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0 pointsuejfiweun4y ago0 comments

Admittedly, I know very little about the economy, let alone the intricacies of the Chinese real estate market. But it seems that this whole situation is just a typical sky is falling media frenzy. I have seen so many stories over my life saying "oh THIS is the domino that will cause China to fall." But China remains a very powerful country, they are led by smart people, and I think these China collapse narratives definitely feel good to read in the West but that's all they are, feel-good pieces.

My layman's understanding is that these companies are going to go bankrupt. The Chinese govt could easily solve the problem by simply bailing them out, but they haven't yet. But I think in the end China will just bail the companies out, and nothing will come of it.

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anm894y ago

I like you would absolutely admit there is a lot I don't know about China. I would say that that is a complicated enough topic where no person on the planet truly comprehensively understands it.

However if you want to hear what I think is a really well stated case for why China's housing problem is more structural than it might appear on the surface I encourage you to check out this bit regarding how China's local governments utilize property prices via LGFVs to do off balance sheet financing off it's social security system and really it's entire economy. If you find it interesting the whole video and the whole 4 part series is really worth a watch:

Housing Crisis — China's Reckoning (Part 2):

https://youtu.be/EgVXRtq5EIg?t=1045

I recommend you to change it to 2x speed.

The reason Evergrande plays into this is not directly a Lehman like systemtic solvency issue IMO, it's a consumer confidence problem which indirectly leads to solvency issue. Regular Chinese citizens are seeing other regular Chinese citizens who pre paid on Evergrand units losing their shirts. Data already show's that housing demand and prices are already way down from pre Evergrande issues.

I would argue if this translates into failures in the local government land auctions, China is basically instantly in a solvency crisis, which, it can deal with, but which will have major consequences.

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