Sometimes those clogged up, tangled situations allow all of us moments to sit back and ponder upon what are the underlying big pieces and ideas that underpin the dynamics that brought up the mess to the current point, like the tectonic plates we hardly notice but nevertheless bring unpleasant jolts from time to time. One common knowledge and thinking is the idea of economic value of land. As economy and population grow, the meaning and value of land increase even more in many ways, than those in a single economic dimension, though the meaning and value in economic dimension alone are very important ones. Case in point is the American revolution. The idealized political marketing line is all about taxation and representation, which is a deceitful cloak to cover one very important underlying reality, the tectonic plate so to speak, which is the ever growing population of American colonists, some with booming export cash crops going well with an attendant slave labor, that wanted to expand westwards, but British forbid them doing so by law with their proclamation line of 1763, a good 2 decades well ahead of American independence, giving enough time to colonists to percolate and simmer over what was wrong with their picture. Quite a few major proponents of revolution, like George Washington, were land speculators, and they stood to benefit from the westward expansion, hence to need to get rid of British rule.
China's constraints lie in 2 big pieces. One is the land use quotas which by national law are determined and apportioned to each and all province and region, where only the central and provincial level bodies can approve land use allocations, all over something like 34 thousand square miles over the last decade or so, with one revision to make more available along the way. Right off the bat, quota allocated and used are not quite matched up, depending on location and how booming the area is economically. The second piece is the public finance. China is still figuring out the whole complete system that would efficiently and effectively collect, share and finance the social, development and industrial policies on national level. In one way, it is a conflict between households and local governments, where local government stands to benefit from selling ever smaller amount of land to residential use with ever increasing price, which is basically a front loaded property tax to the homeowners, and a one time cash windfall for the local government, who in turn will use that revenue to finance their mandated activities. And homeowners, aka payers of tax on personal income, account only for 1 percent of GDP, whereas VAT and corp taxes account for about half of all tax revenue, therefore a lopsided preference to allocate land use to industrial and commercial activities, as they bring in more cash flows and no local government officials would survive their career without those revenues. Revenues from land use sales are multiples of personal income tax revenue collected, so local government would squeeze as much as they possibly could, to the very last drop. China has an abundance of industrial land available, as compared to residential, at much much cheaper price, but in the name of revenue stream game and promotion incentives, the pay out scheme is very much skewed towards economic growth, and hence the promotions, but not the housing affordability. So far, that is. That's the reason you'd see many many industrial and science parks sprouting out all over the place. Property taxes are another way to alleviate the underlying financing needs of local governments, but it's not in a form of a single lump sum windfall, but as a revenue stream coming in over a longer period of time. So if those revenues streams can be matched up with interest payments on local government borrowings, that'd be quite significant, but you'd still need to sell the idea of nation wide property tax ,like OECD style, to the public, and to the local governments as well, despite on going pilots for some years. And you'd need a robust money market for that, and also a sophisticated domestic financial system in general. China is learning and changing every day, but it's mostly marginal gradual changes, more like a one degree starboard turn, instead of 15 degrees in one go. Effectively, Evergrande is the product of those underlying conditions, they are the symptoms, not the disease. Of course Xi Jiping would know what's happening, that's why his common prosperity theme and crackdowns on social and work related excesses. It would be done, but not overnight. Chinese system is broadly based on the idea of stakeholders, aka shared long term interest for everyone, ie, public and long term, while that of America is based on shareholder, aka owner of profits, whose interest in anything and everything over any given time horizon is solely based on availability of uninterrupted profits and profits only, once the profits stop, they'd stop sharing anything and everything, ie its nature is of short-term and private. That's the difference between shared long term interests, aka common prosperity, and short term private profits.
But be that as it may, the case of Evergrande would have been a walk in the park, if it was compared to the subprime bubble that led to the great financial crisis of 2008. Before that, I was totally drinking the Kool-Aid of American Capitalism and plunged my entire networth into it. It took me a better part of 10 years to understand what had happened and why. Even then I was still a believer, kind of, until this covid 19 pandemic hit. Now I can say this in full confidence with my 18 years of formal education that, in the grand scheme of economic development, no other country on earth is qualified to lecture China. And by the same token, no other people are qualified to lecture the Chinese on any thing economic. This is too big of a topic, my head starts spinning