years term. 

If China private financial sector and real estates is up, then Xi's rival will have more ammunition for next year election. That's why Xi locked HK last year and bashed any Chinese IPO in the US. Why would XI cares about foreign investors in a private deal while his theme is currently anti the West and  "common prosperity" which asked the Chinese corporations CEO  listed on the US to donate billions of USD.

Contrarily to popular believes, China reserve USD has running low because they got stuck in inefficient BRI loaning out and lots of the USD they got from export to the US came back to buy US assets or real estates around the world.

Currently Evergrande promised they will pay upcoming USD bond yield with coupons, not cash, which is fun to watch. I hate to say that I agree with Soros about investing to China now. 

They will bail out the bonds or mortgage nominal in China Yuan for sure.??? When will this happen??? after a crash in China in the broader markets???. To date the Chinese authorities have not put forward any plans. My bet is they are incapable of acting right now. China property/real estate has been a giant pyramid scheme for years....  note the following article written over 2 years ago . The reality is 30 percent of Chinas economy revolves around the construction business and when you can not sell or rent what you built and the value goes down on existing property which it is now doing in China you will have a crash. A crash will also lead to more pain for those not involved with construction. A bailout??? Trillions of dollars or 10s of trillions in Yuan might solve the problem. Once again Chinese authorities have not put forward any plans as the problem in Gigantic.

China Has 65 Million Empty Apartments

Douglas A. McIntyre

January 8, 2019 6:51 am

Last Updated: January 11, 2020 12:52 pm

 

The estimates of the number of empty apartments in China are well into the tens of millions, with variations in the number based on different methods. The latest estimate is 65 million, which is more than 20% of all residences in Chinese cities. The new number is from Ian Bremmer, head of Eurasian Group, which released its widely followed report on top risks for 2019 earlier this week. 

Experts have given two other figures for the number of vacant apartments in China’s cities recently. ABC, a distributor of news from sources that include Reuters, CNN and the BBC, put the number at 64 million earlier this year. Professor Gan Li of Chengdu’s Southwestern University of Finance and Economics, who posts an annual number based on China’s own data, puts the figure at 50 million, something less than 20%. By contrast, the Housing Vacancies and Homeownership annual study puts the U.S. number just above 7%.

These vacancy rates are not only in parts of China’s occupied cities. The government has built huge metropolitan areas that have no residents at all. The BBC labeled these “ghost cities,” built around “zombie factories” that have never been open. China’s search engine company, Baidu, did its own research and found cities and regions that were largely unoccupied or where less than 10% of the available apartments were occupied. These included Kangbashi, Suzhou City in Changshu, Erdos City in Dongsheng and Tongliao City in Horqin, the BBC added.

Why do these ghost cities exist, and why are occupancy rates in some cities so low? According to experts who follow the problem, there are two causes, which are related. One is that China’s factory and infrastructure planners forecast that regions or cities would be good locations for major manufacturing hubs. As the cities were built, either the manufacturing moved elsewhere or the need for the factories never materialized. Alternatively, the factories were opened, but logistics were such that other factories had better locations. Workers got jobs and moved into apartments, but the success was temporary.

When asked what the solution to the problem is, most experts have the same answer. The trouble is so massive that there isn’t one, or at least not one that will come close to alleviating the problem.

 

G

 

[SUZNV + 1,197]

5 hours ago, notsonice said:

They will bail out the bonds or mortgage nominal in China Yuan for sure.??? When will this happen??? after a crash in China in the broader markets???. To date the Chinese authorities have not put forward any plans. My bet is they are incapable of acting right now. China property/real estate has been a giant pyramid scheme for years....  note the following article written over 2 years ago . The reality is 30 percent of Chinas economy revolves around the construction business and when you can not sell or rent what you built and the value goes down on existing property which it is now doing in China you will have a crash. A crash will also lead to more pain for those not involved with construction. A bailout??? Trillions of dollars or 10s of trillions in Yuan might solve the problem. Once again Chinese authorities have not put forward any plans as the problem in Gigantic.

China Has 65 Million Empty Apartments

Douglas A. McIntyre

January 8, 2019 6:51 am

Last Updated: January 11, 2020 12:52 pm

 

The estimates of the number of empty apartments in China are well into the tens of millions, with variations in the number based on different methods. The latest estimate is 65 million, which is more than 20% of all residences in Chinese cities. The new number is from Ian Bremmer, head of Eurasian Group, which released its widely followed report on top risks for 2019 earlier this week. 

Experts have given two other figures for the number of vacant apartments in China’s cities recently. ABC, a distributor of news from sources that include Reuters, CNN and the BBC, put the number at 64 million earlier this year. Professor Gan Li of Chengdu’s Southwestern University of Finance and Economics, who posts an annual number based on China’s own data, puts the figure at 50 million, something less than 20%. By contrast, the Housing Vacancies and Homeownership annual study puts the U.S. number just above 7%.

These vacancy rates are not only in parts of China’s occupied cities. The government has built huge metropolitan areas that have no residents at all. The BBC labeled these “ghost cities,” built around “zombie factories” that have never been open. China’s search engine company, Baidu, did its own research and found cities and regions that were largely unoccupied or where less than 10% of the available apartments were occupied. These included Kangbashi, Suzhou City in Changshu, Erdos City in Dongsheng and Tongliao City in Horqin, the BBC added.

Why do these ghost cities exist, and why are occupancy rates in some cities so low? According to experts who follow the problem, there are two causes, which are related. One is that China’s factory and infrastructure planners forecast that regions or cities would be good locations for major manufacturing hubs. As the cities were built, either the manufacturing moved elsewhere or the need for the factories never materialized. Alternatively, the factories were opened, but logistics were such that other factories had better locations. Workers got jobs and moved into apartments, but the success was temporary.

When asked what the solution to the problem is, most experts have the same answer. The trouble is so massive that there isn’t one, or at least not one that will come close to alleviating the problem.

 

G

 

People can't vote in China so there is no reason to bail out right away. People who can afford to speculate houses are not really that's poor. The houses are empty because it will lose the value if you rent out or reselling and the rent is ridiculously low to compensate the lost. 

Xi doesn't want his political rival use economy as a hostage to win the CCP vote next year. He doesn't mind killing the hostages. The main reason Evergrande in crisis right now because Xi start tapering the credit bubble in China and Evergrande cannot keep up their ponzi scheme. Evergrande is not the only one and I would guess Xi know about this for a long time.

Xi can ensure it keeps going to raise hope for now and promise to Chinese investors, not a full bail out.  He can let Evergrande bankrupt, nationalize it and keep extending the promise to Chinese investors.  If people have hope and wait long enough, they will happy whatever deal Xi gives them. Some of the Chinese investors in Evergrande has been waiting for years.

To foreign investor, Xi simply speak capitalism language, high risk high return. This is problem between 2 private parties lender and borrower. He can put Evergrand CEO in trail and that's it.

One reason for construction take a large part of GDP is local government can pockets money for the projects and increase GDP for your local area, which will help local government to climb higher in the rank or to migrate to oversea with the corrupted money, mostly via Hong Kong. Xi tried to stop it with the security laws last year and make bitcoin illegal. It is a ponzi scheme and cannot go forever. People will also less likely to disagree to the governments as long as their house prices keep rising.

Edited September 24, 2021 by SUZNV

[SUZNV + 1,197]

9 hours ago, Strangelovesurfing said:

@SUZNV Here’s a couple YouTube videos which parallel your thinking.

The top link is from Stoic Finance. He goes over many of the troubled Chinese developers and predicted commodity knock on effects. Evergrand indeed is the iceberg tip if that amount of debt exists elsewhere in the system. Spoiler alert! It’s a breathtaking catalogue of apparently insolvent developers.

https://youtu.be/Y8v9O9wHzoI

These next clips are from Steven Van Metre, self styled ‘Bond King’, his analysis is same as yours about foreign debts being defaulted on but domestic being paid. The second link has him reporting a nationalization to protect domestic creditors.

https://youtu.be/x8QfKas1g9Y

https://youtu.be/FDJZQNmyylw

It is not a super secret, only the Hedge Funds invested in China and media keep praising China's potential to cash out the bonds/stocks they are holding.  For retail investors the yield is too attractive compares to in US or Europe.

Vietnam has the real estate bubble like China as well, just not that big yet.

Even white collar  in China working 9am- 9pm, 6 days a week. They don't want to  get married and have kids, let along to buy house, which is bad for the aging population in China as well. And the economy in China has never been in a correction since opened up in 1990s. Youngster in China currently has a movement of lying flat with dignity to protest silently.

Edited September 24, 2021 by SUZNV

[turbguy + 1,553]

...and then there's THIS!

https://www.nytimes.com/live/2021/09/24/business/economy-stock-market-news#china-cryptocurrency-bitcoin

China cracks down on cryptocurrency, banning all transactions.

[SUZNV + 1,197]

2 hours ago, turbguy said:

...and then there's THIS!

https://www.nytimes.com/live/2021/09/24/business/economy-stock-market-news#china-cryptocurrency-bitcoin

China cracks down on cryptocurrency, banning all transactions.

I guess they want to stop all the ways can be use for capital flight out of China, while trying to suck more in. 
The dangerous thing is that they can  sell oversea assets to get the USD reserve up, this is draining fast in China.

Edited September 24, 2021 by SUZNV

[notsonice + 1,266]

18 hours ago, SUZNV said:

People can't vote in China so there is no reason to bail out right away. People who can afford to speculate houses are not really that's poor. The houses are empty because it will lose the value if you rent out or reselling and the rent is ridiculously low to compensate the lost. 

Xi doesn't want his political rival use economy as a hostage to win the CCP vote next year. He doesn't mind killing the hostages. The main reason Evergrande in crisis right now because Xi start tapering the credit bubble in China and Evergrande cannot keep up their ponzi scheme. Evergrande is not the only one and I would guess Xi know about this for a long time.

Xi can ensure it keeps going to raise hope for now and promise to Chinese investors, not a full bail out.  He can let Evergrande bankrupt, nationalize it and keep extending the promise to Chinese investors.  If people have hope and wait long enough, they will happy whatever deal Xi gives them. Some of the Chinese investors in Evergrande has been waiting for years.

To foreign investor, Xi simply speak capitalism language, high risk high return. This is problem between 2 private parties lender and borrower. He can put Evergrand CEO in trail and that's it.

One reason for construction take a large part of GDP is local government can pockets money for the projects and increase GDP for your local area, which will help local government to climb higher in the rank or to migrate to oversea with the corrupted money, mostly via Hong Kong. Xi tried to stop it with the security laws last year and make bitcoin illegal. It is a ponzi scheme and cannot go forever. People will also less likely to disagree to the governments as long as their house prices keep rising.

People can't vote in China??? yes to a degree... Those with money or the will to take risk with others money (by taking out loans) do drive economies. If investing in real estate at any one time looks like a losing proposition, people do not invest in real estate. Exactly what is now happening en masse in China. Evergrande has spooked a nation. It has not spooked sellers into offering units it has spooked buyers.  If Evergrande  is allowed to fail (which its more than apparent the Chinese authorities are letting happen) the real estate sector in China will be crushed for years to come. Meaning that demand for materials and labor in China will plummet. The China miracle (GDP growth) is going to take a hard hit....Averting a recession will take more than propaganda feel happy slogans

The houses are empty because it will lose the value if you rent out????? Huh??? An empty unit is a giant liability, much bigger than a unit that is rented out below market rent. Number one metric when you go to sell a unit into the rental marked is the rental history. No rental history is a red flag that lenders take into account when lending money.

People will also less likely to disagree to the governments as long as their house prices keep rising??? House prices in China stopped rising as the dump of existing properties at sale prices has started in the past 6 months

Real Residential Property Prices for China (QCNR628BIS)

Q1 2021:	110.5647
Q4 2020:	111.1863
Q3 2020:	110.3087
Q2 2020:	109.9382
Q1 2020:	107.1589

data shows the number of new home sales falling 24 per cent year on year in August across 30 major Chinese cities and land sales collapsing 53 per cent in volume terms across 100 major cities. Both metrics deteriorated further in early September.

the 3rd quarter is a bloodbath.

 

[specinho + 475]

https://en.wikipedia.org/wiki/Evergrande_Group

From the link above, this company was incorporated in Cayman island and headquartered in Shenzhen. The founder is given a Cantonese name, might indicate intimate relationship with Hong Kong, and may be Singapore.

From the financial data shown in the link, the revenue is probably large enough to cover debts repayment. The question would be, how willing??

The fundamental issue might be the prolonged period of nation wide lock down........ People might be losing incomes. Cash flow for all sectors are affected. Hence, to reinstate the flow, this lock down ought to be ended. This easing would solve all problems i.e. no need for bail out, no need for nationalization, no need to panic.

There might be a need for the company to gradually return money raised from bond, and other investments. This act would reduce further issue of market made-believe tales down the road.

These projects might involve mainly wholesale buyers, while waiting for individual owners. Wholesale buyers largely can pay so that the construction can be continued. Again, the question is - how willing?

If I were the authority, I would clean up the wrong doings, starting from this company, by mediating the desired outcomes.........

This company might be an mirror image for many other equally large, if not larger, companies, world wide. Over-rated stock prices, fast rate mega-expansion, false financial reports, with plenty of employees awaiting their meals. These, shall are done without the right intention, would likely collapse the financial systems, intentionally or unintentionally; create social injustice; disrupt political stability and more.........

How China handles this case would path the way for successful remediation or create a dash down the hill with those similar companies from the world rolling with it.........

Things always happen in a cycle. Started off with the lowest mode of technology, progressed to become super-hi-tech, and eventually opting the initial or primitive forms of invention.... This law is universal. What do we do in between the cycle to reduce potential or foreseeable undesirable impacts would be the most crucial direction of change........... no?

 

 

[notsonice + 1,266]

3 hours ago, specinho said:

https://en.wikipedia.org/wiki/Evergrande_Group

From the link above, this company was incorporated in Cayman island and headquartered in Shenzhen. The founder is given a Cantonese name, might indicate intimate relationship with Hong Kong, and may be Singapore.

From the financial data shown in the link, the revenue is probably large enough to cover debts repayment. The question would be, how willing??

The fundamental issue might be the prolonged period of nation wide lock down........ People might be losing incomes. Cash flow for all sectors are affected. Hence, to reinstate the flow, this lock down ought to be ended. This easing would solve all problems i.e. no need for bail out, no need for nationalization, no need to panic.

There might be a need for the company to gradually return money raised from bond, and other investments. This act would reduce further issue of market made-believe tales down the road.

These projects might involve mainly wholesale buyers, while waiting for individual owners. Wholesale buyers largely can pay so that the construction can be continued. Again, the question is - how willing?

If I were the authority, I would clean up the wrong doings, starting from this company, by mediating the desired outcomes.........

This company might be an mirror image for many other equally large, if not larger, companies, world wide. Over-rated stock prices, fast rate mega-expansion, false financial reports, with plenty of employees awaiting their meals. These, shall are done without the right intention, would likely collapse the financial systems, intentionally or unintentionally; create social injustice; disrupt political stability and more.........

How China handles this case would path the way for successful remediation or create a dash down the hill with those similar companies from the world rolling with it.........

Things always happen in a cycle. Started off with the lowest mode of technology, progressed to become super-hi-tech, and eventually opting the initial or primitive forms of invention.... This law is universal. What do we do in between the cycle to reduce potential or foreseeable undesirable impacts would be the most crucial direction of change........... no?

 

 

 the revenue is probably large enough to cover debts repayment.???? one would only look at the income not the revenue. Revenue minus cost of doing business leaves only 8 Billion CNY a year...Peanuts when they owe 300 B US$ in debt to banks (at 5 to 15 percent interest) plus an estimated  100  B plus US $ to those who have made deposits , suppliers and contractors. The company is insolvent

 

There might be a need for the company to gradually return money raised from bond, and other investments.??? the company has no cash.....rubber checks are worthless. Their assets are land rights and empty unfinished apartments (this is not cash)

How China handles this case??? they have days to get it fixed .............Evergrande is already crashing the property sales everywhere in China.........

Hang on sailors the ship is entering a gigantic typhoon

 

 

 

[SUZNV + 1,197]

4 hours ago, notsonice said:

People can't vote in China??? yes to a degree... Those with money or the will to take risk with others money (by taking out loans) do drive economies. If investing in real estate at any one time looks like a losing proposition, people do not invest in real estate. Exactly what is now happening en masse in China. Evergrande has spooked a nation. It has not spooked sellers into offering units it has spooked buyers.  If Evergrande  is allowed to fail (which its more than apparent the Chinese authorities are letting happen) the real estate sector in China will be crushed for years to come. Meaning that demand for materials and labor in China will plummet. The China miracle (GDP growth) is going to take a hard hit....Averting a recession will take more than propaganda feel happy slogans

The houses are empty because it will lose the value if you rent out????? Huh??? An empty unit is a giant liability, much bigger than a unit that is rented out below market rent. Number one metric when you go to sell a unit into the rental marked is the rental history. No rental history is a red flag that lenders take into account when lending money.

People will also less likely to disagree to the governments as long as their house prices keep rising??? House prices in China stopped rising as the dump of existing properties at sale prices has started in the past 6 months

Real Residential Property Prices for China (QCNR628BIS)

Q1 2021:	110.5647
Q4 2020:	111.1863
Q3 2020:	110.3087
Q2 2020:	109.9382
Q1 2020:	107.1589

data shows the number of new home sales falling 24 per cent year on year in August across 30 major Chinese cities and land sales collapsing 53 per cent in volume terms across 100 major cities. Both metrics deteriorated further in early September.

the 3rd quarter is a bloodbath.

 

You are using developed Western normal point of view to try to understand China 's real estate, that is the common mind set trap. I can understand it much easier because it is similar in Vietnam, in a much smaller scale.

Real Estate in China is nothing about supply and demand. In China, calculated GDP is based on the "market" house price when it is built, not when it is sold.

By keep building the local government can have the land fees from the construction company which is 40% of the houses values + local GDP grows on paper which will lead to China GDP grows on paper. 

Therefore it is absolutely normal to have an empty buildings out of nowhere. Even if it cannot be sold, the construction companies still can access very cheap debt to build new ones. The local policies are designed to keep the house price up, with buyback new house guarantee like Evergande have  or simply forbid to sell the house under some prices. 

Because the house price is not a free market, from the perspective of home buyer, it is a token of speculation rather than to live in value. You can deposit to have a buying agreement, then sell the buying agreement few days later to someone else and pocket the difference and keep going until it can no longer be done or someone moved in. Worst case scenario you can lose your deposit or let the constructor buy back with the origin value. Lots of the Evergrande's protestors are victim of buying back programs. 

Because the price is not down bellow the origin price, Chinese people can use it as a form of wealth or retirement storage, as long as the price is up or the same, worst case their children can have a house to live in while doing nothing so no jobs around yet is okay(the salary of millennial in Chinese cities is nothing comparing to the real estates assets their parents have). Because no jobs around, no one want to rent it with a up to nothing price to rent out. 

And most people buy by cash, not loan so no pressure from the mortgage side. Losing the virginity of the house will push it down to second class market which will be in another price range. 

There are houses in good location but it will not be empty and young professional will buy it with mortgage with the back up from parents. But these are out of reach for most of normal city people. They rather buy the houses on the above for speculation. 

Chinese people have the same of this mind set when they bought houses in Australia, NZ, Canada and leave them empty with the bonus that for rich people in China, China is where to create wealth, Western are where to store and protect wealth. 

Evergrande is simply a tool for pocket public money for Chinese officials, where Xi targeted them since he is in power. While the company in big debt and asking for bail out or cheap loan from local governments , they still paid luxury dividends up until last year There is no chance for a whistle blower got attention for this ponzi scheme with media censorship & local governments. I would guess because of easy money, the CEO is just the custodian for most of the shares and he forced to pay luxury dividend.

  In the Western world, land is private owned, the local government cannot pocket 40% of the final product price. 

With the Evergrande, they will postpone the promise as long as they can.

Currently China has energy crisis because of the pressure for cleaner energy and trade war with Australia forced them to reduce buying Australian Coal. which is much higher in quality and suit their coal electricity power plans.

Another reason is  the electricity prices decided by governments while the coal price is by free market, with current transportation crisis world wide push the price of coal up, the coal power plans are operating as a lost.

The victims of real estate bubble in China is just a minority comparing to lots of poor rural immigrants to big city for jobs, so even the real estate bubble in China collapsed, it wouldn't affect the power of Xi who wants to get back to Mao era. And the last thing they need to worry is about foreign investors.

The risk for the Western is if the bubble burst,  Xi may force owners of oversea assets to sell out which will pop the Western Stock & housing bubbles since Covid19. Then he can blame  the hardship of Chinese people is because GFC 2.0

[specinho + 475]

On 9/25/2021 at 8:36 PM, notsonice said:

 the revenue is probably large enough to cover debts repayment.???? one would only look at the income not the revenue. Revenue minus cost of doing business leaves only 8 Billion CNY a year...Peanuts when they owe 300 B US$ in debt to banks (at 5 to 15 percent interest) plus an estimated  100  B plus US $ to those who have made deposits , suppliers and contractors. The company is insolvent

 

There might be a need for the company to gradually return money raised from bond, and other investments.??? the company has no cash.....rubber checks are worthless. Their assets are land rights and empty unfinished apartments (this is not cash)

How China handles this case??? they have days to get it fixed .............Evergrande is already crashing the property sales everywhere in China.........

Hang on sailors the ship is entering a gigantic typhoon

 

 

 

You might have mixed up the accounting info. Revenue and income might mean the same thing.

1. revenue/incomes - costs of doing business = profit or net income

- under 'costs' you may have loan repayment, operating costs, and all other expenditure that you would like to deduct in order to make the profit looks much smaller and tax rebate much larger.....

in another words, they have 507 B incomes or revenue. 300 B loans over 30 years? Which is how much?

300 B / 30 y = 10 B / y = 833 millions per month?

If it is loaned over 50 years? 500 millions per month?

there is a reason for the cash poor rich to take loans. The money from bank can be used on rolling. They teach the not so rich to do the same....... This advanced habit is putting banking system on a very high risk of insolvency throughout the world.

Refinancing might be another unintended consequence from finance easing for friends and relatives that brings disastrous impact, consciously or unconsciously, to all parties involved...........

 

2. Cayman island is a black hole enriched with resources. What are they aiming to do might be the key?

 

 

 

Edited September 26, 2021 by specinho