Chinese citizen living in US, posting anonymously for obvious reason.
Huarong and evergrande are just the tip of the iceberg. If you wish to know what all the things fester below for CCP, here's a very timely summary video from laowhy86, one of the YouTube expert on China
https://www.youtube.com/watch?v=RpwtZLzDM_o
Unfortunately you will not find many outspoken Chinese native citizen on YouTube, for they all fear CCP retribution, even living abroad.
Having watched that video, laowhy presents a biased view on the topic. Not a biased view of China mind you, but because his views echo the triumphant 90s zeitgest that capitalism, liberalism, and what can be cast as a "laissez-faire" attitude (supposedly being necessary to the development of a country) is for him the de-facto aka obvious best system. The underlying thread is still that "Fukuyama take" that capitalism and liberalism are the end-of-history.
Laowhy provides a compelling narrative, but it also feels like it is just that: a narrative.
China as a country has endured and has at hand many more tools to ensure its stability. It is not a simple dictature or the USSR, which could be brought to its knees via a mix of political and economic ostracism.
The video sadly feels like some feel-good geopolitical video for westerners: "don't worry about China because China worries about itself and hides it, badly".
I wouldn't call a foreigner a China expert. I wouldn't be a China expert as Chinese, and I can read Chinese.
And, it is not abnormal at all that big company defaults on tens of billion debts. Without digging deep into the issue, I think the company is playing a too-big-to-fail game with the government, by bundling itself with many small investors, it will have more leverage with the government since the government is cracking down on big real estate companies. This is actually not the first time the company use this strategy. The interesting thing now is that is the government going to allow bankruptcy to happen or not.
EDIT: especially the foreigner lives in China spending time with his expats friends, no knowledge of the society, no knowledge of the business at all.. I just started reading Red Roulette, you will know, even you are Chinese, if you are not in the business circle, you don't know business..
"The level of debt is jaw-dropping. The private non-financial sector owed the equivalent of 222% of GDP at the end of 2020. Most of that sits with companies. By comparison, private non-financial debt in America is 164% of GDP."
> "The level of debt is jaw-dropping. The private non-financial sector owed the equivalent of 222% of GDP at the end of 2020. Most of that sits with companies. By comparison, private non-financial debt in America is 164% of GDP."
So they have about a third more debt than we do? "Jaw-dropping" seems like an overstatement.
It seems like the Chinese authorities are trying to deleverage by explicit policy (very evident in the stock market), here when the leverage in the western economies is at its highest.
We in the west have a tendency to overestimate China's debt problems by comparing the numbers and ratios to that of the west. Forgetting that 1) China is very big and has a lot of people 2) most people in China are poor and live essentially in a third-world economy that can grow very fast by basic investment in infrastructure such as transportation, housing, energy, education.
They have been investing in infrastructure, housing and energy. The return on that investment has been decreasing. The CCP has been kicking the can down the road as best it can trying to maintain growth numbers, which in part acts as justification for its single party rule.
This is what I have heard more from other China investing podcasts, that the next China is in rural China. Not ASEAN, not India but rural China will become the next China.
Like you said most of them are probably just getting by. Moving them to the cities and make sure the next generation is educated will give China its next two decades of growth.
From what I also gathered in land rural China grows at like 10% plus a year compared to single digit coastal regions.
"Smart" money has been betting against Evergrande for years, and losing money on it until very recently. I heard of one asset manager who in hindsight was totally correct about the fundamentals give up trading them at all, they so consistently lost so much money on it (the market can stay irrational etc.). It's a dangerous game!
Mike Bird at the WSJ has been going on about this for years as well.
Timinig issues aside. Typically you cannot short something like this directly. But you can do it indirectly by going after ie. suppliers. For example short the Aussie dollar.
This was covered on yesterday's Real Vision Daily Briefing[0]. It does feel like it could be China's Lehman moment. We'll have to wait and see.
There seem to be a lot of cracks and fraying in China's economy at the moment, and it feels like the sort of thing that could bring on a global economic crisis, if not handled with care.
We live in very exciting times. The question isn't "Is China's economy good?" or "Is China's economy bad?". The question is "How will it perform relative to Europe and America?".
The US's economic fundementals aren't great. I'm expecting to see US government spending be the majority of GDP in my lifetime. That sort of centralised planning doesn't bode well for the West.
Economy can evolve, what we consider as fundamentals can change, people would think it is crazy to have a currency not backed up by gold previously has worked, it is time printing money becomes normal, it is just numbers anyway. Unless there is an alternative, the economy will go forward as it is. As long as everyone is buying into this game, the game can continue forever.
Why does every single conversation about China have to devolve into a contest with America? This is usually a way to distract from problems in China with whataboutisms. The soviets did this obsessively too the minute anyone critiqued them.
It is in fact possible to evaluate a countries economy in isolation as well as comparatively globally … and America (and the rare EU anecdote) is not the only economy to compare to.
America’s issues don’t alleviate other country’s issues. The Chinese economy, population, and political/legal system are often very different so direct comparisons are usually only partially valuable.
>Both episodes show that the hierarchy of creditors in China is based on politics and the priorities of the state
The 2008 financial crisis showed that the same is true of Western nations. US and European central banks absorbed trillions in bad debt, and a few banks that officials didn't like walked the plank while the majority came out ahead in the end. The same dynamic is of course 'bold decisive action' when free market capitalists do it, and 'dodgy' when "communists" are engaging in it, at least in the pages of The Economist.
I don't think so. I believe the majority of their commercial paper is in reality IOU to the affiliated exchanges - so money printed from thin air. But I do believe that Tether days are numbered - given the size they reached and the implausibility of the numbers they shared (only beacause they where forced too do so).
As fascinating as this would be the only connection the tweeter makes between the two is that Tether bought a lot of CP and Evergrande happens to need a lot of money. Tweeter needs to get off whatever he's smoking
It is unrelated. If Tether is to unravel it will happen as the broad cryptocurrency market falls and the outflows into USD becomes larger than the inflow into cryptocurrency (via Tether and other means).
chunghuaming|4 years ago
Huarong and evergrande are just the tip of the iceberg. If you wish to know what all the things fester below for CCP, here's a very timely summary video from laowhy86, one of the YouTube expert on China https://www.youtube.com/watch?v=RpwtZLzDM_o
Unfortunately you will not find many outspoken Chinese native citizen on YouTube, for they all fear CCP retribution, even living abroad.
恒大暴雷 市值两万亿的中国第一房企 居然对付不出400亿 如同一个万元户 被400块给逼死了 房企都要塌了 房价还没跌 建筑商的商票拖欠 银行的债务拖欠 私人借贷也拖欠 房子卖出去还收的是全款 不知道这些钱都到哪去了 魔幻的时代 魔幻的故事啊
yrro|4 years ago
Hmmmmmmm. His videos are flashy, watchable... and incredibly poorly researched.
I am incredibly unimpressed by his "I Found The Source of the Coronavirus" video. And frankly it calls into question all his other videos.
https://www.youtube.com/watch?v=ab-r0capbzk
hikingsimulator|4 years ago
Laowhy provides a compelling narrative, but it also feels like it is just that: a narrative.
China as a country has endured and has at hand many more tools to ensure its stability. It is not a simple dictature or the USSR, which could be brought to its knees via a mix of political and economic ostracism.
The video sadly feels like some feel-good geopolitical video for westerners: "don't worry about China because China worries about itself and hides it, badly".
powerapple|4 years ago
And, it is not abnormal at all that big company defaults on tens of billion debts. Without digging deep into the issue, I think the company is playing a too-big-to-fail game with the government, by bundling itself with many small investors, it will have more leverage with the government since the government is cracking down on big real estate companies. This is actually not the first time the company use this strategy. The interesting thing now is that is the government going to allow bankruptcy to happen or not.
EDIT: especially the foreigner lives in China spending time with his expats friends, no knowledge of the society, no knowledge of the business at all.. I just started reading Red Roulette, you will know, even you are Chinese, if you are not in the business circle, you don't know business..
guerby|4 years ago
"The level of debt is jaw-dropping. The private non-financial sector owed the equivalent of 222% of GDP at the end of 2020. Most of that sits with companies. By comparison, private non-financial debt in America is 164% of GDP."
GDP per capita China :
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
USA GDP per capitahttps://data.worldbank.org/indicator/NY.GDP.PCAP.CD?location...
thaumasiotes|4 years ago
So they have about a third more debt than we do? "Jaw-dropping" seems like an overstatement.
throwaway4good|4 years ago
askmike|4 years ago
throwaway4good|4 years ago
We in the west have a tendency to overestimate China's debt problems by comparing the numbers and ratios to that of the west. Forgetting that 1) China is very big and has a lot of people 2) most people in China are poor and live essentially in a third-world economy that can grow very fast by basic investment in infrastructure such as transportation, housing, energy, education.
another_story|4 years ago
dragonelite|4 years ago
echelon|4 years ago
Is smart money already doing so?
Any other dominos that will fall because of this, and similar plays to take advantage of them?
TheAlchemist|4 years ago
As a general rule, you shouldn't trade on news like this, unless you understand really well the risks you are taking.
sparsely|4 years ago
Mike Bird at the WSJ has been going on about this for years as well.
throwaway4good|4 years ago
unmole|4 years ago
christophilus|4 years ago
There seem to be a lot of cracks and fraying in China's economy at the moment, and it feels like the sort of thing that could bring on a global economic crisis, if not handled with care.
[0] https://www.youtube.com/watch?v=_w8twoGZR_Q
roenxi|4 years ago
The US's economic fundementals aren't great. I'm expecting to see US government spending be the majority of GDP in my lifetime. That sort of centralised planning doesn't bode well for the West.
quincunx|4 years ago
Looks like it already blipped the 50% mark in WW2 and is quite close now. Seems to (visually) be leveling though.
powerapple|4 years ago
dmix|4 years ago
It is in fact possible to evaluate a countries economy in isolation as well as comparatively globally … and America (and the rare EU anecdote) is not the only economy to compare to.
America’s issues don’t alleviate other country’s issues. The Chinese economy, population, and political/legal system are often very different so direct comparisons are usually only partially valuable.
yborg|4 years ago
The 2008 financial crisis showed that the same is true of Western nations. US and European central banks absorbed trillions in bad debt, and a few banks that officials didn't like walked the plank while the majority came out ahead in the end. The same dynamic is of course 'bold decisive action' when free market capitalists do it, and 'dodgy' when "communists" are engaging in it, at least in the pages of The Economist.
RileyJames|4 years ago
Tether is speculated to be backed by a lot of Everglade ‘commercial paper’ debt.
https://news.ycombinator.com/item?id=27959852
TheAlchemist|4 years ago
ackbar03|4 years ago
As fascinating as this would be the only connection the tweeter makes between the two is that Tether bought a lot of CP and Evergrande happens to need a lot of money. Tweeter needs to get off whatever he's smoking
throwaway4good|4 years ago
baybal2|4 years ago
Since then, it seem to have grown from "surreally large" to "absurdreally large"
Go to any big Chinese city. Look around. Every skyscraper around is a mountain of secret debt few times its value.
China is really very close to Sri Lanka in how GDP numbers were financially engineered from massive, but well disguised debts on a nation-state scale
It is been very, very hard to take money out of China for a few months now. A sign of things soon to come, I believe.
throwaway4good|4 years ago