More and more real estate firms are failing in China and it is rippling through their already challenged economy as investment flees Xi's financial and foreign policy decisions. Is this a contagion that could sink the US markets and impact upcoming elections? China’s Property Crisis Is Rippling Through the Economy (msn.com) Once a beneficiary of China’s property boom, Lan Mingqiang is now an unwitting casualty of its unraveling. The financial troubles at one real estate company, Country Garden, have left him unable to pay the school fees for his son, who is starting seventh grade. Country Garden owes $21,000 to his company, which makes fences and billboards on construction sites. Now, with Country Garden days away from a default, this money is more out of reach than ever. “Nowadays, real estate is hard,” Mr. Lan said. He recently gave up on the business and left his family in the southern city of Chongqing to try to make a living selling snacks to tourists in Zhengzhou, a city in the north of China. Mr. Lan is just one in a long line of people waiting to get paid by Chinese property developers. Once the country’s biggest creator of jobs, the housing market also enriched local governments and created a store of household wealth. But a move by regulators to deflate a property bubble and China’s slowing economy have accelerated a crisis that is spreading to all corners of life. .................. Small businesses and workers who thrived on the decades-long property boom are no longer getting paid. Low on the payback priority list for developers but an important part of the housing ecosystem, the group includes painters, cement makers and builders, as well as real estate agents and companies that furnished sales offices. As a group, suppliers are waiting on at least $390 billion in payments, according to the research firm Gavekal Research. And that’s a conservative estimate; the number is probably larger.
You can tie this to why that guy shorted the market last month. If banks start fail in China it will cause the market to drop.
On the flip side it will help suppress inflation. As to stock market, find an asset allocation you are comfortable with long term and stick to it. Trying to time the market is a fools errand.
Some things are obvious if one is paying attention though. Hard to ignore the structural problems in China. Bigger picture, high youth unemployment, high nationalism, high male to female ratios, declining population, deteriorating economy partly due to other countries sanctions, authoriatarian rule, investment capital leaving, nine dashed line, Taiwan...all makes beating Putin and showing Xi the way is more important. China seems bent hard towards nationalistic driven conflict. I entering my 10 year horizon and all that makes me nervous, not a fools errand to read the room
China needs a war to employ all those young men and distract them from their wifeless, sexless future.
Our bad mortgage fraud and recession is being made to look minor by the Chinese bubble. It’s like someone scammed the whole country. There are ghost cities with building shells put up and sold as completed to people buying them as investments. It’s not going to be pretty the question is will they pull the entire world economy down with them.
What's weird is how accepted this practice was though. There have been documentaries on these ghost cities with high rises that are not only unfurnished but unfinished yet it was an "accepted" investment. It wasn't some unknown or veiled scam.
So your sense is that you have better insights than the market, including people that work for Wall Street? None of those people can consistently time the market, but you think you can? If the market is making you nervous you need to change to an asset allocation that you can stick with long term.
A bit off topic but related. I watched a podcast yesterday of Chinese infrastructure failures, specifically high rise buildings and bridges. It's shocking how much infrastructure just collapses due to substandard materials / corruption. I'm talking billions of dollars worth.
The situation in China today bears a remarkable similarity to that in the US in 2008 when the housing bubble was bursting.
no, just the chinese real estate is giving me pause. long term is relative and changes with informed risk assessment in my world.
i think it is magnitudes worse, jmo, and it is being exacerbated by other chinese political and economic decisions
Xi et al will whatever it takes to keep the party in control. The alternative has to scare the living shit out of him.
