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Hong Kong court orders liquidation of China's Evergrande

By Holmes CHAN and Xinqi SU

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Market and financial crisis, almost always stem either directly or indirectly from real estate asset class, the largest in the WORLD's is China's.

Above chaos, another reason those in Taipei NERVOUS

-2 ( +3 / -5 )

Another domino has fallen.

5 ( +5 / -0 )

Be very nervous if I held stock/property with any other real estate company (Garden City etc) in mainland China. Shadow banking sector there will also be hit hard. Be surprised if others don't go under. Will the government bail them out? They might if mass protests errupt. Nothing makes people angrier than loosing all their money.

I think Taiwan is fine. Their banking system is sound. Don't think they have to worry except if the CCP wants to deflect people's by lashing out at Taiwan.

3 ( +6 / -3 )

So much for the unstoppable rise of China.

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I'm really interested in the market's reaction when the news hits the global level.

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The unstoppable demise of China is well underway. They had a good run, but its over now.

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For many foreign investors, this will be a key test over how foreign creditors are treated, in a large-scale liquidation. Past experience (nothing of the sheer size of the Evergrande collapse, mind you), has shown an unfortunate tendency for foreign creditors to lose out. And especially since company executives are still making noise that they intend to carry forward despite the HK ruling. Creditors, after needing to wait months / years for the liquidation to happen, will likely see less than a three percent recovery, and off-shore bond and share holders may see even less. Quite a hit, overall, to investor confidence.

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China's construction and property sector once accounted for around a quarter of its GDP.

But Chinese President Xi Jinping deemed the debt accrued by Evergrande and other property firms an unacceptable risk for China's financial system and overall economic health.

Unacceptable risk?

Lots there already.

There awaiting me in the queue, over my morning cup of coffee, was a NYT column from Paul Krugman. About ten days ago (I'm still catching up on some wire stories and columns). Headlining that China’s economy is in trouble. Unusual, in that I don’t remember him having much bad to say about China before.

But there it is.

Why is China’s economy — which only a few years ago seemed headed for world domination — in trouble?

Part of the answer is bad leadership. President Xi Jinping is starting to look like a poor economic manager, whose propensity for arbitrary interventions, which is something autocrats tend to do, has stifled private initiative.

But China would be in trouble even if Xi were a better leader than he is.

Real estate? He mentioned that too.

What happened in China’s case was that the government was able to mask the problem of inadequate consumer spending for a number of years by promoting a gigantic real estate bubble. In fact, China’s real estate sector became insanely large by international standards.

How low, they must have sunk, to have ole Paul swinging 180 from the past, and starting to take pot shots at China's overall laughable economic forecasts?

Take the youth unemployment rate in China, for example. Not reported for a long time, but finally emerged to show 14.9 percent. Over the last summer it was over 21 percent. First instinct is to think it's getting better? Then you see the metrics, and how carefully they are counting who is / who is not being counted anymore.

Time for more coffee.

0 ( +1 / -1 )

Liquidation of the unit in Hong Kong will not directly affect the Mainland. Even in HK it will take quite some time for the liquidators to work their way down through the corporate structure and liquidate the separate units. HK law doesn't automatically translate over to the mainland, they are separate and agreement to recognise each others court rulings to some extent was only signed today and it is very uncertain how or if this will apply to the Evergrand ruling. The CCP probably can't allow Evergrand to collapse as there would be too great a public backlash for even their repressive state structures to keep a lid on.

Foreign creditors to the HK unit might see a degree of return if the government doesn't interfere with the liquidators but creditors of the mainland entity probably won't ever see their money again.

1 ( +1 / -0 )

China's economic bubble has burst. The economic powerhouse was built on a foundation of sand.

Does China still want to reunify with Taiwan? Do they need Taiwan to bail them out?

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Don't forget that almost nobody actually owns land in China. It is all leased from the govt for a period of time. There are a few exceptions - very few.

Picking the exact peak for any investment is basically impossible. We got out of China in 2015 and have no regrets. In 2008, it all seemed pretty great. Then Xi started applying his power where it wasn't needed. Of course, the entire real estate industry in China has been corrupt for over a decade. If they won't bother building a proper sewer, what makes people think their empty cities with crumbling buildings after just a few years are safe to occupy?

0 ( +0 / -0 )

The unstoppable demise of China is well underway.

You must of missed the article about how China will surpass Japan as the world's top automaker. Communist China is still on track to become the world's biggest economy.

-4 ( +0 / -4 )

JeffLeeToday 07:40 am JST

China is still on track to become the world's biggest economy.

Which will mean absolutely nothing in terms of its citizen's prosperity.

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Which will mean absolutely nothing in terms of its citizen's prosperity.

It's reasonable to assume some degree of trickle down. The point is, failed Evergrande is private enterprise, ie, capitalism. The highly successful automakers are mostly state-owned, ie, communist. It's clear the way the wind is blowing in what will be the world's dominant economic power. Nice thought, eh. "The East is Red!"

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*geronimo2006*** Jan. 29 | 02:05 pm JST: ** "Nothing makes people angrier than loosing [sic] all their money."

As opposed to people tightening all of their money...?

-1 ( +0 / -1 )

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