So, you pay your deposit, get a mortgage and admire a drawing of your new home. With a bit of luck it may get built:
The alarm bells are ringing louder. Last week, hundreds of depositors gathered in front of the Zhengzhou branch of the People’s Bank of China in the provincial capital of Henan, demanding their frozen life savings held in rural banks. A day later, tens of thousands of homeowners threatened to stop paying mortgages on scores of unfinished housing projects they had purchased. All of this happened in a week where the officials reported lacklustre second-quarter economic performance.
China’s economy is facing a dangerous cocktail of stalling growth, high unemployment, spreading mortgage payment strikes and continued Covid shutdowns that threaten to explode with serious social and political consequences.
About a third of the Chinese economy relates to the property and related financial sector which is so, so slowly coming to a grinding halt!
Considering just how BIG everything is in China, a slow down or complete stoppage of building would create massive deflation in certain products if not across the entire world economy.
Think, copper, plastic, (water pipe) nylon (carpet) wood for doors and trim, steel for rebar, concrete, so lime and energy, glass for windows.
The knock on effects reverberate. Coal both for energy and blast furnaces is not needed, meaning one of the major exports from Australia goes away shutting down a large economy in the south Pacific.
Add in the population pyramid and the projected peek people in China in 2030, and 15 percent of the urban population owns two homes, you got yourself a significant problem.
China could have quite a shakeup, as in the CCP is seen by the populace as having (to use the traditional phrases) “lost the mandate of heaven” and to no longer be legitimate. From what I am reading it is perfectly possible that more than half of all Chinese “extended” families (the Chinese have far more precise and technical terms for this) have been robbed of significant and extremely highly valued savings by corruption of CCP regional and local officials working in cahoots with property developers.
But the CCP has the tanks and no compunction about using them.
The leadership has to be so rotten that the military turns against them. Not likely since the military is also corrupt to the bone marrow. This corruption can be used against them to end their careers and frequently their lives.
The Captain
has seen how it works in Venezuela. A soldier was burnt to death with a flame thrower – just a training exercise mishap. That will teach the rank and file to keep their mouth shut!
China is the people of the Han. Among themselves it is very hard to hurt each other. The Chinese among themselves are not the “other” as is so significant in human instincts.
I am not concerned with the CCP.
Our interests have to be in the first of the Chinese major financials to collapse. Western trading desks will go into a massive scramble.
Tentative list of banks to avoid
JPM…I think Dimon knows he has some exposure to China. I do not know that as a fact.
WF…when it comes to swaps with Chinese financials a totally logical place to worry about. I do not know that as a fact.
What I am saying and it is coming into focus cover your butts.
JPM…I think Dimon knows he has some exposure to China. I do not know that as a fact. WF…when it comes to swaps with Chinese financials a totally logical place to worry about. I do not know that as a fact.
If they, and the other large institutions (HSBC, Paribas, Santander, etc.) haven’t been veeerrryyyyy quietly (like they’re hunting wabbits) unwinding their exposure to China following the Evergrande debacle, that’d be a gross dereliction of shareholder responsibility.
The Chinese debt can not be offloaded in the west to retail clients all that easily.
The swaps can not be offloaded if at all. No retail client buys something with swaps. Unless ETFs are using swaps and the finance guys hide them there.
The problem is I only trust Dimon to know his book.
The leadership has to be so rotten that the military turns against them. Not likely since the military is also corrupt to the bone marrow. This corruption can be used against them to end their careers and frequently their lives.
Yes. But the way it would work would be the CCP itself splitting along its internal factions, many of those rooted in different regions or cities, and then aligning themselves with their local corrupted-by-local-CCP-potentate generals. China’s troubles have often had labels such as “Warlordism” and “Time of five kingdoms” etcs., all quite traditional.
However, as others have noted, that type of collapse would only come after a very big financial crunch involving unknown western persons, banks, and nations.
The world is growing ever more chaotic ecologically and politically even as tech is making huge leaps forward.