Chinese Economics Thread

[N00813]

Cont'd

Government debt markets​

Aside from China’s approaching economic meltdown, the other major story of the past few weeks has been the very real meltdown at the long end of the US treasury market—a meltdown which has captured a lot fewer headlines than the much-heralded Chinese financial implosion. Over the last 12 months long-dated US treasuries have delivered a negative total return of -17.05%. Over the same period, Chinese bank shares have delivered positive total returns in renminbi terms of 6.7%.

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What kind of financial crisis sees the banks of the country in crisis outperform US treasuries by over 20%? It would be wholly unprecedented.

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Staying on the US treasury market, it is also odd how Chinese government bonds have outperformed US treasuries so massively over the past few years. Having gone through a fair number of emerging market crises, I can say with my hand on my heart that I have never before seen the government bonds of an emerging market in crisis outperform US treasuries. Yet since the start of Covid, long-dated Chinese government bonds have outperformed long-dated US treasuries by 35.3%.


In fact, Chinese bonds have been a beacon of stability, with the five-year yield on Chinese government bonds spending most of the period since the 2008 global crisis hovering between 2.3% and 3.8%. Today, the five-year yield sits at the low end of this trading band. But for all the negativity out there, yields have yet to break out on the downside.

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High yield markets​

While the Chinese government debt market has been stable, the pain has certainly been dished out in the Chinese high yield market. Yields have shot up and liquidity in the Chinese corporate bond market has all but evaporated. Perhaps this is because historically many of the end buyers have been foreign hedge funds, and the Chinese government feels no obligation to make foreign hedge funds whole. Or perhaps it is because most of the issuers were property developers, a category of economic actor that the CCP profoundly dislikes.


Whatever the reasons, the Chinese high yield debt market is where most of the pain of today’s slowdown has been—and continues to be—felt. Interestingly, however, it seems that the pain in the market was worse last year than this year. Even though yields are still punishingly high, they do seem to be down from where they were a year ago.

Where does this leave us?​

Putting it all together, it seems fair to say that as things stand:

• There is a sizable problem in the Chinese real estate sector, and companies are going bust.
• Amazingly, however, Chinese banks seem to be weathering the storm, at least for now.
• The Chinese consumer continues to consume, even if not with the same gusto as in the years before Covid.
• Chinese equities have been disappointing, but Chinese equity markets are not in the kind of full-blown meltdown one might expect given the apocalyptic tone of reporting in the financial media.
• Commodity markets do not seem all that bothered by the implosion in Chinese real estate.
• Government bond yields in China remain stable, and have not broken down to new lows.
• US treasuries continue to melt down, even as returns on Chinese government bonds remain steady.
• The Chinese high yield corporate debt market remains completely dislocated.

 

[siegecrossbow]

Another very interesting and in my view enlightening read on the performances of the U.S. Treasury bonds (which is in the tank) vs the Chinese financial system that has so far outperformed the U.S. And as the author alleged, somehow the headlines plastered all over the western media is "China about to Collapse" for the zillion times.

He leaves his readers with an interesting, if not an educational chart:
View attachment 117633

The article can be read in full here:

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The vested interest in the West wants China to do a 2008 redux and prop up the housing market.

 

[tacoburger]

People are so ignorant about China's economy. Everywhere people on the internet are droning on and on about the real estate market and youth unemployment and other bullshit. I just want to rant. People are brainwashed, everything that supports their narrative of chinese collapse is true and everything that doesn't is fake CCP data.

People are crowning about the real estate troubles and how China is doomed because of it and how commies cannot manage an economy as if the CCP wasn't trying to pop the real estate bubble for a decade now and that Evergrande would still happily gobbing up all the loans that they could get if China hadn't implemented the 3 red lines to pop the real estate bubble before it could pop itself. Evergrande could probably have continued on swelling it's debt load to dangerous levels for another decade or two before the bubble popped via natural market forces if the CCP didn't put a stop to it. Somehow nobody remembers that knee capping it's real estate sector was something that the CCP did, they act like the collapse suddenly came about on it's own.

We all saw what happened when a real estate bubble popped on it own, it's called the 2008 recession and people conveniently forget about it whenever they talk about China's real estate issues. As bad as the real estate slowdown currently is, it was nothing compared to the crisis that followed the 2008 recession, which was global in scale, took countries years to recover and which got bailed out massively by the US government anyway. China on the other hand is letting the real estate companies fail. China want money to flow to other sectors of the economy, they want cheaper housing for the population and they want a less debt drive economy

People also talk about China's ghost cities and overbuilding of apartments, while also ignoring that a lot of said ghost cities are filling up, that China still has tons of urbanization left to do and that in a country of 1.4 billion, of course there's going to be a handful of failed projects or empty cities. It's like pointing to a dying rust belt town in America and using it to say that the entire country is filled with nothing but decaying buildings and drugged out rednecks. Not to mention that the same people will also complain that housing prices in their country is too high, that they wished that their country built more houses and that they wished mega-coporations like blackrock didn't control most of the rent market. They also ignore the fact that a massive housing bubble is building up in major western cities, with housing out of reach for most of the population and working age people.

People talk about China falling into the middle income trap purely based on GDP per capita. Ignoring that 300 million chinese already have GDP per capita and living standards close to Europe/America and that going purely by GDP per capita, cutting most of western and southern china will double the GDP per capita and then China will magically be out out the middle income trap, be a lot stronger and be able to innovate by cutting out half it's population.

This ignores that the resources that control of territory gives. If America were to gain control of Africa, their combined GDP per capita would drop like a rock, by their logic this new nation will be in the middle income trap, unable to innovate and be a lot weaker. Of course, if America gained control of Africa, they suddenly become a new hyperpower and nothing about their innovation or high value manufacturing industry changes. They somehow also ignore the fact China is outperforming a lot of countries like most of Europe with a much higher GDP in science and technology and high value areas like A.I., renewables and space.

People love to mock China's one child policy while ignoring that other east asian countries birthrate have fallen just as fast. Or basically all of the developed world have below replacement birth rates. People will say how stupid China is for controlling it's population while remarking that Africa/India is way too overpopulated, crowed and dirty and saying that people shouldn't breed much when famine hits the region. People will say on one hand that the greatest threat that China faces is it's demographics, while also parroting reports about how A.I is going take most people's jobs in decades or two, and the social unrest the mass of jobless people will cause. They will also parrot the demographics line while also parroting the high unemployment rate in China. Western right wing parties cry about how immigration is destroying Europe and America while also saying that China will collapse if they don't allow mass immigration in the same breath.

They call China militaristic, a bully and blood thirsty, while ignoring how many countries America has invaded or bombed in the last 50 years, or how it has dragged Europe along into the same conflicts. They fixate on every minor issue and civil unrest that China has say that the CCP is about to be overthrown, but ignore America's massive growing class unrest and radical tensions, and outright ignore shit like how ethnic groups in India are basically in open warfare. They say that China's method of government cannot work, while ignoring that a country with similar population, size and economic status aka India is a major shithole while also being a democracy.

People love to call out how China is stealing IP, but never acknowledge how America stole a ton of European IP, or how the various European states were copying the fuck out of each other during the scientific revolution and industrial revolution that allowed for technology to develop so quickly in the first place.

They will never acknowledge how the IP system is designed to keep the wealthy more developed countries on top by locking away valuable technologies from poorer less developed until they're basically obsolete. They will never acknowledged how wealthy more developed countries have a vast advantage over the global south, many of which are underdeveloped because of said richer countries fucking them over via colonialism, economic warfare or coups. They will never acknowledge how damaging brain drain of skilled workers is kneecapping developed countries way worse than any IP theft. They will never acknowledge how China is able develop technologically on par with America is precisely because they didn't give a shit about IP and that allowed them to develop a industry until said industry was mature enough to innovate.

 

[pbd456]

People are so ignorant about China's economy. Everywhere people on the internet are droning on and on about the real estate market and youth unemployment and other bullshit. I just want to rant. People are brainwashed, everything that supports their narrative of chinese collapse is true and everything that doesn't is fake CCP data.

People are crowning about the real estate troubles and how China is doomed because of it and how commies cannot manage an economy as if the CCP wasn't trying to pop the real estate bubble for a decade now and that Evergrande would still happily gobbing up all the loans that they could get if China hadn't implemented the 3 red lines to pop the real estate bubble before it could pop itself. Evergrande could probably have continued on swelling it's debt load to dangerous levels for another decade or two before the bubble popped via natural market forces if the CCP didn't put a stop to it. Somehow nobody remembers that knee capping it's real estate sector was something that the CCP did, they act like the collapse suddenly came about on it's own.

We all saw what happened when a real estate bubble popped on it own, it's called the 2008 recession and people conveniently forget about it whenever they talk about China's real estate issues. As bad as the real estate slowdown currently is, it was nothing compared to the crisis that followed the 2008 recession, which was global in scale, took countries years to recover and which got bailed out massively by the US government anyway. China on the other hand is letting the real estate companies fail. China want money to flow to other sectors of the economy, they want cheaper housing for the population and they want a less debt drive economy

People also talk about China's ghost cities and overbuilding of apartments, while also ignoring that a lot of said ghost cities are filling up, that China still has tons of urbanization left to do and that in a country of 1.4 billion, of course there's going to be a handful of failed projects or empty cities. It's like pointing to a dying rust belt town in America and using it to say that the entire country is filled with nothing but decaying buildings and drugged out rednecks. Not to mention that the same people will also complain that housing prices in their country is too high, that they wished that their country built more houses and that they wished mega-coporations like blackrock didn't control most of the rent market. They also ignore the fact that a massive housing bubble is building up in major western cities, with housing out of reach for most of the population and working age people.

People talk about China falling into the middle income trap purely based on GDP per capita. Ignoring that 300 million chinese already have GDP per capita and living standards close to Europe/America and that going purely by GDP per capita, cutting most of western and southern china will double the GDP per capita and then China will magically be out out the middle income trap, be a lot stronger and be able to innovate by cutting out half it's population.

This ignores that the resources that control of territory gives. If America were to gain control of Africa, their combined GDP per capita would drop like a rock, by their logic this new nation will be in the middle income trap, unable to innovate and be a lot weaker. Of course, if America gained control of Africa, they suddenly become a new hyperpower and nothing about their innovation or high value manufacturing industry changes. They somehow also ignore the fact China is outperforming a lot of countries like most of Europe with a much higher GDP in science and technology and high value areas like A.I., renewables and space.

People love to mock China's one child policy while ignoring that other east asian countries birthrate have fallen just as fast. Or basically all of the developed world have below replacement birth rates. People will say how stupid China is for controlling it's population while remarking that Africa/India is way too overpopulated, crowed and dirty and saying that people shouldn't breed much when famine hits the region. People will say on one hand that the greatest threat that China faces is it's demographics, while also parroting reports about how A.I is going take most people's jobs in decades or two, and the social unrest the mass of jobless people will cause. They will also parrot the demographics line while also parroting the high unemployment rate in China. Western right wing parties cry about how immigration is destroying Europe and America while also saying that China will collapse if they don't allow mass immigration in the same breath.

They call China militaristic, a bully and blood thirsty, while ignoring how many countries America has invaded or bombed in the last 50 years, or how it has dragged Europe along into the same conflicts. They fixate on every minor issue and civil unrest that China has say that the CCP is about to be overthrown, but ignore America's massive growing class unrest and radical tensions, and outright ignore shit like how ethnic groups in India are basically in open warfare. They say that China's method of government cannot work, while ignoring that a country with similar population, size and economic status aka India is a major shithole while also being a democracy.

People love to call out how China is stealing IP, but never acknowledge how America stole a ton of European IP, or how the various European states were copying the fuck out of each other during the scientific revolution and industrial revolution that allowed for technology to develop so quickly in the first place.

They will never acknowledge how the IP system is designed to keep the wealthy more developed countries on top by locking away valuable technologies from poorer less developed until they're basically obsolete. They will never acknowledged how wealthy more developed countries have a vast advantage over the global south, many of which are underdeveloped because of said richer countries fucking them over via colonialism, economic warfare or coups. They will never acknowledge how damaging brain drain of skilled workers is kneecapping developed countries way worse than any IP theft. They will never acknowledge how China is able develop technologically on par with America is precisely because they didn't give a shit about IP and that allowed them to develop a industry until said industry was mature enough to innovate.

Golden post

 

[azn_cyniq]

People are so ignorant about China's economy. Everywhere people on the internet are droning on and on about the real estate market and youth unemployment and other bullshit. I just want to rant. People are brainwashed, everything that supports their narrative of chinese collapse is true and everything that doesn't is fake CCP data.

People are crowning about the real estate troubles and how China is doomed because of it and how commies cannot manage an economy as if the CCP wasn't trying to pop the real estate bubble for a decade now and that Evergrande would still happily gobbing up all the loans that they could get if China hadn't implemented the 3 red lines to pop the real estate bubble before it could pop itself. Evergrande could probably have continued on swelling it's debt load to dangerous levels for another decade or two before the bubble popped via natural market forces if the CCP didn't put a stop to it. Somehow nobody remembers that knee capping it's real estate sector was something that the CCP did, they act like the collapse suddenly came about on it's own.

We all saw what happened when a real estate bubble popped on it own, it's called the 2008 recession and people conveniently forget about it whenever they talk about China's real estate issues. As bad as the real estate slowdown currently is, it was nothing compared to the crisis that followed the 2008 recession, which was global in scale, took countries years to recover and which got bailed out massively by the US government anyway. China on the other hand is letting the real estate companies fail. China want money to flow to other sectors of the economy, they want cheaper housing for the population and they want a less debt drive economy

People also talk about China's ghost cities and overbuilding of apartments, while also ignoring that a lot of said ghost cities are filling up, that China still has tons of urbanization left to do and that in a country of 1.4 billion, of course there's going to be a handful of failed projects or empty cities. It's like pointing to a dying rust belt town in America and using it to say that the entire country is filled with nothing but decaying buildings and drugged out rednecks. Not to mention that the same people will also complain that housing prices in their country is too high, that they wished that their country built more houses and that they wished mega-coporations like blackrock didn't control most of the rent market. They also ignore the fact that a massive housing bubble is building up in major western cities, with housing out of reach for most of the population and working age people.

People talk about China falling into the middle income trap purely based on GDP per capita. Ignoring that 300 million chinese already have GDP per capita and living standards close to Europe/America and that going purely by GDP per capita, cutting most of western and southern china will double the GDP per capita and then China will magically be out out the middle income trap, be a lot stronger and be able to innovate by cutting out half it's population.

This ignores that the resources that control of territory gives. If America were to gain control of Africa, their combined GDP per capita would drop like a rock, by their logic this new nation will be in the middle income trap, unable to innovate and be a lot weaker. Of course, if America gained control of Africa, they suddenly become a new hyperpower and nothing about their innovation or high value manufacturing industry changes. They somehow also ignore the fact China is outperforming a lot of countries like most of Europe with a much higher GDP in science and technology and high value areas like A.I., renewables and space.

People love to mock China's one child policy while ignoring that other east asian countries birthrate have fallen just as fast. Or basically all of the developed world have below replacement birth rates. People will say how stupid China is for controlling it's population while remarking that Africa/India is way too overpopulated, crowed and dirty and saying that people shouldn't breed much when famine hits the region. People will say on one hand that the greatest threat that China faces is it's demographics, while also parroting reports about how A.I is going take most people's jobs in decades or two, and the social unrest the mass of jobless people will cause. They will also parrot the demographics line while also parroting the high unemployment rate in China. Western right wing parties cry about how immigration is destroying Europe and America while also saying that China will collapse if they don't allow mass immigration in the same breath.

They call China militaristic, a bully and blood thirsty, while ignoring how many countries America has invaded or bombed in the last 50 years, or how it has dragged Europe along into the same conflicts. They fixate on every minor issue and civil unrest that China has say that the CCP is about to be overthrown, but ignore America's massive growing class unrest and radical tensions, and outright ignore shit like how ethnic groups in India are basically in open warfare. They say that China's method of government cannot work, while ignoring that a country with similar population, size and economic status aka India is a major shithole while also being a democracy.

People love to call out how China is stealing IP, but never acknowledge how America stole a ton of European IP, or how the various European states were copying the fuck out of each other during the scientific revolution and industrial revolution that allowed for technology to develop so quickly in the first place.

They will never acknowledge how the IP system is designed to keep the wealthy more developed countries on top by locking away valuable technologies from poorer less developed until they're basically obsolete. They will never acknowledged how wealthy more developed countries have a vast advantage over the global south, many of which are underdeveloped because of said richer countries fucking them over via colonialism, economic warfare or coups. They will never acknowledge how damaging brain drain of skilled workers is kneecapping developed countries way worse than any IP theft. They will never acknowledge how China is able develop technologically on par with America is precisely because they didn't give a shit about IP and that allowed them to develop a industry until said industry was mature enough to innovate.

I agree with you, but I'm glad that most westerners are ignorant about China's economy. China will most likely become the strongest nation in this planet's history within our lifetimes. Why should China announce that to the rest of the world? Articles about the "impending collapse of China" literally do not matter at all because they don't change the fact that China's $19 trillion economy grew more than 6% in the previous quarter. If anything, China is probably behind those stories. Western ignorance is a godsend because by the time the majority of westerners come to terms with China's strength, it will be far too late for them to do anything about it.

 

[KYli]

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[ougoah]

The other side of the true nature of all this we haven't raised though is the very real fact that China's economic model (and everyone else's) is completely dependent on perpetual consumption because it is dependent on perpetual production.

This is problematic for China and everyone. A new era of reduced global consumption is upon us, driven not only by market forces but perhaps also underpinned by ecological and resource fragility. At least to a point where those concerns begin wearing the minds of the consumer and policy maker.

Yes China is strategically picking this time to deflate its property bubble which certainly cuts the West deeper as Chinese consumers basically halving its purchases from EU of Veblen goods. The flip side though is Western consumers can't afford to buy as much and consume at previous rates of non-essentials. Both non-essentials and essentials are heavily dependent on China but the non-essentials make up such a massive portion of Chinese industrial output that this spells problem for China's economy too.

China has been moving into new sectors for the last two decades and dominating several for about a decade. Something like 20% of global semiconductor manufacturing and sourcing comes from China despite those EUVL barriers placed on China for leading edge node fab. But shipbuilding? photovoltaics? renewables? energy storage? electronics (at least half the market and more than half of componentry sourcing)... these are just a few high end essentials that China dominates. The issue is this field is dynamic and moves quickly. China must do even better by educating youth, producing the next generation of researchers, engineers, and technicians to continue dominating the rest.

This isn't so hard to do as while China suffers some net brain drain to the West, it's still the leading producer of the current batch of global scientists and engineers (disproportionately higher than the US coming in at no.2 ... see Nature, Science indexes, WIPO's GII, SCImago SJR). The majority of westerns in the West not counting immigrants and students go to non STEM fields and the rest go to Onlyfans, their drugs of choice, alcohol abuse, and plain old doing fck all. Their family wealth enables this and their society's welfare to some degree.

China still needs to explore how to best juggle this transition where the global economy basically spends half what it used to on non-essentials as their economies deal with 70 years of US economic abuse. Everyone is moving into this shaky ground. China just stands to lose too much and needs to figure out how to transition into a population of 800 million within the next 50 years while its entire industry shiifts almost entirely to becoming a technology product exporter while still holding onto lower end manufacturing, competing with Vietnam, Bangladesh, Indonesia, Thailand, and India in that space.

Economics is a question of where to put resources and what to spend resources on right? So we know now that non-essential consumption is dying off. This was what China built its previous industrial foundations on to win economic favour. Now it's just moving and smart leadership knows when to move and how to restructure. Guess what has been happening in China for over two decades already?

Let the chimps continue shouting in their echo chambers. Behind the scenes you can bet your last dollar that Western experts and well informed leaders know exactly (the truth of) what's happening around the world and in China. They are angry and frustrated because China's making moves reforming and it all requires this bloody property bubble deflating. You can blame the moronic average Chinese mum and dad investor. Where you put money is where resources need to go. The last place to really put money is property if you have a high functioning society and economy. Local Chinese leaders also abused this to pump their "productivity" measures. Property should honestly be removed from those metrics. No, high property prices isn't a sign of productive citizens and economy. Look at Australia. Woeful real outlook on genuine productivity. No efficiency, close to zero competitiveness outside of maybe only a small handful of niche fields, property prices being pumped non-stop. At least it's a desirable place to live I suppose.

 

[paiemon]

People also talk about China's ghost cities and overbuilding of apartments, while also ignoring that a lot of said ghost cities are filling up, that China still has tons of urbanization left to do and that in a country of 1.4 billion, of course there's going to be a handful of failed projects or empty cities. It's like pointing to a dying rust belt town in America and using it to say that the entire country is filled with nothing but decaying buildings and drugged out rednecks. Not to mention that the same people will also complain that housing prices in their country is too high, that they wished that their country built more houses and that they wished mega-coporations like blackrock didn't control most of the rent market. They also ignore the fact that a massive housing bubble is building up in major western cities, with housing out of reach for most of the population and working age people.

I think the issue with the real estate is not just the alleged overbuilding, its building in places where the demand did not materialize as expected or the local fundamentals did not generate market interest in urbanization to sustain those properties. The Evergrande bankruptcy illustrates this, since if its creditors and the government believed that the sum of its property holdings held value (i.e., could be sold and moved in thanks to urbanization) they could have rolled over its debts, provided interim financing to get those projects finished, etc. The fact that they didn't is probably a telling sign that they believe some of those properties need to be written off/torn down with the land repurposed, while others can be salvaged, finished and used to recoup some of what they are owed. Hence Evergrande is in bankruptcy court to figure all that out. Obviously, that's going to be painful for people and creates alot of uncertainty around real estate and related industries creating economic headwinds. Since many people have parked wealth into real estate and its related sectors (something which has been discussed as needing diversification), its unsurprising that they feel poorer and are being more cautious when spending. That's deflating asset bubbles for you, the alternative is to keep feeding the beast like some countries (*cough* Canada).

This isn't so hard to do as while China suffers some net brain drain to the West, it's still the leading producer of the current batch of global scientists and engineers (disproportionately higher than the US coming in at no.2 ... see Nature, Science indexes, WIPO's GII, SCImago SJR). The majority of westerns in the West not counting immigrants and students go to non STEM fields and the rest go to Onlyfans, their drugs of choice, alcohol abuse, and plain old doing fck all. Their family wealth enables this and their society's welfare to some degree.

STEM is not the end all and be all, while it is an essential pillar to a thriving economy and country it is one of many contributors. Media, arts, culture, etc all contribute to a thriving society and are devalued monetarily but should not be dismissed. Look at Genshin Impact, its a harmony of arts, culture mixed in with technology to create one of the biggest entertainment/cultural hits in the world. I agree that in Western societies people have more room to experiment with their life paths since they started out at a higher standard of living and have a bit of a buffer, but thats just the way the cards have been dealt. The fact that immigrants go into STEM is because they were mostly recruited for those skills (whether it is truly a talent shortage or just a way to depress wages is an arguement in itself), its a selection bias. And the fact that western youth have options besides STEM whether it be other professional fields, trades, etc should be an argument that STEM should improve what its offering in terms of compensation relative to the competition (now we potentially have the opposite problem with people flooding into CS/tech for the $$$). CS/Tech is often held up as the example but theres alot more to STEM then just that. The fact is, most people would do as little as possible to achieve the highest standard of living possible (myself included). How you achieve that, is up to you to find the balance. If you can generate your wealth through monetizing your appearance/sexuality through donations from lonely men/pervs as an OF creator or Chinese titty streamer/NSFW artist then all the power to them since the market dynamics favor women. To put it another way, if lonely women were willing to pay for media involving male genitalia and you could make a nice living doing that, I am sure there would be many males taking their shot at the opportunity, including some of our members here.

 

[KYli]

I think the issue with the real estate is not just the alleged overbuilding, its building in places where the demand did not materialize as expected or the local fundamentals did not generate market interest in urbanization to sustain those properties. The Evergrande bankruptcy illustrates this, since if its creditors and the government believed that the sum of its property holdings held value (i.e., could be sold and moved in thanks to urbanization) they could have rolled over its debts, provided interim financing to get those projects finished, etc. The fact that they didn't is probably a telling sign that they believe some of those properties need to be written off/torn down with the land repurposed, while others can be salvaged, finished and used to recoup some of what they are owed. Hence Evergrande is in bankruptcy court to figure all that out. Obviously, that's going to be painful for people and creates alot of uncertainty around real estate and related industries creating economic headwinds. Since many people have parked wealth into real estate and its related sectors (something which has been discussed as needing diversification), its unsurprising that they feel poorer and are being more cautious when spending. That's deflating asset bubbles for you, the alternative is to keep feeding the beast like some countries (*cough* Canada)

Evergrande and most Chinese developers are overleveraged. Their assets are mainly lands reserve which are mostly funded by borrowing which mean it is difficult to monetize lands especially during the downturn. Most of their "apartments" are built through money from home buyers and bank borrowing and postponing paying account payables which mean these apartments even after completion would not monetize much especially after price cuts.

Many other valuable assets of property developers have mostly been separated listed. More importantly, most property developers have paid out huge dividends over the years. These developers also borrowed in dollars bonds at a very high rate. The truth is many founders and big shareholders of property developers are still wealthy even if their companies filed bankruptcy. Evergrande founder Hui alone has received billions of dividends over the years. Moreover, the buyers of high interest bonds of mainland developers are their buddies in Hong Kong and their friends in Western hedge funds. In the end of the day, the Chinese government has no interest to bail out these developers. The only reason the Chinese government is helping the property sector only to ensure the completion of all apartments that have already started.

As for 3 and 4 tier cities, there are no true ghost cities even for those less desire and affluent ones. If these apartments could compete and sell at a reasonable price then there are always a demand. Many 3 and 4 tier cities are still attractive for rural and counties people that want to have an apartment in a major city and many residents do want an upgrade to a better and newer apartments. The issue is many apartments have priced out of reach of many buyers and take a lot of time to fill. For example, a few apartments projects in Sichuan in 3 and 4 tier cities cut their price by 30% last year and all of their apartments were sold out by days not weeks or months so demand is there at the right price.

 

[tamsen_ikard]

Considering China's urbanization rate of 65%, they have a huge potential of people who still need to move to cities. So, I don't think that China is overbuilt. There is a problem of people overinvesting in multiple properties instead of investing in stocks. So, China needs a long property downturn to change people's obsession with properties.

But the problem is the lack of stimulus and monetary expansion. China has a huge dollar reserve, they should print more yuan and use the dollar reserve to defend the currency. But they are not doing it. I wonder why they are so hesitant to print more yuan and end the deflationary period.