Major defaults in the property sector (those issuing international bonds):
But the property crisis is far from over – with Bloomberg data showing 34 of the top 50 developers as defaulters.
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You wonder if China thinks these companies are too big to fail (as might happen in the US).
Will China come to their rescue?
I don’t see how they can given the debt levels in China:
I’m not too sure why, but the Chinese government is starting to reintroduce the idea of village canteens:
I think that it is more an insurance against civil rural unrest rather than war planning.
Zeihan can be a bit of a self promoting gasser, but he is also well informed and careful about his reputation. Here is his latest vid on China debt and the property market – very grim.
david fb
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I watched that video this morning and thought of this thread. Zeihan likes to make big predictions (small predictions don’t pay the bills) but if what he is saying is generally true, then China is screwed in a big way.
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China has been buying vaste amounts of gold, swapping their yuan for ‘real money’.
I’m always reminded of the words of Gerald Celente: when all else fails they take you to war
Tensions rising:
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Who is taking their yuan in return for gold? And what are they doing with all those yuan?
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Yuan crash seems very likely. And when that crash crunches China will need to, uhm, sell gold?
david fb
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I doubt anyone is taking yuan in exchange for gold. Far more likely they are using dollars.
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60 Minutes aired a segment about 6-8 years ago on the real estate construction bubble that was already evident. Leslie Stahl interviewed a woman who was taking over as CEO of one of the biggest Chinese construction firms at the time whose own projects were already idle for years. That bubble had all the external indicators that Americans at that point would have recognized as the equivalent of our 2008 collapse on steroids.
The fact that China has NOT imploded… YET… hints at how much additional money the Chinese government has been shoveling into the books of these entities trying to defer recognition of the core problem and how much worse it has likely become during the past 8 years. It seems China learned all of the exploitive, corrupt habits from “modern capitalist” economies (internet, web commerce, financialization, speculative retail investing by unsophisticated consumers) yet incorporated none of the controls (corporate audits, independent statistics, meaningful retail lending criteria) required to operate an industrialized pseudo-capitalist economy without fraud and stupidity going unchecked.
Events unfolding in China could be the economic equivalent of operating a nuclear reactor without a containment building… Using tinker toys instead of graphite as control rods for the reaction.
WTH
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It’s worse than that. They did learn a bunch of bad habits, but they also invented a new one of their own. Localities (the equivalent to states/cities/etc in the USA) were not given the power to tax (at least not much ability) so they found themselves in the position that raising money required property development (because the locality would sell the property, or allow the development, to a developer who funded them), and property development they did, in huge numbers, and across most of the country. Now that property development has imploded, their source of revenue has dried up, and they will have a hard time providing services to their populace.
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Chinese had no good investment opportunities to save for retirenment except for owning shares in zombie corporations (which they wisely shunned) or in private residential property, and quite wonderfully, property values seemed to just keep going up and up and up and up and up and…
…oops.
david fb
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Who it is not…
All gold and silver held by domestic units, with the exception of raw materials, equipment, household utensils and mementos which the People’s Bank of China has permitted to be kept, must be sold to the People’s Bank of China. No gold and silver may be personally disposed of or kept without authorization. Article 6.
That is a good thing. That means there will be soup kitchens. People won’t starve.
The original statement was that China is increasing their holdings of gold by using yuan to buy it. Moving gold around internally (inside China) doesn’t accomplish that. The implication is that they are buying gold from outside China. With yuan. Hence the question - who is accepting yuan in exchange for gold? Maybe Russia?
IMF list of foreign currency reserves shows much less yuan when compared to the other four major world currencies.
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There were gold traders as of 2011 commodity traders in China who were selling to the public. I do not know their current status. I do not know if the government turns a blind eye. The gold was imported by the traders.
And what did they pay with exactly?
You’d have to ask them.
How would I know? I am not a Chinese national selling gold.
Presumably because you are commenting about it! The claim was that people outside China were selling gold to China in return for yuan. I showed that there isn’t all that much yuan outside China, so it can’t be true. Anyone in China (govt, traders, individuals, etc) buying gold from outside China must be paying with some other kind of “currency” (could be US$, could be Euro, could be shares in companies, could be percentage ownership in real estate, etc).
I could say RMB and probably be correct.
You could have used Google. But that would take some effort. American kids these days. Sheesh! Big plus you’d actually be using facts.
The SGEI facilitates “offshore” gold trading in renminbi and can play a crucial role in de-dollarization, as it allows countries to use renminbi as a trade currency that can be converted into gold without affecting China’s balance of payments.Jun 9, 2023
The Shanghai International Gold Exchange and Its Role in De-Dollarization.
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You could say that, but you’d still be wrong. Renminbi is the name of the currency. Yuan is the unit of account. The two terms are often used interchangeably.
Yes. But more effort than reading literally the next sentence in the paragraph you quoted:
De-dollarization can be accomplished by using yuan to settle international trade and store surpluses in gold through the SGEI.
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