"Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play

[Peter1469]

China's economy is expected to contract in 2021-22 due to a collapsing property market.


"Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play

No matter how the Evergrande drama plays out - whether it culminates with an uncontrolled, chaotic default and/or distressed asset sale liquidation, a controlled restructuring where bondholders get some compensation, or with Beijing blinking and bailing out the core pillar of China's housing market - remember that Evergrande is just a symptom of the trends that have whipsawed China's property market in the past year, which has seen significant contraction as a result of Beijing policies seeking to tighten financial conditions as part of Xi's new "common prosperity" drive which among other things, seeks to make housing much more affordable to everyone, not just the richest.

As such, any contagion from the ongoing turmoil sweeping China's heavily indebted property sector will impact not the banks, which are all state-owned entities and whose exposure to insolvent developers can easily be patched up by the state, but the property sector itself, which as Goldman recently calculated is worth $62 trillion making it the world's largest asset class, contributes a mind-boggling 29% of Chinese GDP (compared to 6.2% in the US) and represents 62% of household wealth.

With that preamble in mind, we bring readers' attention to a little noticed report in Shanghai Securities News, citing China Real Estate Information Corp. research (link), which revealed that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year. According to the report:

• Sept. sales totaled 759.6b yuan ($118BN), down 36.2% from September 2020 and 17.7% lower from the same period in 2019, deepening a downward spiral that started in July
• Among companies, 60% of developers saw sales decrease by more than 30% y/y in Sept.
• Beijing, Shenzhen and Guangzhou saw transaction volume of residential properties decline 30% y/y, while Shanghai fell 45%

We had to do a double take when we saw this because these are absolutely terrifying numbers and are, to put it bluntly, scarier than Goldman's "worst case scenario"; what's worse this sudden collapse in China's property market is taking place before Evergrande has even defaulted, an event which would lead to a glacial freeze in the property market as potential buyers hold off expecting liquidation firesales from the property giant in hopes of getting bargains. The problem is that in addition to being the world's largest asset, China's property market is also the world's largest ponzi scheme, and without constant inflow of new capital it would implode, especially when factoring in the 90 million vacant apartment which just sit inert and which would promptly be dumped by anxious owners, flooding the market with excess inventory and sending prices crashing.

Read the entire article at the link.

[RMNIXON]

Back in the early 2000's I knew someone who traveled to China. And he said the biggest problem with the construction boom was the low quality of what they were doing. For example huge apartment complexes and to save money the Chinese builder did not use sink traps. Soon the whole place smelled like sewage even if it looked good on the outside. I have heard other stories about homes and other building that appear to look great just like in the West but it is a facade as they are cheap imitations.

[Peter1469]

Back in the early 2000's I knew someone who traveled to China. And he said the biggest problem with the construction boom was the low quality of what they were doing. For example huge apartment complexes and to save money the Chinese builder did not use sink traps. Soon the whole place smelled like sewage even if it looked good on the outside. I have heard other stories about homes and other building that appear to look great just like in the West but it is a facade as they are cheap imitations.

Yes and bridges and dams are failing do to poor construction.

[PJL]

China's economy is expected to contract in 2021-22 due to a collapsing property market.


"Catastrophic" Property Sales Mean China's Worst Case Scenario Is Now In Play





Read the entire article at the link.

Surely you can find more accurate sources than "ZeroHedge" to report on this ? ....I certainly can , and I'm almost computer illiterate.....(lol) . There's a simple reason why this is not a major problem for China , similar to America's 2008 debacle with Leamon Bros .

[PJL]

Back in the early 2000's I knew someone who traveled to China. And he said the biggest problem with the construction boom was the low quality of what they were doing. For example huge apartment complexes and to save money the Chinese builder did not use sink traps. Soon the whole place smelled like sewage even if it looked good on the outside. I have heard other stories about homes and other building that appear to look great just like in the West but it is a facade as they are cheap imitations.

These type of fakes stories are typical of America's anti-China white-anting process.....they just get funnier , the more they try....(lol)

[PJL]

Yes and bridges and dams are failing do to poor construction.

.....the question is , are they really falling ? - probably not . I would like to see just 1 single high speed rail infrastructure project in the US , just to show that they were capable of building it , and prepared to spend the funds on it , rather than directing those funds into corporate hand-outs .

[hanger4]

These type of fakes stories are typical of America's anti-China white-anting process.....they just get funnier , the more they try....(lol)

I heard stories such as these from Chinese missionaries, maybe it's you pushing the fake stories.

[PJL]

I heard stories such as these from Chinese missionaries, maybe it's you pushing the fake stories.

Missionaries over the centuries have been nothing more than blatant instruments of external interference , in countries that never benefit from their presence , and are still much the same today . All religions try to do it , with no exception . All people have a right to their chosen faith ........but all hierarchies , whether political or religious , are subject to the normal human weaknesses .....like trying to interfere , breeding extremists to do their dirty work , and manipulate politics for the benefit of a select few .....faith belongs to people , not hierarchies .

[Cotton1]

.....the question is , are they really falling ? - probably not . I would like to see just 1 single high speed rail infrastructure project in the US , just to show that they were capable of building it , and prepared to spend the funds on it , rather than directing those funds into corporate hand-outs .

Of course we can build a high speed rail. But why waste the money ?

[hanger4]

Missionaries over the centuries have been nothing more than blatant instruments of external interference , in countries that never benefit from their presence , and are still much the same today . All religions try to do it , with no exception . All people have a right to their chosen faith ........but all hierarchies , whether political or religious , are subject to the normal human weaknesses .....like trying to interfere , breeding extremists to do their dirty work , and manipulate politics for the benefit of a select few .....faith belongs to people , not hierarchies .

Nice rant, but that doesn't change what the Chinese missionaries said. As a matter of fact your rant doesn't even touch the substance of what I posted.