Evergrande & The Chinese Economy

The financial woes of Evergrande the once-mighty Chinese property developer highlight a showdown between two competing objectives for China's Communist Party. They aim to force China's private sector away from speculative and risky lending practices while avoiding a financial meltdown and the collapse of the property sector, in which more than 70% of the nation's urban wealth is locked up.

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[Touj-jpdt]

I love financial disasters because Patrick makes more videos.

[bigm]

Your insights are great. The economic concept of moral hazard as driving up debt was made clear and concise. When you feel that there is always government support you will borrow to the hilt. Issue would be similar to Australian housing where people view the government will never let properly prices fall so they borrow to the hilt.

[Spectacurl]

Can you talk about the other companies that are highlighted as “systemic risk” on the report of the People’s Bank of China?

[jg]

Evergrande may be the biggest, but other developers in China are in trouble too. Fantasia, China South City Holdings, Guangzhou R&F, & Xinyuan Real Estate Co. are all in danger of default and China Fortune Land Development Co. has defaulted on a multimillion dollar bond. Other companies have been seriously downgraded by ratings agencies.

[nicoz]

Amazing piece as usual. This one is much more "deep". One quick comment though: the need for new development housing projects is not really related to migrants. Because, most of the time these are not well paid. Also, as they do not have the hukou of the place they live in which makes buying very complicated to virtually impossible. Polymatter did a good piece on that. The driving force to the numerous development projects is mainly related to the local governments who use the land requalification to be able to get money for their budget, since they are not able to collect taxes (most of these). The second reason is like you said: people here in China are used to crazy (unsustainable) housing price increases year after year. So real estate is one of the only few ways to invest. And most of the purchases in the last years are of 2nd and 3rd property putting a huge burden on young adults to finance their first purchase. In any case, good piece as usual. Patrick is on fire !!!

[ChucksterJax]

I can't believe how much more I learned viewing this presentation on the crisis than any others I've watched. Thanks!

[frieswijk]

When I watch Patrick i feel like a well informed investor.

But then again, I also feel like Gandalf when I watch Lord of the Rings.

[lfsantosl]

The fact that people dislike a video like this is beyond me !! Thanks Patrick!

[SaintierSet]

There's so much white noise related to Evergrande these days. I can only trust your opinion Patrick.

[kateoloughlin]

Patrick you are doing an outstanding presentation of your knowledge and professional opinion.
Experience Speaks.
Kate 👱‍♀️

[michaelkylewalker]

*Nice video though...buh why is no one here talking about Bitcoin.. now's the best time to buy the dip and it's gonna be a changing for a lot of lives*

[willchee]

In Malaysia when the opened water tap days was still around and people could get away getting a loan just by declaring how much salary they earn without any commitments taken into account, you would see 100% capital gains in matter of months if you bought a hot property.

But after tightening of rules and procedures, now property prices barely move and many even goes down in value.

Therefore we can say that debt from banks are like a market maker that ensures the property market stays fluid. But now that everything is so controlled, it is not longer fluid hence no longer attractive.

[daveallentown]

Your explanation of how China achieves high nominal growth far exceeding high quality growth, from 11:15 to 13:30, is superb. When explained by sharpies such as you it is easy to understand. If only government listened...

[justinmjulian]

Excellent work. Certainly the best, clear, factual coverage on this unfolding situation.

[angieatwork]

"Debt: first 5000 years of human history" is a 536 page book by anthropology Prof David Graeber from Yale and, Pat, you just updated it with a live edition within 15.38 minutes. Fantastic!

[agenericaccount]

I wonder how China’s largest and third largest developers are doing.

[medea]

Patrick, thank you so much for putting excellent captions on your videos - it not only means that the deaf & hard-of-hearing can avail of your knowledge & insights, but it's also a priceless tool for any viewer trying to pick up the nuance of financial terminology & explanations that we're not as familiar with (terms which often cause the autocaption system to melt down with some amusing interpretations!). Much appreciated! 👍👍

[floribethenterprise.]

Investing is buying yourself a better future you don't have to work hard.

[CharlotteTranp]

Sounds familiar, like the construction in Australia off the plan

[dogukan]

Your channel is a gold mine. Thanks for sharing such expert views in such a way.