China House of Cards? China Evergrande Group in Major Liquidity Crisis

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But you can't escape that immense debt they've racked up to build poor real estate. It always screamed seemed like an economy built on a foundation of sand.

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Indeed.

Not a lot of US exposure ... yet.

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Real estate is the chief investment vehicle in China from what I understand

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A full quarter of China’s total investment is locked up in real estate.

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The even big­ger prob­lem for Ever­grande and the gov­ern­ment is home buy­ers who have sunk their sav­ings into the de­vel­op­er’s un­built apart­ments. Pre­selling prop­er­ties a few years in ad­vance is a com­mon prac­tice in China and is an in­creas­ingly im­por­tant fund­ing chan­nel for de­vel­op­ers. Ever­grande’s con­tract li­a­bil­i­ties, which are mostly from such pre­sales, stood at 215.8 bil­lion yuan as of June.

Ever­grande’s liq­uid­ity cri­sis means it has prob­lems pay­ing its sup­pli­ers and fin­ish­ing those apart­ments. Wor­ries that Ever­grande may not be able to de­liver its flats have al­ready re­sulted in a vi­cious cy­cle as po­ten­tial home buy­ers stay away from the de­vel­oper: Its con­tract sales in Au­gust were nearly half the level from two months ear­lier. Ever­grande said Tues­day that it ex­pects a sig­nif­i­cant fur­ther de­cline in Sep­tember, which is usu­ally a strong month. Chi­na’s con­tin­u­ing poli­cies to curb de­vel­oper lever­age have al­ready squeezed Ever­grande’s other fi­nanc­ing sources hard. With­out money from pre­sales, Ever­grande will find it even harder to fin­ish its projects on hand.

Home buy­ers are al­ready mak­ing noises on Chi­nese so­cial me­dia and spo­radic protests have bro­ken out across the coun­try, ac­cord­ing to lo­cal me­dia. That could in­ten­sify as more buy­ers worry that their apart­ments may not be de­liv­ered.

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This is from the Wall Street Journal. I’m watching this with fascinated curiosity.

so much capital is locked up in ghost cities. its fricking nuts. mutiple cities designed to handle 3 million with only 100k living there and all brand new buildings. its insane. very similar to detroit without the decay.

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Except a lot of those buildings are decaying from the inside. I've read stories of them cutting every corner possible: bamboo instead of rebar, cutting the concrete with way more sand, etc.

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Lived in China and Hong Kong. All of this is very true.

A friend of mine was on the ground for the 2008 Sichuan earthquake that caused so many schools to collapse. The corruption involved in the construction of those buildings was an absolute horrorshow.

I hate the pain a black swan event would cause ordinary Chinese people, but it would be worth it if that megalomanic, Xi Jinping, was pulled out of power.

Trying to determine this myself.

Citibank has the largest exposure to China of the US banks, but digging deeper we should really look at all the countries with major exposure to China and then the banks who have the most exposure to those countries in addition to China, Japan and Australia for example. May still be Citibank because they have a large international exposure but I’m not that far yet.

I’d have to think this implosion would negatively affect construction commodities and equipment suppliers and correct inflation prices there globally. Lumber, machines (CAT), etc.

Not far enough in my own research yet.

There is a rumor that a large chunk of the cash/cash equivalent that Tether holds is Evergrande or other Chinese RE companies commercial paper. If so it could spread into the cryptomarket because of Tether being a stable coin.
This is a good synopsis of the Evergrande Situation and how it could play out.

I just knew we’d be waking up to a blood bath Monday morning. Still have time to be wrong but god dammit frick China.

looking ripe red tomorrow

This week gonna be a wild ride