How many of you guys remember Evergrande, the Chinese real estate developer? They were the largest real estate developer in Asia when they collapsed in 2022, and this was the start of a significant downturn, the kind that America is also due for, but China seems to have it worse than we do.
The problem with real estate in China, is that owning a house is everything to a man.............. it's cultural. If you don't own any real estate, it's much harder to get a wife, and you're usually not viewed as secure enough to start a family. The people of China have 70% of their net worth in Chinese real estate........ very low level of diversification.
So what China has been doing for years, Evergrande and many other developers, is they would buy land, decide what they were going to build, and sell the plots\houses\units to buyers, who took out mortgages and paid in full for the units, and then had to wait for them to be built........... and they'd start construction, but they also used a lot of that money to go and buy more land, so they could sell more units, often before the company even broke ground................... these companies got really rich in the short term, but this is similar to a ponzi scheme, where they rely on new money coming in to provide the promised product to the prior home buyers, because they're lining their pockets, taking risky bets and investments, and theres a ton of corruption and fraud......... the money ran out and they weren't able to deliver on millions of housing units.
One brave group of Chinese victims banded together and all decided to stop paying their mortgages for their seriously delayed project all at once.............. a drop in the bucket, but the last few years, it's caught on........... now there are hundreds of projects, massive massive projects where all of the unit owners are not paying all at the same time until construction restarts and theres no money for construction to restart, and the banks can't just foreclose on their units, because they're unfinished, with no solution in sight.
China has 60,000,000 empty housing units, (America has 16,000,000, and if 3,000,000 of those came online for sale, our housing crisis would be over) because owning homes is so important in China that people would buy multiple homes even if they were leaving them empty. Many of these new ones aren't finished and I'm not sure how they'd solve this, but it's caused protests and civil unrest in the recent past. Civil unrest is rare because the Chinese government has shown they will kill their own citizens and dissapear them in the Tiananmen Square massacre............ China does these things.
The real estate sector is up to 31% of the Chinese economy compared to 16% in the United States. We have always been much more diversified than China. The other big sector is manufacturing of course, which is 27% of the Chinese economy.............. so with real estate at 31% and manufacturing at 27%, and real estate being in free fall, Trump was correct in knowing that this is the right time to apply the pressure of tarriffs to even the trade playing field. Even my company moved its purchasing of flooring from China to Vietnam because of tariffs. 57% of Chinas economy is suffering greatly in just those 2 sectors.
Banking is also getting crushed of course, they have so much debt out, and it's not all coming back to them. Evergrande defaulting was a massive blow, and wake up call............ one of the top 4 banks in China, the Peoples bank of China started limited how much money people could take out a year ago, (probably fixed by now) and that creates a huge loss of confidence in the banking system, and then everyone wants to take out as much as they can.
Is China the enemy of the US and should it be treated like one? Enemy is a strong word............ for those that don't know me, I'm 50% Chinese. They are at least a big bully of a competitor that doesn't play fair in the sandbox............... and they've gotten unlucky by choosing a poor strategy for real estate development, and with Trump standing up to them often, they're getting pretty beat up. If anyone you know brings you any investment opportunities in China, I'd be extra scared.
The love of gambling .....
If CCP is really serious about land reclamation, they could have extended the Loes-Platteau project. This then would allow more people to have real estate tied to their own labor and production, which alleviates the deep poverty that still lines CCP controlled territory.
Instead, they built ghosttowns, Highrises and what not on good land. And then they spoil the good and further by toxic waste.
Pajeet may be shitting on the sidewalk, Chief Ping is reveling in viruses, toxic waste, air pollution and cheap crap.
The CCP is the enemy, not the people.
That said, the people have been abused so long by their government that corruption and dishonesty is endemic, which make cultural understanding, trust and goodwill very difficult.
David is a personal friend. I have partnered on several investments with him and find him to be a clear thinker who tends to find solutions where others see only problems.