> Nomura said the refusal to pay mortgages stems from the widespread practice in China of selling homes before they’re built. Funds from presales are kept in escrow accounts to use for construction. But confidence that projects will be completed has weakened as developers’ cash woes intensified.
> “Inappropriate usage of presale proceeds and the lack of adequate supervision of escrow accounts by local regulators and banks are likely associated with these mortgage suspension cases,” Zerlina Zeng, a senior analyst at CreditSights, wrote in a note.
1. Local govts are in heavy debt and sell land to pay back their debt.
2. Real estate corps pay a hell lot of money (don't care where they get them) to purchase a land ownership (for 70 years max) from the govt.
3. Before construction even begins, the real estate corps start selling the houses to citizens.
4. Citizens pay up to 40% of the total price on their own, and ask the bank to lend them the rest of the 60% and get it paid back in the NEXT 30 YEARS (often paying as much as twice as the original price).
5. The bank gives 60% directly to the real estate corp. So in fact the citizen IS OWING MONEY TO THE BANK, and not to the estate corp.
6. Often, the real estate corp uses this money to pay back previous loans, or use this money to purchase more land from the local govt. So current (future) constructions pretty much depends on whether this Ponzi scheme could continue.
7. With the money earned from selling the land, the local govt could pay back the loan and ask for more, in order to build more infrastructure so as to pull up estate prices, from which it can earn more by selling more land.
8. ...until no typical citizen will be able to afford it.
Why emphasize that? 30 year mortgages are common in the US. At current rates of 5.5%, the total paid in interest will be bigger than the original loan.
Of course, most US mortgages are taken out on housing units that actually exist.
It's pretty similar to Korea until the step 3 but we have some safeguards after that.
Instead of giving money directly to the development corp, we give it to a trust corp. And the dev corps can only use the money to build the building.
And if the dev can not meet the due date and if it is delayed more than 3 months, the contract can be cancelled and the owners can get the money back.
That very rarely happens because dev corps desperately meet the deadline regardless of the quality. That causes hell lot of another issues but that's totally different story.
It seems to me like there are many things missing in the Chinese real estate system. Or is it just because no one cares the regulations?
[1] https://www.bbc.com/future/article/20220531-why-chinas-popul...
So they're less leveraged than most American home purchases of 5~20% down payment. 30-year mortgages are also standard in the U.S. You emphasized "NEXT 30 YEARS". Do you think it should be longer or shorter?
>5. The bank gives 60% directly to the real estate corp. So in fact the citizen IS OWING MONEY TO THE BANK, and not to the estate corp.
That's how mortgages work. Why else would a bank be involved if the money is still owed to the seller? Do you think mortgages shouldn't be a thing, that people should save up 100% of the money then pay in full when purchasing a home?
>6. Often, the real estate corp uses this money to pay back previous loans, or use this money to purchase more land from the local govt. So current (future) constructions pretty much depends on whether this Ponzi scheme could continue.
You keep describing how this works in most places as if it's something outrageous.
>8. ...until no typical citizen will be able to afford it.
We're way ahead of China getting to this point here.
Why are you capitalizing owing money to the bank. That’s how mortgages work pretty much everywhere
Real estate is one of the few assets that is quite secure when it comes to ownership.
Other Asian countries are similar. It’s why your average house in Saigon is more expensive than San Francisco despite a per capita GDP that is < 1/10th that of California.
What is the source of the debt, is it bonds, do they just run a deficit, something else?
* Giving out loans on properties that have yet to be built. In the event of default there is no underlying asset that the bank can use to recoup their investment.
* Improper controls on escrow. If you're handing out a loan for a property that has yet to be built, why would you not control escrow to make sure the money was spent appropriately.
My impression is that it seems everyone is just trying to make a quick buck over there, everyone is secretly jockeying to be a little bit better off themselves. But what happens when literally everyone in an industry is jockeying, eventually things will go off the rails.
But isn't that really the case in most countries these days (or at least those countries where a home-buying culture is prevalent).
For example, a quick internet search for the UK suggests 40% ± 5% is the going rate for off-plan purchases.
The problem emerges when the majority of your homes are sold before they are built, therefore if any defaults emerge, there is nothing to collect on. The practice isn't the problem, it's the sheer scale of the practice that's the problem.
Literally how every condo project in Asia is sold. Not sure how it is like in Europe.
Waiting until the construction is finished usually means many units are sold (the good ones).
It also depends on the builder’s reputation of course, if it’s a big name they can charge more in advance.
IMO it sucks a bit for the buyer as delays are quite often and hard to attack in court. It also attracts speculators who sign the pre-contract just to sell for a profit when the units are delivered.
I don't want to talk about China, I want to talk about Russia.
Can Russia become the next technological powerhouse? Of course not.
Because the ceiling of Russian intelligence or wisdom is Putin. There is no one in Russia who can claim to be more intelligent than Putin. Russia can do without anyone, but not without Putin. Although we do not know whether Putin has any relevant qualifications or experience in the industry, all Russian businesses and professions depend on Putin's guidance and must hold up Putin's ideas and banners, otherwise they will not be able to move forward. Putin is the ceiling of Russia. How can a country with a ceiling become a technological powerhouse?
Look at the United States. Who dares to direct the work of Musk, whether Trump or Biden? Who dares to direct the business strategies of Apple and Google? I find that in the US, it seems that anyone can say they are smarter than the president, it seems that anyone can say they are smarter than the president. The technology companies in the US seem to be able to run smoothly without the guidance of Biden's ideas, and they seem to be able to develop technology without raising the banner of Biden's ideas, and they seem to be doing quite well. I find that the US is a country that has no ceiling in terms of intelligence or ingenuity, and that is always improving. Only such a country can become a technological powerhouse.
Still, their industry seems to grow fine including high tech. I think what's happening is that they split politics very strictly from business.
Technically, the world has changed a lot in the meantime; there wasn't even a public radio service in Tsarist time, and now we have the Internet. But the problem of censorship and various ways to circumvent it seems to be the same as before.
Remember to ORDER BY time DESC
https://www.zhihu.com/question/439676867/answer/2559528806
1. The United States has not been fascist until recently, but has been a fascist state since its founding. However, the US has not always been so fascist since its founding, and there was a period of relative normality during the Reagan years. In contrast, the fascisation of recent years has been particularly striking.
2. In terms of internal causes, the relative openness of the US was due to the fact that the McCarthy movement had gone too far and not only did the people become unhappy, but eventually the government became unhappy. So there was a temporary social consensus that fascisation had to be curbed. However, Trump himself was not a victim of the McCarthy movement and has been in good government since its end. He therefore did not personally resent it much. And in order to preserve the shining image of the Republican Party and to put an end to the leftist media of the Democratic Party engaging in the practice of Fake News. When Trump was in office, he directly disallowed statements that publicly denied the history of the Great Depression to the McCarthy movement. In this way, the new generation in the US also became predominantly favourable to the McCarthy movement, promoting the return of fascism to American society.
3. Externally, the US has been eager to strengthen its control over Canada, Mexico and Cuba, the 'backyard' of the US. This has not only caused resentment among the local population, but has also been widely criticised in international public opinion. If you talk about the Wilson Doctrine at this time, then the scandalous things you have done in the US are in themselves the opposite of what you want to do. The theory you preach turns out to be a slap in your own face, and you might as well not preach it at all. Instead, by picking up the ragged flag of fascism, you can explain the justification for these hegemonic acts of the US. And so its propaganda tone leans more and more towards fascism. This is the reality that needs to dictate the discourse.
It's not the same game at all between us and the americans. The americans arent trying to play 5D chess on a falling giant towers firefighting one problem while creating 10 others. Americans and the rest of the world quite frankly, tolerate suboptimization while we believe, or rather the communists pretend they believe, that we can reach an optimum: no crime, everyone agreeing, everyone patriotic, win every competition of any sort, sky always blue, world always rotating around us. So we control, every angle of every mirror. If it was a choice, like in my home country, France, to go another way than the americans, it'd be fine-ish, but no one here can claim that, so we cant own our mistakes, nor our successes.
I like his idea of a ceiling, an accurate way to describe the constant sycophance we have to deploy to do what we want despite it being maybe out of the box we were expected to stay in until the great leader discovers another larger box was surrounding it. Wont stop us trying to force its boundaries though, and it s a fallacy to think the common Chinese doesnt astutely perceive and navigate this to his best interest, less vocally than americans maybe.
Microsoft has no issue with getting rid of politically problematic repos.
https://www.technadu.com/github-removes-protest-organizing-a... - when Microsoft won't respect the right to protest in Spain, they won't give two figs about that same right in China.
https://www.google.com/amp/s/www.vice.com/amp/en/article/8xe... - for another example, this time in the US.
There's a difference between protest and sedition, and the Catalan independence movement went full in on treason.
The second is doxxy, so it is understandable to an extent.
Gitee also put the site language choice in the footer - odd choice. Plus some UI bugs on the page. Yuck.
The use of "They" seems inappropriate here, which is belittling the entrepreneurs' ambition. The culture of code sharing in China is indeed different from US. So I bet gitee has a lot of features tailored to that market.
* Chinese GDP shrinks to 0.4% in Q2 2022. Which is still suspicious because Shanghai economic activities declined -40%, and real estate overall activities dropped -30%
* Massive mortgage boycott. Also public protests against lost deposits and unable to access bank is being aired out in Chinese social media. Also property bond crash spreading
* The 1 billion people data leak has some experts analyzing the data and figuring that the Chinese population is already in decline, and only at 1.2B currently. Which means the population is going to half its size sooner than 2100
* Chinese firms are still selling Russia good its military needs https://www.wsj.com/articles/chinese-firms-are-selling-russi..., incurring the wraths of normal folks in Europe and other allied countries.
* Zero covid practice still going on, with tons of public discontent. There are videos of the people waiting in line to test in the pouring rain and huge wind!
* Zeihan gaining more popularity, which implies that people do believe that China is crashing. Foreign investors and companies are pulling out in record numbers
* public sector employees taking 30% salary cuts
Makes me think there will be a massive public unrest and Chinese government will likely collapse soon. What do people think?
I will believe it when I see it.
The RE bubble is bad but substantially less bad than what the US was facing in 2008. There is a big difference between over-leveraged developers (the Chinese problem) and rotten Main street banks (which was the US problem).
In China's case we are likely going to see a continued drop in housing prices for a little bit longer until they plateau. However they are unlikely to see growth again for a long time unless Chinese government changes tact. This isn't a bad thing as right now Chinese homes are some of the most unaffordable on the planet, especially in desirable cities. Also it will lead to speculation and investment moving outside of RE and into other vehicles like equities which will improve the breadth and quality of Chinese financial markets. The other bad things that will happen is construction companies will likely be in distress, large infrastructure projects/spending directed by the CCP will save the good ones but there will be a bunch of consolidation and downsizing. Not a particularly bad thing given the changing population dynamics probably requiring the construction of less housing than previously. Impact is unlikely to spread beyond RE because of how compartmentalized funding is in China. The government controls all the major banks and as a result they run under very low-risk capital regimes. It's much more likely the big financial fallout will be from foreign investors that were greedily holding onto risky Chinese commercial paper.
All-in-all I actually suspect this to go out with a whimper rather than a bang. The way systems are setup in China there just isn't really the potential for a bang outside of like big social issues causing a revolution or something but generally speaking that doesn't happen. Usually as dissent grows they recognize it won't go away and start doing something to appease the people. Recent example being their effort to deal with pollution in the major cities, etc.
So yeah. I get that Western folks, Americans in particular don't understand the Chinese system and wish ill will upon it but the reality is that it's a lot more robust than said folks give it credit so don't bet on it failing anytime soon.
bad policies such as zero covid, tech crackdown, or not resolving the root of real estate crisis -> investor (domestic and foreign) loss of confidence -> companies leaving or shut down -> rising unemployment or reduced salary -> debt bubble gets bigger -> bad policies.
This death spiral is enhanced by demographics collapse which is happening now, not 30 or 15 or 10 years ago, as well as nationalistic behaviors that isolates China. Not to mention global inflation and consumer demand collapse.
In my list of things I also didn't mention
* 20% unemployment rate for new grads
* layoffs from big tech companies
* 70% of China's economy is real estate related, which means China will take an even bigger impact from real estate collapse than other countries that have less % of economy in real estate.
* collapse in demand for real estate due to fast aging population
* 20% of built real estate stays empty (not even rented) due to investment vehicles purpose
they will not because the reason japan (and the US) lost theirs is that china was cheap.
Where are you going to get this type of labour - skilled but cheap - other than china, in the next 10-30 years? Southeastern asian countries could make up some of the amount, but if they could do it today, they would've dominated already!
The repatriation of manufacturing is political propaganda - it won't work economically, as consumers' preferences is overwhelmingly for cheap goods, not expensive patriotism.
We have our own issues here in Europe with incurring wrath on Russia, thank you, we can't take two at a time. Or at least I hope we won't f.ing take two at a time, the gas prices being what they are is bad enough.
GDP growth
> Massive mortgage boycott.
Probably won't be as bad as 2008.
> The 1 billion people data leak has some experts analyzing the data ...
Link please?
> Chinese firms are still selling Russia good its military needs
What do you expect? China does not sanction Russia. And USA is hard pushing China in all China's surrounding areas: Taiwan, South China Sea, Xinjiang, South East Asian... Punching a cow and you'll be paled.
> incurring the wraiths of normal folks in Europe and other allied countries.
"Wraiths"? Can we first see the wraith be unleashed onto the Russian troops in Ukraine, which supposes to incur even more "wraiths"...
> Zero covid practice still going on, with tons of public discontent. There are videos of the people waiting in line to test in the pouring rain and huge wind!
You can measure how anger the US public is towards their covid policy, vs Chinese public's reaction. ANY public policy is going to err some people, especially in a country with close to 5 times the population of USA.
> * Zeihan gaining more popularity, which implies that people do believe that China is crashing. Foreign investors and companies are pulling out in record numbers
Who/what is Zeihan?
> * public sector employees taking 30% salary cuts
Err... Link please...
> Link please?
https://www.reuters.com/world/china/hacker-claims-have-stole...
If noone would do anything (no boycott), some customers would have to pay mortgage for apartments that won't be finished ever.
With boycott, the blast radius will be bigger, possibly affecting the banking system.
What options do authorities have?
If you don't pay, the property will be taken off you, and probably valued at a high valuation (because the property developer wouldn't want to have their unbuilt properties selling for cents on the dollar). That means you probably will escape bankruptcy or any further debt.
which would contradict the assumptions that lead to the decision not to pay.
Therefore, i suspect that the (half-completed) property would indeed be worthless (even to the bank), and is not a suitable form of collateral to recover any debt from. It might be the case where the bank eats the loss - or those who stopped paying the mortgage would be forced to pay (unlikely if this is a widespread issue as it causes social unrest).
My prediction is that the state owned banks would eat the loss, and wait out the confidence crisis - which might take 10 yrs - but then real estate will resume as before as a form of investment (and the cycle begins again).
Buying off-plan is common worldwide despite what others are saying in here.
When you have an over-estimated stock on the market, it's going to drop. Eventually.
People who boycott mortgages get their properties confiscated by court eventually, and if any developments suffer issues government should aid developers to ensure any paid customers get their property done.
Corporations, while it might pain them on some level, want to exist in a free, open and democratic sociality since it gives them access to courts and people in power. In Authoritarian systems, people at the top, just take whatever they want and there is nothing to be done about it.
Also, a foreign corporation is never going to have access to the higher levels of the Authoritarian government because they are foreign. Places like China don't care about foreign corporations because at the end of the day, there is nothing they can do to help the head authoritarian.
Yeah, I think there's a reason the best and brightest in China often try to immigrate to the USA, Canada, Australia, etc. Its not for the food, believe me.
I hope the people ultimately get the houses they paid for. What a terrible thing it would be to put 20-40% down for a home and to never have it delivered. I would assume there is going to be some sort of bailout?
So when building stopped altogether, due to government crackdown of developer loans, there aren’t any new entrants, and no greater fool to buy the worthless property, a lot of wealth might disappear in China.
It’s like US 2008, but much worse. Or perhaps US 2023… who knows?
You should reexamine your assumptions about these sources. Sounds like they deserve credit for reporting it earlier.
Then a link to a Mao speech. Weird
Of course, this is a double edge play. Notice how the message boils down to “the party is right! It’s probably the fault of some dark, greedy figure(s) somewhere!”. But by absolving the government from ever being wrong you remove the possibility of them ever improving and fixing themselves. So someone(s) get sent to jail, others are demoted, and everything is swept unde the rug, but the structural problems remain and will appear again and again.
It is a risk to your life to protest the national government, but the national government allows protest to local governments as a means to reduce steam buildup.
This results in over the top worship of Mao during local government protests as a hedge, because it creates a potential photo op where the local government is tearing down praise to Mao.
Mao is an icon of mass initiated political movement. You thus saw Mao and Maoism get badmouthed universally nowadays. And you wonder why that's the case...
So when you're in a glasshouse don't throw stones. Always the hypocritical "look China bad us good". I'm so tired of the propaganda - an EU resident.
Before you start judging a person for being dirty, make sure you're not dirty yourself.
The only thing you can get is the propaganda from the Kremlin. That propaganda is the crucial part of the Russian warfare. It functions to sow doubt about the truth. It is instrumental to get people to believe that Ukraine downed MH17. If Russia commits war crimes, its media start to spout different explanations, often mutually exclusive ones. Lies, damned lies, stupid lies, but it takes a lot of effort to deconstruct even the most plainly stupid ones of them. The effect is that you see a variety of nonsense, which makes you think about it as it sows confusion. This is known as the Firehose of Falsehoods. You are not sure anymore, some of your friends might buy one of the lies, while another one might stick better with you because it fits your beliefs better. This has nothing to do with understanding the truth.
You cannot compare our free press to the russian media. I am very critical about our media, also because they seem to be ignorant about the dynamics of our media which the Kremlin perfectly knows to exploit.
One of the pitfalls we have been observing is the one of False Balance, where you present the statements of one side as is, although it is complete garbage. Deconstructing false statements takes time, knowledge and a deep understanding of the context of events. Now look at the financial incentives and you see why we have got a huge problem in our western societies that rely on commercial entities to provide our news.
The bad news is: Firehose of Falsehoods is extremely effective! Look at Trump and his relationships with truth. He gives a new meaning to it.
Now you might think you are smart and special, so propaganda has no effect on you. Just like everyone else thinks. It is a poison, there is no reason to drink it.
If someone was stealing and breaking stuff every time they came over to your house, you wouldn’t let them in anymore either.
Utter unrestricted access to all from everywhere is a odd notion. Is it also somehow hypocritical to censor isis propaganda?
[1] https://www.scmp.com/economy/china-economy/article/3185326/c...
In the late 1980's Japanese real estate was the most valuable in the world, then it collapsed and they have not recovered.
This is a big secular shift for China. All of the previous projections were wrong, just like those indicating Japan would take over the world in the 1980's.
This is where China comes out of 'catch up' mode, and is now finding it's 'reality equilibrium' with the rest of the world.
the one big difference with all the previous examples is that China is authoritarian, where as the others were all (at least on paper) democratic.
China _could_ mandate the population to perform actions that the other tiger economies couldn't. I would be hesitant to assume that historical economic performance of japan and korea would give much indication to what future economic performance would be in china.
China has enormous leverage both on GitHub and especially on Microsoft.
If China could afford to damage these banks (or if the people who run them fail to have the right connections and attitude), it seems like it would actually benefit the government to publicize these boycotts as further support for the crackdown.
In the US, we'd just call the papers and get them to all run stories about a new trend among right-wing conspiracy theorists to stop paying their mortgages, relate them somehow to tax protesters and sovereign citizens, call them freeloaders, and insist that the figures being spread around about the number of people involved are probably from covert Russian sources.
edit: I mean, after that we'd start censoring, demonetizing, think-tank fact-checking and downranking, but only after accusing everyone involved of being a terrorist.
