China’s Real Estate Embarrassment: A detailed Look

Youtube

This video lays out the rapidly expanding problem in great and clear detail. If you are invested in any funds that hold international bonds, you owe it to yourself to watch this.

A lot of people would be going to prison, if this scheme had been perpetrated in a real country. Evergrande has been borrowing $billions in order to pay dividends to company and party insiders. Much of these billions will never be repaid, leading to a growing crisis in international markets.

China’s Wealth is Tucked Inside a Sinking Ship

Real estate has played an outsized role in China’s economy in recent years, compared to its importance in many other countries, and Chinese families have much of their wealth tied up in homes and in investment properties. Slower sales could spill over into investment and construction, potentially hurting growth, employment and local government finances. Discounting to spur sales could hurt home prices and hit household wealth.

China Home Sales Falling

That is not just China’s problem. The entire world has been riding this Ponzi scheme, and when it crashes and burns, the world will pay.

Of the $139 billion of dollar-denominated bonds trading at distressed prices, 46% were issued by companies in China’s real estate sector, according to data compiled by Bloomberg on Oct. 12. That captured bonds trading at yield premiums of at least 10 percentage points above their benchmark rates.

China Distressing Bond Market

The devil is in the details. The great size and tangled nature of this mess is too bizarre to be believed, ordinarily. But China is no ordinary criminal enterprise, and in the age of China’s Covid and a fraudulent US administration* these are no ordinary times. Anything could happen, as China finds itself in the squeeze and feels forced to strike at anyone convenient in the attempt to change the narrative.

Hope for the best. Prepare for the worst. It is never too late to have a Dangerous Childhood. © .

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