China's housing minister says real estate developers must go bankrupt if necessary
China's struggling property developers won't be getting a major bailout, authorities indicated, warning that those who "harm the interests of the masses" will be punished.
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Y’all are dancing on this, but if they go through with it, this is going to cause a run of panic that will wipe out the savings of hundreds of millions of people.
It would in the west, in China they do a controlled crash, i mean it's already happened, one of their biggest housing companies already crashed and it did not caused anything except rise in home ownership among the people.
There's a high percentage of Chinese workers that invested their savings in real estate instead of having a pension. And there's no welfare, which means a lot of people who will be left on the street when they are too old to work.
After a complain, I did some research so I can provide enough clarity on my statement:
The why enterprise annuities didn't work (0.25% of companies enrolled) is a very complex one but let's say is mostly due to the abnormally high statutory pension contribution rate.
So up until 2022, a little more than 500 million people had few options for extra savings beyond those $25 dollars/person, and that was real estate (you know, the thing that always goes up).
With IRAs now, and a possible conversion from the two main basic pension plans into a centralized one, it's possible newer generations will have a foothold for a safer savings method, however there are several challenges on the horizon:
Altogether this could very well be a ticking time bomb.
And there's no welfare [in China]
Lol. They're really scraping the bottom of the barrel with China Bad propaganda
There has always been and will always be government bonds.
?
Ah NOW it makes sense.
There’s a high percentage of Chinese workers that invested their savings in real estate instead of having a pension.
That's why no bailout. Only the regular folks getting curbstomped by this one.
Edit - Well, this was a wildly unpopular comment, but I don't know why. 8 people who think everyday folks are as likely to be bailed out as the 1% I guess. Since none of them bothered to comment, I can only speculate.
China has said they will bail out the regular people. What they're doing is they're buying the homes at a discounted price from the people and turning them into subsidized housing. To quote the article:
“We will scale up the building and supply of government-subsidized housing and improve the basic systems for commodity housing to meet people’s essential need for a home to live in and their different demands for better housing,”
So there's no bailout for the property developers but they are controlling the loss for regular folks.
I'm sorry people downvoted you without explaining that. I know it's hard to read the entire article sometimes.
Ah well my cynicism was unwarranted and I should have more than skimmed the article. Thanks for the clarification.
Well it's also important to note that western media is intentionally not reporting on this properly and putting what I said as remarks at the end of articles. There's two reasons for this.
So here's a Korean article that explains it better and isn't as influenced by western media.
The key take away point is, stop believing US media, it's absolutely shit propaganda. I'm not saying China is good, hell I agree with the Koreans that this might not work, but for the love of god don't believe USA.
You are also having people with a wrong understanding of the Chinese property crisis by trying to map it to the American Great Recession, when the two problems are very different.
For instance, Evergrande is a real estate developer, not a bank. Evergrande going broke is like if Toll Brothers went broke in the USA. It would be bad, but it isn't the end of the financial world.
Second, China doesn't have the mortgage industry that the USA does. China has mortgages, but a large part of the market is owned as investments. You also have to pay a lot more as a down payment compared to the USA. So, the exposure that the Chinese banking industry has to this is a lot less than what happened in the USA in 2007/8. However, this means that people are more at risk in losing money on their real estate.
Third, while housing in the USA is an investment that some people take, there are generally other ways Americans invest their money to save for retirement. In China, a greater percentage of the population saves for retirement by buying property. Given China's demographic issues, this can be a problem if a lot of retirees lose a significant part of their nest eggs.
Fourth, municipalities and provinces can't set their own taxes and the national government hasn't been giving them enough money to pay for services. Local revenue generation has been handled through real estate development. There has not been a plan released yet to handle the loss of revenue or dealing with municipal debt. National plans for real estate development are removing the profit incentive, so how does that impact local budgets?
Some of these points are covered in your article. However, even in this thread, the discussions seem to be trying to view China's property crisis through an American lens when the mechanics behind both are very different.
Sure, I completely agree with everything you have said. And the sad reality of news right now in the English speaking world has a US bias for obvious reasons. My link to a S.Korean paper is still a link to a US ally. They're not as biased as USA itself, but won't escape all influences. It's unfortunate at best.
Yeah, but I feel like you would get biases from Chinese sources as well. This property crisis seems to be the worst economic crisis that China has dealt with for a generation and the party has seemed to lean more on the mandate of heaven justification for them to stay in power.
And a government dealing with a loss of legitimacy during a financial crisis isn't just a Chinese issue, but it appears to be something that current Chinese leadership has no experience in handling given their decades of economic growth.
So I would expect Chinese sources to paint a rosier picture of the crisis, focusing on punishing the greedy developers while trying to stifle discussions on reforming the municipal tax bases or the role of local officials being a key part in property overdevelopment.
Absolutely, it's incredibly annoying everyone has a bias. But that's what we are going to see as the world splits into 2. In many ways it's inevitable. I'm just appreciative that at least for now, both sides seem to be opposed to war, with distressingly USA seemingly more likely to start it. Since historically when you have 2 superpowers, war is the first thing that they used to do.
Don't be sorry that people downvoted. This site attracts uninformed bullshit like flies to shit, and a lot of us are just tired of explaining to everyone that the facts are there in the article. My limit is 25 wildly incorrect but confident comments before I stop trying to inform people.
What about all those unfinished buildings that people got in debt to buy?
They are not needed. There is no one to live in them.
They have over a billion excess homes. It was the only thing that normal people could invest in so they just kept building.
If you bought one as an investment, nobody is going to buy them from you. They are worthless.
But what is the actual real-world practical solution for those people?
Are they now just going to be broke (or even in debt) with no place to live?
Someone buying an unfinished building likely already has a home. If they don't they can buy one for much cheaper now since housing prices have gone down cuz of the real estate bubble popping.
So what are you going to do with the millions of people relying on that for their retirement savings?
🤷♂️
IMO Social Security is a better solution because not everyone has extra money to invest, and any class of investment can crash.
They have over a billion excess homes.
Which is good, because it keeps costs of living down, amiright?
Evergrande already went bankrupt in 2021 and the general population in China have been mostly shielded from the damage (except the poor billionaires though 😢)
How were they shielded? Do you have a source I can read? I'm genuinely interested.
I remember reading that there were protests because people bought condos and were essentially told they were never going to get completed. Did those people get a refund from the government or the company?
Not afaik. Anyone buying an unfinished condo though likely already has a home, specially since China's home-ownership is about 90%.
And if they don't, they can buy one for much cheaper now cuz house prices have gone down thanks to this real estate bubble being popped. And China already has 600 million vacant homes.
This also coincides with the CPC moving funding from the overinflated real estate sector to the high tech sector btw.
particularly EVs
Geopolitical economy report has a more in-depth video on this.
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Geopolitical economy report has a more in-depth video on this
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After 2008 they're gambling, not investing.
wipe out the savings
It's zero sum to the population. Every dollar lost by an investor is a dollar saved by a new family buying a home.
I dont care about investors when their investing in real estate has caused housing to skyrocket in price and making renting the only option for many people, myself included, while at the same time those same people will rent out at astronomical rates making many of us live more than paycheck to paycheck.
American developers need to go bankrupt the same way if they won't make accommodations affordable