Tag Archives: Chinese

Chinese Stop Paying Mortgages as Real Estate Crisis Spreads

July 28, 2022 tremendousblog Leave a comment

Chinese homebuyers are refusing to pay their mortgages in a boycott that’s spreading across the country. Many fear the homes they’re paying for will never be finished.

Now, suppliers to builders are also defaulting on loans.

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From ABC News Australia:

A fast-growing mortgage boycott across dozens of cities in China has prompted some property suppliers to cease their bank loan repayments, raising fears the escalating situation could trigger a further downward spiral in the sector and even threaten the country’s financial stability.

Hundreds of landscapers, sculpture-makers and construction companies have expressed their anger that they have been bled dry because some debt-saddled developers did not pay their bills while they continued to service or help build apartments, Chinese media Caixin reported.

Chinese usually buy homes and start making payments before they’re complete.

The boycott has spread to 90 cities in mere weeks.

The Chinese government is censoring reports on the boycott, per Bloomberg. So the situation inside China may be even worse than reported.

A real estate meltdown is a catastrophe for the average Chinese saver. Chinese put 70% of their wealth in real estate, compared to 35% in the US.

The property sector accounts for about 25% of GDP. China’s GDP growth has flatlined as the sector sputters.

And it gets worse. Chinese banks have lent huge sums to property developers.

As developers default, bank runs are spreading across China. Government thugs have beaten protesters desperately trying to recover their life’s savings.

Amid a bleak economy and constant COVID lockdowns, workers are struggling. Youth unemployment has spiked, hitting over 19% last month.

Consider the picture for the average Chinese person: most of your savings are tied up in an apartment that will never be completed, the rest is in a bank that’s insolvent, and your only child can’t find work.

Revolution might start to sound good.

In the US, we know that a property crisis fueled by heavy debt can spread quickly. Huge liabilities pop up at different institutions unpredictably.

This undermines confidence in the entire financial system. When that happens, you get a financial crisis.

That’s what China is facing today.

At stake is the legitimacy of the Chinese Communist Party. Officials have staked their power on offering ever-increasing living standards.

Those days may be over.

I can only hope that Chinese citizens prevail and oust a government that has brutalized them for generations.

Our Man in Hunan

March 15, 2022 tremendousblog 1 Comment

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On a quiet block just south of bustling 42nd Street, my wife and I ducked into a doorway and disappeared.

This isn’t a spy novel. But it is an incredible lunch.

Hunan Manor in midtown Manhattan serves outstanding Chinese food firmly rooted in the traditions of the motherland. You’ll find American dishes like an excellent General Tso’s, but also traditional recipes like scallion pancakes.

We sat down today in the surprisingly spacious dining room and within minutes, our waiter brought my wife’s spicy hot and sour soup and my enticing spring roll. Biting down with a satisfying crunch, I could tell this torpedo of flavor was freshly fried.

A few minutes of conversation later, out came the entrees. For the lady: ginger shredded beef with peppers. For me: Hunan style shrimp in a thick, piquant sauce.

The shrimp were cooked perfectly. Their texture was springy and yielding, unlike the little overcooked stones so many restaurants pass off as shrimp.

But the missus’ beef stole the show. The char on the thin strips of flesh, coupled with the perfume of ginger and tender peppers, made for a perfect dish.

I found myself wishing for tortillas to put the beef in, fajitas style. It’s interesting to see how different cultures approach similar ingredients and put their unique stamp on them.

We both ordered off the lunch combo menu, which I highly recommend. Everything is between $9.50 and $12.50, and that includes rice and either soup or a crispy spring roll.

You’d be hard pressed to find a better deal in town!

There will be no blog tomorrow. I have an acting gig. 🙂

See you Thursday!

Will Evergrande Spark a Global Financial Crisis?

September 20, 2021 tremendousblog 1 Comment

A massive Chinese property developer is teetering on the edge of bankruptcy, roiling markets worldwide today:

Worries about spreading contagion from troubles in China’s property market sent U.S. stocks toward their steepest declines in months on Monday.
The retreat came amid concerns over property developer China Evergrande Group. Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders. The company’s debt burden is the biggest for any publicly traded real estate management or development company in the world.

What Is Evergrande?

Evergrande is an odd company. It is one of China’s largest property developers but also has its hands in electric cars, soccer and bottled water. It has more debt than any other real estate company on the planet.

Sales have slowed in recent years, along with China’s economy. Rather than devising a new strategy or pulling back on growth, Evergrande has continued to build at a breakneck pace, earning lower and lower margins.

It’s the old “We lose money on every one, but we make it up in volume!” mistake. And as if to make things even worse, they’ve expanded to businesses they know nothing about. What unique insights does a property developer have on the bottled water market?

Risks in China

If Evergrande goes down, who’s going down with them? Probably mostly Chinese banks, as they’re the major holder of the embattled conglomerate’s debt. JP Morgan estimates that China Minsheng Bank has the largest exposure.

China Minsheng bank is an interesting company. In a banking sector dominated by state owned banks, China Minsheng was the first bank mostly owned by the private sector.

In a moment when Xi is trying to centralize the economy and promote state owned business, he could let it fail. The state owned banks could pick up the pieces, cementing their position.

But if a massive property developer like Evergrande fails, perhaps taking some major banks along with them, the Chinese financial system could be badly shaken.

Add this to crackdowns on numerous tech companies and even seemingly random targets like celebrities, and I could see a crisis in confidence in Chinese markets.

They’re already weak:

What About the US?

I think US markets are overreacting today. The institutions with heavy exposure to Evergrande appear to be mostly Chinese, not American. Moreover, trade with China is just 6% of US exports.

In all, I could see China’s economy and markets taking a significant hit, but I think the damage will be contained.

Investors in China, good luck.

China’s Tech Elite Is Running Scared

August 3, 2021 tremendousblog Leave a comment

China’s government has launched a severe crackdown on its leading tech companies. Didi Chuxing, the equivalent of Uber, has been removed from app stores and ed tech companies are now required to be nonprofit, likely wiping out their investors.

A major index of Chinese tech stocks is down over 40% since February, even as US tech stocks climb:

China’s tech elite is responding by placating the government however it can, including a rapid increase in philanthropy in response to government messages that it expects bigger donations from the rich.

But it doesn’t stop there. Alibaba has been under intense pressure from the Chinese government since founder Jack Ma criticized some aspects of its performance, which led to his disappearance for several months. Alibaba has since created a special app to promote “Xi Jinping thought”.

China’s top entrepreneurs are also looking for an escape hatch in case their appeasement of the government doesn’t work. Interest from wealthy Chinese in moving abroad is increasing amid the government crackdown.

Sudden donations, new Communist dogma apps, and quiet plans to leave…these are acts of desperation.

I see a couple results from China’s crackdown:

1) Major businessmen in tech and other sectors are distracted. They’re worried about appeasing the government and/or emigrating, not building their core business. This will harm the prospects of their companies.

2) Would-be entrepreneurs are discouraged. Why start a company when it can be so easily appropriated?

3) Investors are discouraged for the same reason as # 2.

China is rapidly strangling its economic golden goose. The only question is, who will pick up the pieces?

Tremendous