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China's Evergrande - The Real Estate Debt Bubble Appears to Finally Be Bursting


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Why does every major crisis starts in China these days?😋

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Chinese property prices 20x in 20 years. Surely the biggest bubble in history.

The financial disaster alert is on! A catastrophic bank meltdown seems to be looming in China: The country's entire financial sector is getting extremely alarmed with the possibility of a major default crisis, given that one of its biggest property developers, Evergrande, recently announced that it became unable to pay its gigantic debt. That debacle has exposed the perilous state of China’s vast property sector and its consequences could have a ripple effect across global markets and lead to billions in losses. Last week, Evergrande, the world’s most indebted property developer, warned that it would likely fail to meet its financial obligations, triggering widespread panic among investors, dealing a severe blow to its bonds, and resulting in trading suspensions in the markets of Shenzhen and Shanghai.The crisis led two credit rating agencies to downgrade Evergrande last week, and it sparked a shocking 80% collapse on its Hong Kong-listed shares since the beginning of the year. And at the beginning of this week, the Shanghai Stock Exchange stopped trading in Evergrande's May 2023 bond after it dropped more than 30%. Right now, the Chinese developer is sitting under a colossal pile of liabilities that total more than $300 billion, after decades of borrowing to finance its rapid growth. Over the past few weeks, Evergrande has been rushing to sell assets to generate cash but several companies are refusing to accept the firm's commercial paper. According to S&P analysts, the developer might be paying suppliers through transfers of its properties instead of cash. In essence, the company has become exposed to a vicious debt cycle, and it doesn't have enough cash to finish its projects and generate further proceeds from sales. Only in August, sales declined by a staggering 26 percent compared to the same time last year despite the steep discounts. And, of course, the developer is in desperate need of that cash not only to service but also to reduce, its enormous debts. Beyond financial markets, the most significant problems that could be triggered by the Evergrande downfall are a residential and commercial real estate collapse all across China, as well as a brutal crisis on the broader property sector. Other worries include the growing possibility of a bank meltdown, as at least 128 banks are highly exposed to Evergrande's liabilities, according to a 2020 leaked document. On top of that, 121 non-banking institutions are also exposed, and all of them are at risk of facing billions in losses. Analysts have been comparing the imminent bank meltdown in China to the 2008 collapse of U.S. investment bank Lehman Brothers, which sparked crises at counterparties and ended up collapsing global markets. Bloomberg reported that Chinese authorities warned major lenders to China Evergrande Group "not to expect interest payments due next week on bank loans, which takes the cash-strapped developer a step closer the nation’s largest modern-day restructurings," and signals that China's "Lehman Moment" is right around the corner. Authorities have been silent on whether they will allow Evergrande creditors to face major losses. Bondholders are speculating that a buyout, break-up, or bailout are the only possible scenarios, which has infuriated countless investors and creditors. The company's intricate web of obligations to bondholders, investors, banks, suppliers, and homeowners has essentially turned into one of the biggest sources of financial risk in the world’s second-largest economy. It is now threatening to trigger a crisis that goes beyond a residential and commercial real estate collapse -- or even a widespread bank meltdown -- but it could result in a financial catastrophe that would impact the entire world. Analysts argue that now that investors started to sell off their holdings of the company, the broader credit market may be dragged further down if the property developer fails to buy time with banks to pay off its debt. The consequences are also threatening to spill over the Chinese economy. Considering that real estate is the central engine of China's growth, which accounts for 29% of economic output, a residential and commercial real estate collapse in addition to the bankruptcy of such a large company would have severe repercussions on the economy. Investors are growing increasingly nervous that the Evergrande collapse could spread to other property developers and result in dangerous systemic risks for the country's banking system. As the financial expert Mark Twain noted, companies go bankrupt in two ways. "Gradually, then suddenly." Until last week, Evergrande was in the "gradually" phase. Now, it just got to the "suddenly" phase. From now on, the collapse is likely to accelerate and generate a cascade of systemic failures, bankruptcies and push China to the verge of a default crisis never before seen in world history.

 

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Hard to say how this will play out....

1990. The Economist. China's economy has come to a halt.

1996. The Economist. China's economy will face a hard landing

1998. The Economist: China's economy entering a dangerous period of sluggish growth.

1999. Bank of Canada: Likelihood of a hard landing for the Chinese economy.

2000. Chicago Tribune: China currency move nails hard landing risk coffin.

2001. Wilbanks, Smith & Thomas: A hard landing in China.

2002. Westchester University: China Anxiously Seeks a Soft Economic Landing

2003. KWR International: How to find a soft landing if China..

2004. The Economist: The great fall of China?

2005. Nouriel Roubini: The Risk of a Hard Landing in China

2006. International Economy: Can China Achieve a Soft Landing?

2007. TIME: Is China's Economy Overheating? Can China avoid a hard landing?

2008. Forbes: Hard Landing In China?

2009. Fortune: China's hard landing. China must find a way to recover.

2010: Nouriel Roubini: Hard landing coming in China.

2011: Business Insider: A Chinese Hard Landing May Be Closer Than You Think

2012: American Interest: Dismal Economic News from China: A Hard Landing

2013: Zero Hedge: A Hard Landing In China 2014. CNBC: A hard landing in China.

2015. Forbes: Congratulations, You Got Yourself A Chinese Hard Landing ….

2016. The Economist: Hard landing looms for China

2017. National Interest: Is China's Economy Going To Crash?

2020. Economics Explained: The Scary Solution to the Chinese Debt Crisis

2021. DW News: What's behind the collapse of Chinese property development giant Evergrande?

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China’s crashing housing and commercial real estate markets are making the headlines once again as the country’s biggest property developer has been hit by a liquidity crunch and is now at risk of collapsing. Since last year, the slow collapse of the nation’s second-biggest developer, Evergrande, is keeping investors worldwide on edge as they fear the company’s bankruptcy is going to have a knock-on impact on China’s entire real estate sector and send the world into a financial crisis. And now that Country Garden Holdings – the largest investment-grade developer in the country – is in major trouble with international bondholders, it seems that we’re one step closer to a global financial meltdown. The company was one of the few remaining large, better-quality private developers that had been unscathed by the liquidity crunch, even while other big groups, such as Shimao, faced dramatic reversals in their credit ratings. In December, Shimao’s implosion was viewed as “more devastating than debt crisis at Evergrande and Kaisa”. And now it seems like Country Garden is the final and most visible property giant for contagion risk, as extraordinary levels of stress in the offshore bond market threaten to drag credit ratings down. Just as Evergrande and every other developer peer that relied on debt to fuel growth, Country Garden needs access to funding in the offshore credit market to pay for its projects. But given that the Chinese government has recently shut that door, the company is now coping with a debt load to the tune of US$11.7 billion, representing its total outstanding US dollar bonds, as Bloomberg reported. According to Bloomberg, the main risk plaguing the developer right now is its limited access to funding. “Any sign of doubt in the firm's capacity to weather liquidity stress risks may prompt a widespread repricing of other higher-quality developers,” analysts wrote. In other words, if the company doesn’t prove that it’s capable to obtain financial support to finish its projects, it may end up downgrading the credit ratings of its peers and triggering a sizable crash in the nation’s housing prices. With over 3,000 housing projects spread across every single Chinese province, Country Garden's financial health has enormous economic and social consequences, far greater than Evergrande. Even more worrying, if the group starts showing signs of weakness, it will dramatically damage the already fragile investor and homebuyer confidence, compromising China's economy and even social stability. Experts argue that’s when China's Lehman moment will finally emerge. Now, investors are paying close attention to Country Garden's capacity to raise funding from a variety of channels, especially considering that the offshore credit market remains effectively closed to most developers. The company must repay or refinance about US$1.3 billion on bonds this year, the majority of which are dollar notes. Its next bond maturity is a US$425 million bond due on January 27. Any indication of default can make the situation far more complicated. Keeping in mind that investor confidence is at historic lows, and the dollar bond market is essentially shut for developers, the sector currently has very limited refinancing options, which increases the risk of companies failing to pay the debt on time. “Risks across the Chinese property sector are rising, evident from difficult refinancing conditions for even the most well-regarded firms,” said Wei Liang Chang, a macro strategist at DBS Bank. “Greater clarity on the disclosure of liabilities as well as asset sales are crucial to shore up confidence,” he added. Bloomberg estimates also point out that at least seven Chinese developers have defaulted on dollar bonds since October. And this crisis is about to hit a whole new level as the very foundation of the property market loses financial support. If you’re wondering why does all of this matters, the truth is that as investor and consumer confidence evaporates in China, the inevitable collapse of these massive companies will hamper at least 25 percent of the Chinese GDP and set off a tsunami of bankruptcies this year, leaving a dent on global financial markets and slowing down the global economy. In the best-case scenario, Beijing will have a recession on its hands. In the worst-case scenario, a depression may follow, which will leave the world’s central banks scrambling to bail out the second biggest economic superpower on the planet. Regardless of the outcome, the impacts are going to be very painful. In short, this means that we’re heading to an era of credit tightening while inflation continues to soar and eats up a larger share of our purchasing power with each passing month.

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Now it appears to be getting real... 

China’s global exports sank at their steepest pace since early 2020. That’s bad news for the world’s second-largest economy, which has been struggling to recover after unwinding its zero-Covid policy. Western consumers have been spending less on electronics and clothes (often made in China) and more on travel and restaurants (not in China). Last week, UPS said its revenue took a hit from weaker China demand. Meanwhile, China tipped into “deflation” (falling prices) — an ominous sign for the global economy. 

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Evergrande shares plunge as much as 87% as trading resumes after 17 months

https://www.msn.com/en-us/money/markets/evergrande-shares-plunge-as-much-as-87-as-trading-resumes-after-17-months/ar-AA1fReBV

 

China’s Worsening Economic Slowdown Is Rippling Across the Globe

https://time.com/6308850/china-economy-slowdown-global-effects/

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    • @JW Insider Your summary is irrelevant, as I do not make any assertions regarding BC/AD other than their usage by scholars and in history, as you yourself have also acknowledged on numerous occasions, thus rendering your point invalid and evasive. The Watchtower leverages external viewpoints, including secular evidence, to substantiate the accuracy of their chronological interpretations. There are numerous approaches to dating events. Personally, I explore various alternative methods that lead to the same conclusion as the Watchtower. However, the most captivating approach is to utilize secular chronology to arrive at the same outcome. By relying solely on secular chronology, the pattern still aligns, albeit with a distinct interpretation of the available data. Nevertheless, the ultimate result remains unchanged. This is why when you get upset, when you are proven wrong, you, Tom, and those with the authority to ban take action, because you like others cannot handle the truth. In this case, your infamous tablet VAT 4956 has become useless in this situation. I do agree with you on one thing: you are not an expert, just like COJ. However, I must admit that this foolish individual was not the first to debate the chronology with the Watchtower and abandon it based on personal beliefs. He simply happened to be the most recent one that's on record.
    • This person will never give you a direct answer. He's beyond reasoning and only seeks to dodge the truth. The information about the tablet has been available for decades, but I chose to bring it up now to refute previous and current criticisms about the limitations of this tablet. The real issue is that he can no longer rely on this insignificant tablet. It's frustrating how much time has been wasted on accepting falsehoods from others.
    • Maybe I too should write a book called George vs Apostates but actually mean it. 
    • This will be my last point on this topic here, unless you continue to make further references to me, as you have done so many times already.  After what you have said above, this is a good place to summarize the most important points again. You say that the organization holds steadfast to the numbers in the Bible. This is true, because the Bible offers a fairly complete relative chronology with very few places where one must resort to interpretation to complete a relative chronology from Adam to Zedekiah, or even Jehoiachin's 37th year of exile, or at the very latest, 70 years after the destruction of the Temple, referenced in Zechariah 1:8 landing on the . . .On the 24th day of the 11th month, that is, the month of Sheʹbat, in the second year of Da·riʹus. . .).  So there is a long stretch of relative dates. But there are no BC/BCE dates in the Bible. There is no Bible-based way to connect any BCE dates to our day, or even to the time of Jesus. There are no indications in the Bible that would give us the BC/BCE dates. Even the WTS relies both directly and indirectly on records from Babylonian/Persian/Greek ASTRONOMY to link the Bible accounts to any BCE date. If we claim they are from unreliable records, then that means that our own claims about any BCE dates are just as unreliable. So it is wrong to say that the WTS stance is grounded in divine guidance. The Watchtower's BCE dates are grounded in Babylonian astronomy. However, the dates used by the WTS are cherry-picked so that astronomy-based BCE dates are accepted only as long they are AFTER about 560 BCE, and all dates PRIOR to 560 BCE only presented after adding 20 years to them. Personally, I have no problem with the claim that the 70 years of servitude to Babylon ran from 607 to 587. That seems to be the right time period supported by astronomy. [And I have no problem with the astronomy evidence that says Nebuchadnezzar's 18th year was 587, and the astronomical evidence that Darius' 2nd year was about 518, which would explain the other 70-year period mentioned in Zechariah 1:7-12] And if someone wants to start a 2520 year period from 607, that's just an interpretation. No harm done. But the astronomy evidence the WTS relies on to get 539 also shows that 607 was NOT the 18th year of Nebuchadnezzar's as we claim, but points to a year in which there was no such thing as a King Nebuchadnezzar. He didn't become king for another two years.  The claim that the astronomy evidence might be wrong or unreliable is one thing. But it's problematic to claim that only a tiny percentage of that data is correct. Especially because the part we accept is the part that is MOST prone to the errors the WTS makes use of to dismiss the much larger set of excellent evidence. We dismiss literally ALL the evidence which is not as prone to those same errors. We even say we can make "pivotal" dates from the more error-prone evidence, but that we must also ignore the better parts of that same "pivotal" evidence in places where we don't like what it tells us. If we merely claimed that the WTS has divine guidance and that's what it completely relies on, then that might be a difficult concept for some, but it would not be so problematic. It only becomes problematic when we try to impeach the very evidence we make use of. The WTS uses WT articles that try to show that the same evidence might mean two different things. That shows that we somehow "need" the Babylonian evidence to support us. And we have even followed Furuli's folly in order to make a FALSE claim about VAT 4956. This was really disingenuous, not just because  the claims were 100% FALSE, but because VAT 4956 is only one of a dozen different completely independent sources for the entire set of astronomical dates for Nebuchadnezzar's reign.  Of course, I can't fault any of us for not understanding this. Very few of us will try to look into it for ourselves. And I'm no expert, and I fell for the same bits of false reasoning that made me think we were right and the rest of the world was wrong. But it's those false claims that we are right because "the Bible tells us so" or that "divine guidance tells us so" that will continue to embarrass us for anyone who goes to the trouble to check out the evidence. As I said, I'm no expert, but it doesn't take one. It's a very straightforward thing to look up the astronomical evidence for ourselves and tell others what we found. Any junior high school student could do it. You don't need that much education. You don't need to be an expert. So there is obviously a reason that almost no Witnesses will ever go to the trouble of looking up any of the Babylonian observations we pretend to rely on. You haven't done it, or if you have you won't admit what you found. Scholar JW won't do it. The GB won't do it. The GB Helpers won't do it. JWs are intelligent. And yet almost none of them dare to do it. If they do, they don't dare admit publicly what they found out. There are just a couple of exceptions to that rule. And we see what happens to them. As for me, I don't think it's right to learn something and not be able to share it. I think that if we love the organization, if we love the brotherhood, and if we love Jehovah who is a lover of truth, we would share our concerns. We shouldn't want the organization to be embarrassed by having made a man-made obsession about something so trivial and unnecessary. The WTS should never have made such a big deal out of a secular, man-made set of dates.  As for me, I will follow Psalm 26: 26 Judge me, O Jehovah, for I myself have walked in my own integrity, And in Jehovah I have trusted, that I may not wobble.  2  Examine me, O Jehovah, and put me to the test; Refine my kidneys and my heart.  3  For your loving-kindness is in front of my eyes, And I have walked in your truth.  4  I have not sat with men of untruth; And with those who hide what they are I do not come in. ...  8  Jehovah, I have loved the dwelling of your house And the place of the residing of your glory. ... 11  As for me, in my integrity I shall walk. O redeem me and show me favor. 12  My own foot will certainly stand on a level place; Among the congregated throngs I shall bless Jehovah.
    • Can you explain why you consistently misinterpret his words? What's your purpose for doing so? Why are you distorting this ghost's 20-year presence with false representations? What is the reason for a runner 20 years earlier given your stipulation is 568 to 587 for VAT 4956 wouldn't mean to have a runner for a distance of 617 miles, considering that the tablet in question is believed to have been written or dated in 568? Are you saying you believe in magic like the Pagan Babylonians and somehow Nebuchadnezzar used telepathy to convey an order? So, if anything significant occurred in the 37th year of Nebuchadnezzar that is linked to 587 by this tablet that apostates and opposers use, Borsippa should also be taken into account for the year 587, except for the fact that you are referring to a distance of 617 miles and transportation back then was with either a chariot or horse and the mention of a king giving an order for Borsippa which is 617 away from Jerusalem as apostates state Nebuchadnezzar was in 587 can't be easily explained unless a runner is used or the King was home in Babylon. Those are the choices.
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