Afraid to invest in the stock market, the Chinese people have invested their life savings in the housing market. The housing market holds aprox 62% of the life savings of the Chinese people. Property development has been a huge factor in China’s economic growth. It accounts for 28% of GDP. Its all about to change.
New property sales in China dropped by 36% in September on average, as much as 45% in Shanghai.
Evergrande has until Oct 23rd to make its bond payments or they will default. These payments are to the bond holders who have invested in buying Evergrande bonds. The USA is holding $300 billion of these bonds which could spell trouble here.
If they default, Evergrande will have to liquidate properties at rock bottom prices.(90 million vacant apartments) This will destroy housing prices and crush the housing market along with the Chinese peoples life savings.
It seems Evergrande had to much money invested in assets that were not selling. Their net income fell, investors got scared and stopped investing and short sellers swooped in when they saw the fall of Evergrande coming a few months ago.
Without any liquidity from Evergrande, other heavily leveraged developers will also soon fall. We are talking about a $62 trillion housing sector that the Chinese people have a large chunk of their life savings invested in.
Remember the video where we saw China imploding high rise apartment building that were half built. No money to finish them and they stand to destroy the housing values if they go on the market at dirt cheap prices.
Evergrande has literally built a house of cards using the Chinese peoples life savings and money from bond purchasers here in the USA. I keep reading the bond market here may implode. If you have money in bonds, maybe talk to your broker
This could start an uprising in China, an overthrow of the current political class. I guess Xi could bail out Evergrande if he wanted to but throwing good money after bad is not the best idea. Bursting the bubble now is better than kicking the can down the road and the damage would be greater.
I don't know what the political implications for Xi or the CCP would be if the people started to revolt after learning they invested in a giant Ponzi scheme. What Xi has going for him is a few years ago he instituted new regulations that would prevent a future Evergrande scenario but at the same time these new regulations started the collapse going on now. It almost seems that Xi did this intentionally and my question is "Did he do it at President Trump's request"? Lots of different scenarios intersecting at the same time. This could get interesting.
Here is a good video explaining what is about to happen.
Property taxes go to local gov. Not state. Not federal.
So? They are incorporated with the feds.
It's like being a Duke and u collect taxes from the land the king let's youblrosper from as long as some gets kicked back to him.
It's all the same system.