Evergrande: This will get out of hand and we'll be lucky to live through it

[Parliament 14374]

They're a big Chinese real estate developer whose chickens are coming home to roost.  The Chinese real estate bubble, 15 years in the making, might be about to pop.

In a stock filing this month, Evergrande said flat-out that "there is no guarantee that the Group will be able to meet its financial obligations."

So far, Evergrande's efforts to offload office buildings and attract new investors haven't helped, and the company has hired a team of outside advisers.

But a big question is how the Chinese government will intervene, if at all. China has been growing increasingly concerned about debt levels in the country, especially in its overheated property sector.

https://www.npr.org/2021/09/20/1038944385/china-evergrande-wall-street-stocks-selloff

https://www.foxbusiness.com/markets/beijing-unlikely-to-save-evergrande-report-says

[RDCanecutter 26553]

Evernotsogrande, amiright amiright...

[Laxtonto 12640]

This is just one of many that are severely over leveraged and have been dipping in the shadow credit market in China. Without the massive annual GDP growth, many of these firms are going to find it hard to keep the charade going. This has happened to several midtier banking institutions in China the last 2 years as well, but COVID has obscured it from being a big global warning sign.

If Evergrande completely imploads how much of the banking and real estate market does it take with it? Are we going to see a massive cascade effect or will we see the Chinese government step in to try to limit the damage.

Normally the government would step in and help mitigate the fallout, but with COVID and all the issues tied to it, I am not sure if they just go ahead and let it burn and think that now might be time to go ahead and let the bubble pop and then roll in more systematic changes as a COVID recovery response. 

Never let a good crisis go to waste...

 

[Knoxtnhorn 6165]

I read somewhere that there are 65 million empty apartments in China right now.  Good lord.

[gmr548 16641]

Update:

[Laxtonto 12640]

Looks like Bloomberg and WSJ are having a source off. Bloomberg says the Chinese government is signally they want to keep them from imploading and WSJ is saying they have already missed some payrolls and the Chinese government is expecting them to crash and are working on containment strategies.

 

[strangulation! 1716]

16 hours ago, Knoxtnhorn said:

I read somewhere that there are 65 million empty apartments in China right now.  Good lord.

that could also be due to covid

[Knoxtnhorn 6165]

19 minutes ago, strangulation! said:

that could also be due to covid

Right.  But how is a company focused on real estate going to get above water when there's already plenty of inventory?  They keep building, but the need is not there.

[Laxtonto 12640]

22 minutes ago, Knoxtnhorn said:

Right.  But how is a company focused on real estate going to get above water when there's already plenty of inventory?  They keep building, but the need is not there.

Lots of the phantom or ghost cities that sprung up were part of the push to maintain the Chinese GDP growth mirage through state financed infrastructure programs.

The thing is that many of those empty apartments are in areas that don’t have a real need for housing because they aren’t where the population explosion is happening. So yeah their is a glut of apartments, but it is a lot more nuanced than that.

There are entire “ghost” cities built that people never moved to and so they remain vacant and keep getting rolled into this “empty apartment” number.

[NeverMarryAStripper 22030]

19 hours ago, Knoxtnhorn said:

I read somewhere that there are 65 million empty apartments in China right now.  Good lord.

Homeless problem solved

[DonkeyCigars 143]

Evergrande caused a sell-off for exactly one day. 

TINA.

[Trey3216 15380]

12 hours ago, Knoxtnhorn said:

Right.  But how is a company focused on real estate going to get above water when there's already plenty of inventory?  They keep building, but the need is not there.

The need is for Beijing to look like a shiny beacon when in reality it’s a slimy pork rib bone turd from your standard non pure bred dog.   

[Trey3216 15380]

11 hours ago, Laxtonto said:

Lots of the phantom or ghost cities that sprung up were part of the push to maintain the Chinese GDP growth mirage through state financed infrastructure programs.

The thing is that many of those empty apartments are in areas that don’t have a real need for housing because they aren’t where the population explosion is happening. So yeah their is a glut of apartments, but it is a lot more nuanced than that.

There are entire “ghost” cities built that people never moved to and so they remain vacant and keep getting rolled into this “empty apartment” number.

I mean, if no one moved to them, they’re fucking empty.  

[Guest Lobo]

On 9/23/2021 at 1:27 PM, NeverMarryAStripper said:

Homeless problem solved

This is a fantastic idea.  We can fly them all over there first class and still be saving money once Adler's hotel grift stops.

Not a real strong chance any of 'em can ever afford to fly back to Austin.  

"You'll be taken care of there. Nice apartment.  Good food."

"Can I take my dog?"

"I don't think that's a good idea." 

[Trey3216 15380]

On 9/24/2021 at 3:52 PM, Lobo said:

This is a fantastic idea.  We can fly them all over there first class and still be saving money once Adler's hotel grift stops.

Not a real strong chance any of 'em can ever afford to fly back to Austin.  

"You'll be taken care of there. Nice apartment.  Good food."

"Can I take my dog?"

"I don't think that's a good idea." 

They'll provide immediate employment as well.  Camp-like feel  

[Texas St. Armadillos 1381]

On 9/24/2021 at 3:52 PM, Lobo said:

This is a fantastic idea.  We can fly them all over there first class and still be saving money once Adler's hotel grift stops.

Not a real strong chance any of 'em can ever afford to fly back to Austin.  

"You'll be taken care of there. Nice apartment.  Good food."

"Can I take my dog?"

"I don't think that's a good idea." 

I think this with a combination of a Squid Game tournament could turn this whole thing around.

[Bernard 879]

Residential property taxes in China are zero. It makes it really easy for people to buy and hold real estate, even if it’s producing no income. Say what you want about property taxes in the USA, but at least they are a nudge toward keeping property productive, and a disincentive to build unneeded buildings. That being said, a zero property tax rate is a sure fire way to stimulate construction industry jobs.

Bernard

[elfenix 34387]

might have sold some assets to make some(?) of its bond payment due today:

 

https://www.reuters.com/world/china/investors-brace-rough-ride-evergrande-faces-payment-deadline-2021-09-28/

Edited September 29, 2021 by elfenix

[Laxtonto 12640]

10 minutes ago, elfenix said:

might have sold some assets to make some(?) of its bond payment due today:

 

https://www.reuters.com/world/china/investors-brace-rough-ride-evergrande-faces-payment-deadline-2021-09-28/

The buyers are all heavily state controlled companies. These are all “assets” that Evergrande tried to sell of several times and no one was willing to purchase and now  all of the sudden they are getting acquired at their asking price.

Still won’t be enough to solve their issues, but it might be enough to lessen the blow to those within China that we’re looking to get squeezed, but still not really taking care of the international  investors.

Edited September 29, 2021 by Laxtonto

[Trey3216 15380]

19 hours ago, Bernard said:

Residential property taxes in China are zero. It makes it really easy for people to buy and hold real estate, even if it’s producing no income. Say what you want about property taxes in the USA, but at least they are a nudge toward keeping property productive, and a disincentive to build unneeded buildings. That being said, a zero property tax rate is a sure fire way to stimulate construction industry jobs.

Bernard

It's also a way to overinflate your GDP by 10-15% for a decade or more  

[tbone_ 14259]

My understanding is all the residential property in China is developed on a ground lease because the govt owns all the land. And they ultimately own all the banks as well. So China is basically printing money through real estate development. We do it by using the Fed to buy bonds.

Obviously interesting to see how all this plays out.

[Parliament 14374]

Next up:

https://www.forbes.com/sites/williampesek/2021/09/30/goldman-flags-82-trillion-threat-worse-than-china-evergrande/

 

 

[tbone_ 14259]

Is $8.2 trillion a lot? That seems like a lot.

[Laxtonto 12640]

Ohhh look, Taiwan is now concerned that China will invade.

When there is internal concerns that the current political class can’t control that may devolve into a climate of social unrest as the society looks to new leadership, the drums wars begin to beat louder.

A playbook as old as history itself..

 

[tbone_ 14259]

If China invades Taiwan it will be to get TSMC, which the rest of the developed world will not be able to allow.

[Laxtonto 12640]

1 hour ago, tbone_ said:

If China invades Taiwan it will be to get TSMC, which the rest of the developed world will not be able to allow.

The invasion of Taiwan would cripple most of the globe from a electronics manufacturing standpoint. With the dependency the rest of the globe has on their chip manufacturing I am not sure what will happen.
 

This, not the Trump- China trade is the most likely thing to literally kick off a legitimate global shooting war.  It’s one of the potential nightmare timelines that exist right now

[Blotto 23705]

didnt realize that taiwan was now responsible for 63% of global semiconductor manufacturing. Most of that is TSMC, who I guess possesses like 84% of manufacturing capacity  below 10 nm ... scary shit (samsung has another 14%). Is Intel the only US chip company even trying to manufacture at these geometries? I dont pay as much attention to this shit as I used to before I left the industry years ago.

[Parliament 14374]

SIXTY THREE PERCENT!?  How did we let that happen?

[tbone_ 14259]

Intel chickened out on the iPhone chips. Not to worry though. They are currently building a $20billion expansion to their Chandler AZ plant. TSMC is building a $36billion plant in Phoenix right now.

[Blotto 23705]

Last I heard, the Williamson County bid for the $17B Samsung fab was still on track. I don't think it's official, but I know a guy that just signed on with Samsung here in Austin, and presumably it's to get that project up and running. At least that's what he was hinting at. 

[Laxtonto 12640]

We are going to see a major global shift in who buys what chip tech where and an added importance of providing a closed loop infrastructure if and when the US begins to reshore most of all chip fab. 
 
I hate to say it but if/when that happens I am not sure how “important” Taiwan is then treated in the global landscape. It would then move more into a regional escalation issue, as long the the chip design and fabrication  aspects are kept out of Chinese hands.

I would probably be willing to bet that whenever a potential invasion of Taiwan would take place all chip fab locations will become smoldering piles of rubble first and foremost and then the real “fighting” would occur.
 

Bigger question would be who does it? The US, Japan, Israel, or someone else.

 

This is a timeline I would not want to live through, because regardless of what happens Taiwan is done, the global tech supply chain would collapse and I doubt the rest of the world would allow the chip manufacturing to be captured intact.
 

That would then imply all of that death or destruction for nothing, with the reduction in chip fab production leading to a global depression and more than likely food shortages as well. 

[Parliament 14374]

But China KNOWS that doing anything that impedes the manufacture and export of those chips would bring the navy of every free nation of the World to their doorstep, right?  And they know they can't beat us all.  Right?  

[tbone_ 14259]

Interesting scenario. Especially if they cut off our chips.

[Laxtonto 12640]

10 hours ago, Parliament said:

But China KNOWS that doing anything that impedes the manufacture and export of those chips would bring the navy of every free nation of the World to their doorstep, right?  And they know they can't beat us all.  Right?  

Not sure.  I would hope so, but rational decisions and the desire to maintain power have never been two concepts that go together for long. At what point is a war better than a regime change?
 

Right now domestically with China we are seeing lots of cracks in the Xi regime. Xi is “supposed” (anyone is believing that, I have a bridge to sell you..) to step down soon and it seems that his faction is doing all that they can to consolidate power.
 

It can be argued that the entire lack of bailout Evergrande is as much about trying to deal with the housing bubble and the massively over leveraged mess it has become as it is to cripple one of the Xi competitors major financial backers.

If they are willing to integrate those types of issues into their internal politics, would they also not be willing to interject that self serving nature into their international agenda?

I doubt that it would get to the point an invasion occurs, but I wouldn’t be shocked to see that saber rattling become worse. Part of the issue is that they may be boxing themselves in and making it hard to be able to back down of this keep going forward. My greatest fear is that they reach the point where the political machine can’t be stopped, even though common sense shows that it is a global disaster to all parties to keep moving forward.

 

Edited October 5, 2021 by Laxtonto

[bolverk 29822]

The End of a ‘Gilded Age’: China Is Bringing Business to Heel
Executives sit in jail, tech companies are being reined in and the biggest developer is teetering. It’s the beginning of a new era for China’s economy.

Chinese tech companies are reeling from regulation. Nervous creditors are hoping for a bailout for China’s largest developer. Growing numbers of executives are going to jail. An entire industry is shutting down.

For China’s leader, Xi Jinping, it’s all part of the plan.

Under Mr. Xi, China is reshaping how business works and limiting executives’ power. Long in coming, but rapid in execution, the policies are driven by a desire for state control and self-reliance as well as concerns about debt, inequality and influence by foreign countries, including the United States.

Emboldened by swelling nationalism and his success with Covid-19, Mr. Xi is remaking China’s business world in his own image. Above all else, that means control. Where once executives had a green light to grow at any cost, officials now want to dictate which industries boom, which ones bust and how it happens. And the changes offer a glimpse of Mr. Xi’s vision for managing the economy, ahead of a political meeting expected to solidify his plans for an unprecedented third term in charge.

The goal is to fix structural problems, like excess debt and inequality, and generate more balanced growth. Taken together, the measures mark the end of a Gilded Age for private business that made China into a manufacturing powerhouse and a nexus of innovation. Economists warn that authoritarian governments have a shaky record with this type of transformation, though they acknowledge that few have brought such resources and planning to the effort.

Spoiler

In one week alone last month, creditors fretted about the fate of China’s largest developer, Evergrande, with no word from officials about a bailout; the central bank announced that all transactions involving unapproved cryptocurrencies would be illegal; and the authorities detained the top two executives at HNA Group, an indebted logistics and transportation conglomerate, and sentenced the chairman of Kweichow Moutai Group, a high-end liquor company, to life in prison for taking bribes.

At China’s annual World Internet Conference last week, an official signaled that efforts to rein in internet giants were not over, warning against the “disorderly expansion of capital.” Once a showcase for the might of China’s entrepreneurs, this year’s conference became a platform for pledging fealty to state efforts to spread the wealth.

Lei Jun, the founder of the smartphone maker Xiaomi, said big internet companies should help smaller ones. Alibaba’s chief executive, Daniel Zhang, hailed his firm’s new $15.5 billion plan to help small business and underdeveloped regions, invoking the aphorism “If you teach a man to fish you feed him for a lifetime.”

“The very definition of what development means in China is changing,” said Yuen Yuen Ang, a political science professor at the University of Michigan. “In the past decades, the model was straightforward: It was one that prioritized the speed of growth over all other matters.”

“It is clear by now that Mr. Xi wants to end the Gilded Age and move toward a Chinese version of the Progressive Era, with growth that is more equitable and less corrupt,” she added.

Shockwaves have been felt across China’s economy, the world’s second largest. Analysts argue that some measures, such as reducing debt and curbing anticompetitive behavior among internet platforms, have long been needed. But they worry that the new policies could hurt competitiveness and favor the inefficient, monopoly-dominated state sector, which Beijing has long avoided reforming.

Natasha Kassam, a director at the Lowy Institute, an Australian think tank, said private-sector dynamism could suffer. She likened the shifts to Mr. Xi’s anticorruption campaign at the start of his tenure nine years ago, which curbed rampant graft but also consolidated power.

“During the anticorruption drive, no one knew who might be targeted next,” Ms. Kassam said. “What it led to was inertia. Officials were too terrified to make decisions in case they were the wrong ones; you’ll see a similar chilling effect on the private sector.”

For many businesses, the guidelines were once clear: Pay lip service to the government, make money and go global if possible, with foreign listings and acquisitions. While China’s billionaires always felt vulnerable — the country’s list of richest individuals is often joked about as a catalog of targets — they also had a cozy relationship with officials that allowed for flouting the rules and influencing policy.

Success is no longer a guarantee of safety. The big-name casualties are piling up, and there is little sign that Mr. Xi and the regulators he has empowered are daunted by the carnage. Since February, investors have erased more than $1 trillion from the market value of China’s largest listed tech firms.

The knock-on effects are also hitting regular Chinese people, with the potential to stir social unrest. Officials have issued directives urging local governments and companies to look out for budding protests related to the troubled property sector. Evergrande’s crisis has triggered anger among unpaid suppliers, home buyers who purchased apartments years in advance and employees, some of whom have demonstrated at its offices.

Beijing is trying to send a warning that no firm is too big to fail. Mr. Xi’s corruption campaign and an ensuing push to curb excess borrowing have already made a big difference, said Dinny McMahon, an analyst for Trivium, an advisory focused on China.

“These days, the behavior of financial sector executives is more conservative,” he said. “It’s not about looking to what you can get away with anymore, but trying to adhere with the spirit of what Beijing wants.”

Mr. Xi appears to be imposing the same discipline on the tech sector. Last year, regulators scuppered the blockbuster listing of Alibaba’s sister company Ant Financial. When Didi Chuxing — the ride-hailing company that bought Uber in China — went ahead with an initial public offering in the United States despite reservations from Chinese regulators, its software was pulled from app stores in China.

Tech firms are also learning to relinquish control. Most companies now have Communist Party cells, which can dictate decision making. Investment firms run by China’s cyberspace regulator have taken small stakes in TikTok’s parent company, ByteDance, and the social-media firm Weibo in the past two years.

New signals that companies should focus on “common prosperity” — a government initiative to lessen the wealth gap — have led to a parade of giving from tech giants and their leaders. Tencent and Alibaba, China’s two most dominant internet firms, both have made multibillion-dollar pledges to help train small businesses and revitalize villages.

As it has become riskier to be a star, some of China’s leading entrepreneurial talents have shunned the spotlight. After the deaths of two employees, Colin Huang, the 41-year old founder of Pinduoduo, an e-commerce platform, stepped down in March to make way for a new generation. In May, the 38-year old founder of ByteDance said he would resign as chief executive.

In the eyes of Beijing, all tech is no longer equal.

Companies focused on the consumer internet have lost the protections they once enjoyed. Instead, the government is focused on a push for national self-reliance, countenancing big bets on bleeding-edge technology, partly in response to United States policies that cut off access to key components like microchips. Officials have heavily subsidized manufacturers of semiconductors, commercial aircraft, electric cars and other products.

Huawei, a company closely tied to the government that makes critical telecommunications infrastructure equipment, has mostly sidestepped the crackdown. After its founder’s daughter Meng Wanzhou, was released from detention in Canada late last month, state media trumpeted her return to China. Though Ms. Meng is the picture of inherited privilege in an unequal society — she is known for wearing luxury brands and spent her detention in a Vancouver mansion — her homecoming was portrayed as a national triumph.

“It was a stark reminder that they are not like you. There are hierarchies in Chinese society, and different treatment comes with it,” Ms. Kassam said. She added that Huawei had long had special status as a favorite of the government.

“Still, part of me wonders for how long. I might have said the same thing about Jack Ma not too long ago,” she said, referring to the founder of Alibaba.

 

[bolverk 29822]

7 minutes ago, Laxtonto said:

Not sure.  I would hope so, but rational decisions and the desire to maintain power have never been two concepts that go together for long. At what point is a war better than a regime change?
 

Right now domestically with China we are seeing lots of cracks in the Xi regime. Xi is “supposed” (anyone is believing that, I have a bridge to sell you..) to step down soon and it seems that his faction is doing all that they can to consolidate power.
 

It can be argued that the entire lack of bailout Evergrande is as much about trying to deal with the housing bubble and the massively over leveraged mess it has become as it is to cripple one of the Xi competitors major financial backers.

If they are willing to integrate those types of issues into their internal politics, would they also not be willing to interject that self serving nature into their international agenda?

I doubt that it would get to the point an invasion occurs, but I wouldn’t be shocked to see that saber rattling become worse. Part of the issue is that they may be boxing themselves in and making it hard to be able to back down of this keep going forward. My greatest fear is that they reach the point where the political machine can’t be stopped, even though common sense shows that it is a global disaster to all parties to keep moving forward.

 

The article I just posted points to what I think you're talking about: Xi & company consolidating their political grip on China's "private" sector with a view to keeping the masses happy. I'd guess a lot of this is a response to an expected slowdown in economic growth and in anticipation of demographic headwinds.

[Laxtonto 12640]

2 hours ago, bolverk said:

The article I just posted points to what I think you're talking about: Xi & company consolidating their political grip on China's "private" sector with a view to keeping the masses happy. I'd guess a lot of this is a response to an expected slowdown in economic growth and in anticipation of demographic headwinds.

This sentence is the real money shot

Quote

Where once executives had a green light to grow at any cost, officials now want to dictate which industries boom, which ones bust and how it happens

Surprise surprise, these industries and even individual companies that are allowed to boom or bust, seem to correlate very highly with who has ties of allegiance with Xi's faction.

I would probably focus more heavily on what direction they keep their boom and bust targets to than anything else. Notice they even mention here about heavily subsidizing the chip fab and architecture sectors within China. If they continue to put pressure on Taiwan it signals to me that they have come the realization that they will not be able to catch up in space and are worried that the US and her allies will continue the moves to freeze them out.

The common view of state for technology advancement has been to acquire it through any means necessary, and if it looks like they cannot acquire it through research or IP theft, maybe the best way to do it is through conquest.

[Fudge Nuggets 19276]

Good grief, people.  China ain’t invading shit.

[Laxtonto 12640]

Looks like Evergrande is going to officially default and next on deck is Kaisa (which has a huge set of international paper as well).

 

Still seeing the pattern that the Chinese government is most likely letting the foreign bond holders get boned and doing what they can to protect the domestic investors.

[Fudge Nuggets 19276]

S&P 500 is up roughly 9% since this thread started.  Hope the collapse of Kaisa or whatever can generate the same returns.

[Blotto 23705]

Not related to Evergrande, but this thread seems as good a thread as any for this

Quote

A Chinese property developer that was once one of the country's largest says it has lost contact with a wealth manager that it gave $313 million. It's just the latest blow to China's embattled real estate sector.

China Fortune Land Development said in a stock exchange filing on Thursday that it entrusted the money to China Create Capital, a company registered in the British Virgin Islands, to invest in fixed-income financial products. It said it expected an annual return of 7% to 10% on its investment.

The Chinese developer says now, though, that it hasn't been able to contact China Create Capital.

Fortune Land said that it doesn't yet know how the missing funds will affect its profits. It added that it will "actively cooperate" with a Chinese police investigation "to protect the company and shareholders' interests."

Lulz. "Whattya need, 10%? Yeah, we can get ya 10% returns, just uh..... hurry up and wire that $300 million on over."

Edited December 17, 2021 by Blotto

[Laxtonto 12640]

Just FYI, but there are multiple rumored reports of massive bank runs happening in Henan, Shanghai, and Dandong, China the last 10 days or so.

What makes this a bit scary is Henan is one of the major ag hubs in China and if we see bank runs and potential bank defaults there then it directly leads to lack of cash to pay for the Henan rice harvest (which is generally in mid-summer) going to the market.  If no cash is on hand to pay for the crops or more importantly pay to harvest the crops, we are going to see even more of a strain on the internal food prices in China, which tend to see even more panic bank runs as people pull out cash to try and hoard staples.

It isn't a major "oh shit" moment yet because this is most likely isolated to some regional banks and the reports are not widespread, but most of the regional banks that crash are those so heavily leveraged in the Chinese real estate market that without a major bailout will collapse. This once again can easily end up with another cascade effect if we see another wave of real estate defaults.

Everyone sort of forgot about the Chinese real estate market steadily degrading due to the COVID lock downs earlier this year, but is just one more scary data point that the banking and real estate sector over there is still in serious trouble and a global downturn will make it even more volatile.

[Laxtonto 12640]

The China real estate market slowly marches towards its inevitable crash. Will be really interesting to see how big of a cascade it has elsewhere in the region.

 

Evergrande files for US bankruptcy protection as China economic fears mount

Spoiler

HONG KONG/NEW YORK, Aug 18 (Reuters) - Embattled developer China Evergrande Group (3333.HK) has filed for U.S. bankruptcy protection as part of one of the world's biggest debt restructurings, as anxiety grows over China's worsening property crisis and its impact on the weakening economy.

China unexpectedly lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little, too late, with much more forceful measures needed to stem the economy's downward spiral.

 

Once China's top-selling developer, Evergrande has become the poster child of an unprecedented debt crisis in the country's property sector, which accounts for roughly a quarter of the economy, after facing a liquidity crunch in mid-2021.

The developer has sought protection under Chapter 15 of the U.S. bankruptcy code, which shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.

 

While the step is seen as procedural, it indicates that the company is nearing the end of its restructuring process after more than one and a half years of negotiations with creditors.

Evergrande said in a filing on Friday that it will ask the U.S. court for recognition of schemes of arrangement under the offshore debt restructuring for Hong Kong and the British Virgin Islands as its dollar notes are governed by New York law.

 

"The application is a normal procedure for the offshore debt restructuring and does not involve (a) bankruptcy petition," it said in the filing, adding it is pushing forward with its offshore debt restructuring.

The company proposed scheduling a Chapter 15 recognition hearing for Sept. 20.

Evergrande's offshore debt restructuring involves a total of $31.7 billion, which include bonds, collateral and repurchase obligations. It will meet with creditors later this month on its restructuring proposal.

 

A string of Chinese property developers have defaulted on their offshore debt obligations since Evergrande ran into trouble, leaving unfinished homes and unpaid suppliers, shattering consumer confidence in the world's second-largest economy. Property investment, sales and new construction starts have been contracting for over a year.

DOMINO EFFECT?

The property crisis has also fanned worries about contagion risks to the financial system, which could have a destabilising impact on an economy already weakened by tepid domestic and foreign demand, faltering factory activity and rising unemployment.

A major Chinese asset manager has missed repayment obligations on some investment products and warned of a liquidity crisis, while Country Garden (2007.HK), the country's No.1 private developer, has become the latest to flag a stifling cash crunch.

Angry investors in trust products of Zhongrong International Trust Co., a unit of the asset manager, have lodged complaint letters with regulators, pleading with the authorities to step in after the trust firm missed payments.

Nomura on Friday followed some of the major global brokerages to cut China's growth forecast for this year. It now sees China's gross domestic product (GDP) growing 4.6% this year, down from an earlier forecast of 5.1%, but much of that growth may have come in the first quarter after strict COVID curbs were lifted.

China is targeting 5% growth for this year, but an increasing number of economists are warning that it could miss the goal unless Beijing ramps up support measures.

China's economic and property woes and the absence of concrete stimulus steps have sent a chill through global markets. Asian shares (.MIAPJ0000PUS) posted a third straight week of declines. Chinese blue-chips (.CSI300) dropped 1.2% on Friday and Hong Kong's Hang Seng Index (.HSI) slumped 2.1%.

In an attempt to boost investor confidence, China securities regulator said on Friday it would cut trading costs and support share buybacks as it unveiled measures aimed at reviving the stock market.

But so far, the scope of support that Beijing has offered has underwhelmed financial markets, with some analysts wondering if policymakers are reluctant to risk adding to a mountain of debt created in part by massive stimulus in the past.

"To be sure, the economic downturn is putting a great deal of strain on financial sector balance sheets, and it does increase the risk of a messy policy mistake if officials don’t handle the situation with care. But we still think a full-blown financial crisis is a tail risk rather than a probable outcome," Capital Economics said in a report.

DEBT RESTRUCTURING

China's central bank reiterated it would adjust and optimise property policies, according to its quarterly policy implementation report this week.

Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted, most of them private property developers.

Longfor Group (0960.HK), China's second largest private developer, said on Friday it would try to boost profitability in response to changing supply and demand.

The Beijing-based developer posted a 0.6% rise in first-half core profit, and said it would strive to return to positive cash flow this year and not take on new interest-bearing debt.

"The China property sector is like a black hole, so many developers have been dragged into it since two years ago after Evergrande," said Winner Zone Asset Management CEO and CIO Alan Luk.

"The central government has yet to introduce (strong) measures because this is too large a hole to fill."

https://www.reuters.com/world/china/china-evergrande-files-protection-us-court-part-32-bln-debt-overhaul-2023-08-18/

[Parliament 14374]

Is there much American money invested in that gong show?  Is it even legal to do so?

[Blotto 23705]

11 minutes ago, Laxtonto said:

The China real estate market slowly marches towards its inevitable crash. Will be really interesting to see how big of a cascade it has elsewhere in the region.

 

Evergrande files for US bankruptcy protection as China economic fears mount

  Reveal hidden contents

HONG KONG/NEW YORK, Aug 18 (Reuters) - Embattled developer China Evergrande Group (3333.HK) has filed for U.S. bankruptcy protection as part of one of the world's biggest debt restructurings, as anxiety grows over China's worsening property crisis and its impact on the weakening economy.

China unexpectedly lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little, too late, with much more forceful measures needed to stem the economy's downward spiral.

 

Once China's top-selling developer, Evergrande has become the poster child of an unprecedented debt crisis in the country's property sector, which accounts for roughly a quarter of the economy, after facing a liquidity crunch in mid-2021.

The developer has sought protection under Chapter 15 of the U.S. bankruptcy code, which shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.

 

While the step is seen as procedural, it indicates that the company is nearing the end of its restructuring process after more than one and a half years of negotiations with creditors.

Evergrande said in a filing on Friday that it will ask the U.S. court for recognition of schemes of arrangement under the offshore debt restructuring for Hong Kong and the British Virgin Islands as its dollar notes are governed by New York law.

 

"The application is a normal procedure for the offshore debt restructuring and does not involve (a) bankruptcy petition," it said in the filing, adding it is pushing forward with its offshore debt restructuring.

The company proposed scheduling a Chapter 15 recognition hearing for Sept. 20.

Evergrande's offshore debt restructuring involves a total of $31.7 billion, which include bonds, collateral and repurchase obligations. It will meet with creditors later this month on its restructuring proposal.

 

A string of Chinese property developers have defaulted on their offshore debt obligations since Evergrande ran into trouble, leaving unfinished homes and unpaid suppliers, shattering consumer confidence in the world's second-largest economy. Property investment, sales and new construction starts have been contracting for over a year.

DOMINO EFFECT?

The property crisis has also fanned worries about contagion risks to the financial system, which could have a destabilising impact on an economy already weakened by tepid domestic and foreign demand, faltering factory activity and rising unemployment.

A major Chinese asset manager has missed repayment obligations on some investment products and warned of a liquidity crisis, while Country Garden (2007.HK), the country's No.1 private developer, has become the latest to flag a stifling cash crunch.

Angry investors in trust products of Zhongrong International Trust Co., a unit of the asset manager, have lodged complaint letters with regulators, pleading with the authorities to step in after the trust firm missed payments.

Nomura on Friday followed some of the major global brokerages to cut China's growth forecast for this year. It now sees China's gross domestic product (GDP) growing 4.6% this year, down from an earlier forecast of 5.1%, but much of that growth may have come in the first quarter after strict COVID curbs were lifted.

China is targeting 5% growth for this year, but an increasing number of economists are warning that it could miss the goal unless Beijing ramps up support measures.

China's economic and property woes and the absence of concrete stimulus steps have sent a chill through global markets. Asian shares (.MIAPJ0000PUS) posted a third straight week of declines. Chinese blue-chips (.CSI300) dropped 1.2% on Friday and Hong Kong's Hang Seng Index (.HSI) slumped 2.1%.

In an attempt to boost investor confidence, China securities regulator said on Friday it would cut trading costs and support share buybacks as it unveiled measures aimed at reviving the stock market.

But so far, the scope of support that Beijing has offered has underwhelmed financial markets, with some analysts wondering if policymakers are reluctant to risk adding to a mountain of debt created in part by massive stimulus in the past.

"To be sure, the economic downturn is putting a great deal of strain on financial sector balance sheets, and it does increase the risk of a messy policy mistake if officials don’t handle the situation with care. But we still think a full-blown financial crisis is a tail risk rather than a probable outcome," Capital Economics said in a report.

DEBT RESTRUCTURING

China's central bank reiterated it would adjust and optimise property policies, according to its quarterly policy implementation report this week.

Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted, most of them private property developers.

Longfor Group (0960.HK), China's second largest private developer, said on Friday it would try to boost profitability in response to changing supply and demand.

The Beijing-based developer posted a 0.6% rise in first-half core profit, and said it would strive to return to positive cash flow this year and not take on new interest-bearing debt.

"The China property sector is like a black hole, so many developers have been dragged into it since two years ago after Evergrande," said Winner Zone Asset Management CEO and CIO Alan Luk.

"The central government has yet to introduce (strong) measures because this is too large a hole to fill."

https://www.reuters.com/world/china/china-evergrande-files-protection-us-court-part-32-bln-debt-overhaul-2023-08-18/

Sounds like they have it under control

Quote

China's economic and property woes and the absence of concrete stimulus steps have sent a chill through global markets. Asian shares (.MIAPJ0000PUS) posted a third straight week of declines. Chinese blue-chips (.CSI300) dropped 1.2% on Friday and Hong Kong's Hang Seng Index (.HSI) slumped 2.1%.

In an attempt to boost investor confidence, China securities regulator said on Friday it would cut trading costs and support share buybacks as it unveiled measures aimed at reviving the stock market.

 

[Captainant 27974]

Just now, Parliament said:

Is there much American money invested in that gong show?  Is it even legal to do so?

Doesn't matter if there's not direct money invested - China is such a globally integrated economy that a massive collapse like this would singlehandedly destroy a ton of small nations that are reliant on China importing their stuff. Not to mention just generally slowing down the velocity of money and making lending more expensive everywhere

In terms of money though China did issue bonds and whatnot that are held by Americans, but they've been in default for a while so no net change there

[Laxtonto 12640]

1 minute ago, Captainant said:

Doesn't matter if there's not direct money invested - China is such a globally integrated economy that a massive collapse like this would singlehandedly destroy a ton of small nations that are reliant on China importing their stuff. Not to mention just generally slowing down the velocity of money and making lending more expensive everywhere

In terms of money though China did issue bonds and whatnot that are held by Americans, but they've been in default for a while so no net change there

A good example of this is that a 1% GDP drop in China generally means a 1/2% drop to Australia. That number stays pretty static with most of the ring of fire.

So the real question will be when the pop finally happens, how much does it impact the rest of the banking sector. The shadow lending market there is heavily intertwined in the construction industry and the real estate market collapses what does that do to everything else?

[Fudge Nuggets 19276]

Considering this thread was started two years ago, seems the Masters of the Universe have had plenty of time to get their shit together. Whether they did anything is a different matter. They probably let it ride on red and get the taxpayer to bail them out… again.

[Newdoc 3465]

1 hour ago, Fudge Nuggets said:

They probably let it ride on red and get the taxpayer to bail them out… again.

This strategy sounds so familiar…..

[Laxtonto 12640]

China’s Country Garden risks default after ‘missing bond payment’

Spoiler

The crisis in China’s property sector deepened as Country Garden, the country’s biggest developer by sales, reportedly missed its final deadline for an interest payment on a dollar bond, putting it at risk of default.

The company, which has about $200bn (£163bn) in liabilities and nearly $11bn in dollar-denominated offshore bonds, was due to make a $15.4m coupon repayment this week, but failed to do so, according to reports. Its share price fell 4% in Hong Kong on Thursday, and is down 74% since the beginning of the year.

Country Garden rejected reports that its founder and chair had both left China. It said in a statement that its founder, Yang Guoqiang, and his daughter Yang Huiyan, who chairs the company and is its majority owner, were “working as normal” in China.

Yang Guoqiang was born into a peasant family and his rags-to-riches tale led to nicknames for him and his company such as “the most grassroots tycoon and the “Universe’s No 1 property developer”. He spent years building up his fortune and worked as a farmer and on construction sites before turning to property development. His daughter was the richest woman in Asia, with an estimated $29.6bn fortune just two years ago, before China’s property bubble burst.

Country Garden has been battling to avoid a default on its international debts. Last week, it said it was unlikely to “meet all of its offshore payment obligations when due or within the relevant grace periods”. It added that its sales were “under remarkable pressure” while available funds had continued to decline.

Creditors are seeking urgent talks with the developer, Reuters reported. Two bondholder groups have emerged seeking discussions about a potential debt restructuring package. One group holds about $2bn of Country Garden’s offshore bonds, and is made up of international and fund manager investors.

The credit rating agency Moody’s said it could downgrade the developer’s “corporate family rating” if the recovery prospects for its creditors weaken further. Moody’s said Country Garden’s senior unsecured rating of C was already at the bottom of its scale.

The crisis in China’s property industry was sparked by a clampdown by authorities on developers’ high debt-levels, which resulted in the default of Evergrande on parts of its $300bn debt pile in late 2021. As property accounts for more than a quarter of China’s economy, the construction delays and slump in housing sales have dragged down growth

Evergrande, the world’s most indebted developer, with a burden of $340bn, faces a winding-up hearing in Hong Kong at the end of the month. Its debt restructuring plan was derailed in September because of an investigation.

 

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https://www.theguardian.com/business/2023/oct/19/china-country-garden-default-bond-payment

So China's largest developer is about to default... everything is fine