A Hong Kong court ordered the liquidation of China Evergrande, the world’s most indebted property developer.
Evergrande has assets of about $245 billion, but owes about $300 billion.
Its demise is a “controlled collapse,” but still raises systemic risk and will hurt investors, says an analyst.
The chickens are finally coming home to roost with the decades of bullshit in commercial real estate worldwide without proper regulation. This isn’t unexpected to anyone with half a brain looking at the industry, which means it obviously completely blindsides major institutional investors who never even consider anything more than quarterly numbers in a vacuum. The pandemic exposed the systemic issues so quickly they couldn’t just brush it under a rug with misinformation.
I’m not saying it’s ideal or healthy.
But I don’t see how the west would have an upcoming issue with real estate.
People are still willing to pay increasingly large amounts of money for real estate and when locals can’t afford it they just bring in immigrants.
I’d be interested to know how the real estate valuation in the west is going to decrease.
I have a feeling that “too big to fail” will continue to be the mantra in the west for bailing these institutions out.
and will hurt investors
breaks out world’s tiniest violin
Investors can go suck it, I’m in the corner of the working class.
I don’t think you quite understand that in this case, it’s millions upon millions of working and middle class people who put most of their life’s savings into this.
Even here the system will be rigged in favor of big investors vs small investors vs people who bought an asset and will get squat. Because working class who gave them money upfront to purchase an appt or house will be the last one in the collectors queue.
But your response is accurate to the “claim” that investors will be hurt. Media is so messed up that they don’t even mention the customers that will get the worse impact than investors.
That’s literally what the return on all the other investment is for: the assumption of risk.
I guess it’s the same shift in mentality as the credit card processing machine asking for a tip for everything by default.
Does it hurt anyone other than investors? Because I could not possibly care less about investors.
Probably won’t hurt the investors, they’ll get paid. But all the individual contractors who worked for the company are very unlikely to actually see payment.
That’s the problem with investors, if they’re not making more money than last year they find a way to fuck the rest of us. Either they pressure companies to lay off workers, they pressure the government to cut taxes, lower pesky labour and environmental regulations, or just handover cash in the form of a subsidy or bailout.
Either way they get our money somehow and enshittify our lives. If there’s no hell we’ll need to invent a special kind of justice for these people.
I don’t know if I can really blame the investors themselves for enshittification… I mean, sure, it’s done for their sake but is it their call? They want a return on the investment, but how much say do they have in the companies that actually do the shitty things?
Then again if I gave money to someone and said “go bring me some milk” and they got me milk, but also murdered everyone they saw along the way, I would definitely not be hiring them again and probably could be in trouble despite not asking for or wanting the murders. If the investors don’t pull out when the company is doing shitty things to make them money, they are definitely evil themselves.
Sorry I was just watching a video that was explaining that most companies are run by a handful of people who basically each represent several of the largest shareholders combined. I suppose I was imagining these people making the actual decisions and hiring the board and pushing the direction of the company and the lobbying efforts as the “investors”.
You’re right I don’t mean we should commit war crimes against grandpa because he has a pension fund lol
Fiduciary responsibility. Shareholders/investors can, have, and will, sue.
That’s where the primary focus is supposed to lie. Legally anyway.
If selling all the assets and firing all the people could increase the share price for a quarter, they’ll do it.
“investors” in this case include middle class Chinese citizens, I think that’s worth caring about
The thing with debt is that every time someone (or something) that owes a world-changing amount of it suddenly goes kaput, it becomes pretty clear how much of the debt system is made up.
If Evergrande owes banks, they’ll just write off the debts and pretend it never existed. If they owed companies, they’ll recoup “lost” money from assets and loans from someone else.
Most of the debt system is arbitrary and totally nonexistent. This wont be the collapse of the chinese economy like ““china waters”” claimed it would be; for a capitalist country masquerading as a classless economic system they’re doing capitalism a lot better than most of the world right now.
They just write it off 😃
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Oh boohoo, did someone who enthusiasticly supports capitalism play and loose? Good, welcome to the extreme shittiness of a global free market.
You know, sometimes it’s really obvious when a person is a broke ass jealous loser.
Imagine being this stupid and thinking “I’m not stupid”.
God you people are sadly obvious
That’s pretty funny coming from the guy whose comment history is primarily room temperature IQ hot takes and telling people exasperated by your dimness to fuck off. It’s sadly common to encounter stupid, angry people online, but your dedication to the art puts you at least five short buses ahead of your peers.
Yall ain’t even smart enough to get it
Yall
ROFLMAO, I tell you wut.
Jealous of who?
People with more than 5 bucks
I have more than 5 bucks. I don’t see anything wrong with being happy that is hurting the wealthy.
The idea that this is hurting the little guy more than the wealthy is clickbait nonsense.
Any sane person has their retirement diversified and uses index funds.
You sound like a wannabe day trader; a temporarily embarrassed millionaire.
You sound like a whiny bitch.
You project all your emotions on to others.
Right, I’m the one chortling with glee at others misfortune. Loser.
Let’s see if China have a capitalism with American characteristics and is going to rescue the company with public money, or if they’re going with a more theorical one and left it going broke.
I think China has complete control of many of their companies so it’s a tad bit different than us.
Will this affect pensions funds? Do they typically use these types of investments?
They should start a couple utopian city experiments in those ghost suburbs they built way outside cities. Offer housing and a vision and put some academics in charge so we can learn something.
The problem is that those ghost cities aren’t actual cities. The housing is largely worthless and uninhabitable, crumbling before it’s even finished, often only “finished” to look that way from afar. You can’t actually do anything with it other than tear it down.
It looks to me like there are a fair amount of finished homes with fine construction that are vacant due to this whole thing. Many weren’t completed but many were.
Fine construction? Based on what? Have you actually seen these ghost cities? There is nothing fine about them.
Based on scanning wiki and a couple articles and seeing nothing about construction quality aside from unfinished projects, definitely not an authority
Oh I see, didn’t realize the construction quality was terrible:( So it was a sham the whole time? I thought they just didn’t think through the locations which made the housing useless (no work within reasonable commute).
The whole thing was essentially a real estate Ponzi scheme where new investors were paying for pre-existing work, from what I’ve read
New investors were covering existing loans you mean!
No Ponzi scheme here, nothing of the sort. Just good old economics!But yes, they sold apartments and used the proceeds to finance existing, already sold buildings that weren’t built yet.
This isn’t a pyramid scheme, but it definitely collapses if it stops growing.
Finally it’s only been, what, two and a half years since they went bankrupt?
Tencent next please.
I am somewhat concerned about the global implications of this. Evergrande is a symptom of a deeper malaise in the Chinese real estate market.
How did it get so bad? Is there a tl;Dr anywhere that explains it fully?
This is from Economics Explained two years ago. It basically explains the whole thing, but it isn’t really a TLDR.
https://www.youtube.com/watch?v=lbH_8Nj51HU
If that’s too long, Peter Zeihan recently gave a fair summary in a six-minute video.
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It’s a ponzi sceme with extra steps
Maybe they bought too many houses in the US and can’t rent them for 5000/m
is a symptom of a deeper malaise in the Chinese real estate market.
Its even worse than that because retail investors in China use real estate as their primary investment vehicle. Where as someone in the USA might put money in a 401k for retirement or a brokerage account for investing, those don’t exist (in the reliable way) in China. So many regular people’s nest egg is tied up in real estate. So this isn’t just the real estate market getting wiped out, its millions of working class people’s life savings just evaporated.
Goddamn. Thanks for the perspective. This is much more horrible than I thought. It sounds like vulnerable working class people are going to be hurt the worst.
Not just a China thing. Canada is absolutely fucked with the government floundering to try and keep house prices from falling
Correct me if I’m wrong. I know that Canadian home prices are bonkers, especially in large cities like Vancouver or anywhere in the GTA (are the Quebecois also having this trouble?). However, the problem with Evergrande isn’t just failure of this company reduces home prices (which is where lots of Canadian savings resides), but Evergrande had taken deposits for tens of thousands of homes it never built or never completed.
So while the value/sale price of a home in Canada may be falling. At the end of the day it still does have value monetarily, and still serves a vital function of housing a family.
China’s situation with Evergrande means the money paid for the house by the owner simply evaporated with no possibility of a refund and the house doesn’t exist because it was never built (or never completed). So to me the China situation looks significantly more dire.
Montreal is catching up with the rest of Canada
It’s mental. A rundown shoebox in my neighborhood is upward of 600k even with interest rates as they are now.
We are holding on our apartment as long as possible, wishing that we don’t have to move until kindergarten is done for our youngest. The moment we are forced to move, it will cost us easily 1k$/month more for a lot less space.
Nah, they way things are, if the canadian housing market falls, the whole economy will shit the bed. The GDP is currently driven by the housing market, the nations finances are literally built on a house of cards.
