Evergrande: the end of China's property boom | FT Film
The rapid expansion of China's property sector was powered by a great migration from the farms to the cities - and built on cheap credit. The FT tells the story of Evergrande, the most indebted property developer in the world, which now stands on the brink of collapse. It's a story that changes the outlook for China's position as the locomotive of global economic growth. But is this China's Lehman Brothers moment? Read more at on.ft.com/3tNHO0j
Produced, directed and edited by Daniel Garrahan
#Evergrande #property #China #EvergrandeGroup #Housemarket, #propertymarket #propertyboom #Asia #investinginAsia #investment, #HongKong #business #realestate #residentialproperty #migration #Chinaeconomy #Chinagrowthmodel #financialcrisis #LehmanBrothers #growth #globalgrowth #Greengrowth #factories #factoryworkers #HuiKaYan #bonds #debt #borrowing #bondmarket #finance #Markets
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The person who did the graphics should get a raise. Very intuitive and nice.
Totally!
Was it you?
It’s not hard? Once you know, you know.
@@markgrech1866 no it was not
It was terrible, especially the editing. I stopped watching because this is just 20 min of cuts between stylized buildings and some randoms saying the dumbest cone liners before cutting to more useless buildings looking pretty.
I feel like this video missed a couple key points which make the problem much easier to understand: first, property is the primary investment vehicle for most Chinese people, which is why property values got so high. They don't put their money into financial markets like most of the west does, they pump it into their homes. Second, real estate companies could use these sky high prices to leverage their property assets for debt. And some of them, like Evergrande, seem to have been overestimating the value of their assets in order to get larger loans. Now that demand is falling, they can't sell their assets at anywhere near the estimated value and thus can't pay back their debt.
You can "buy" property in China and it will be yours for 70 years, after that you have to return it to the goverment, thats why they all come buy in the western countries, they buy up blocks of appartments here and rent it out... there are even policies in my country now saying you have to live at the adress you bought for at least 5 years before renting it out to others, that crazy it has become..
I believe the general population does not have the option to buy stock investments. so, the only investment they can do is buying houses. The gov't and the builders got the people in their hands as disposables.
@@stephenc2481 No they can buy houses that they have to give back after 70 years (1 lifetime) so that's why they invest overseas, cars are not worth it in chinese traffic. Everything is government controlled over there. It's communism..
@@TheWuKeng That "70-year property rights" is just a misconception, it is just a matter of renewing the "rights" after 70 years; Chinese people buying bricks overseas because it make them feel stable and fulfilled, or it is just diversified investment choice.
@@al-tes At one stage they were talking about a fee of up to 1/3 of the property value to renew the lease though.
It’s not just construction workers! It also affects manufacturers like glass, steel, etc also gets affected. The real estate business really was an economic driving force because it affects so many more types of jobs.
Why would these manufacturers have any troubles they should be super rich now and never have any troubles agian if there were so many buildings being build u selling Materials should make u super rich so if ure not u a dummy and got scammed by someone lol
Supply chain. The apartment buyers also work in this supply chain. They lose their jobs -> don’t pay the mortgage -> no money in the financial system to borrow/invest and this vice circle feeds over and over. The 1st phase is taking place now. There is no more money for the real estate developers to continue the Ponzi scheme. All construction being on hold.
There’s no lacking of housing in China, that’s the silver linings. Also the speculators who brought those empty apartments as investments are going to get burned. Those who brought the properties to live in, well they still have to live somewhere no matter what their houses cost. The ordinary people who were priced out of the market and really need a home are the winners in a big crash. I think that’s poetic justice.
The other sector is the building of infrastructure like roads, high speed rail, airport and etc.
You don't know what the Chinese (stock)market will do, owning Chinese stock does not mean you own a part of the company, please be aware of that. BYD is making mini cars, hybrids and ice cars, not so much BEVs. Numbers are not looking that great too. Their batteries are great tho and will be used by Tesla as well.
Only if I had more time to play around in the market, retirement is around the corner and my primary concern is how to grow my reserve of $300k which has been sitting duck since forever with zero to no gains, I'm having serious anxiety.
@@claraclouse9086 I agree with clara, I have been pretty much on the sideline observing for awhile, figuring out the best strategy to get in, until I came by a coach, commended by a pundit on Reddit, reluctant at first but I went ahead and reached the coach, long story short, it's over 3years and counting and I've made over 1.5million simply following the guidance of my coach.
@@bobbymainz1160 my 401k lost everything it’s gained since early 2019. wouldn’t mind looking into the advisor that guides you, I believe the best way to beat this recession and inflation is to earn more.
@@joesphcu8975 The coach that guides me is Eileen Ruth Sparks, it shouldn't be a hassle finding her, she's quite known among her peers, so just search her name.
@@bobbymainz1160 Thanks, her website popped up on the first page immediately I searched her, I read through her resume and seems pretty tight, so I booked a call to discuss with her.
The topic of ghost cities and real estate overdevelopment in China has been a topic of discussion and concern for at least 10 years now. Crazy that this problem was allowed to grow so large when seemingly everyone saw it coming from a mile away. Classic human greed.
It got nothing to do with greed and everything to do with government fund/credit to keep a bubble alive, giving illusion of prosperity. This is the future of every single economic bubble. Fiat money and government control of interest rate are the problem. It's amazing how nobody talks about the greed of federal reserve guys, or the ecb or pboc bureaucrats.
Classic state funded corruptive communism.
@@swagatopablo It's not that nobody talks about them, it's just that nobody listens
@@davidcarlsson1396 yeah because this is all "communism's" fault. Anymore brilliant takes?
@@swagatopablo Greed plays a factor too, that credit was taken out to amass fortunes into the future.
Why does anyone trust Big 4 auditors anymore is beyond my understanding. Every major financial disaster has shown that the Big 4 have certified everything as ok as long as they were well paid.
Auditors can *sometimes* detect *obvious* fraud and *obvious* regulatory non-compliance. I find it absolutely laugable that people think that a business is sound just because it passed an audit. The clever people at the centre of complex transactions can be very confidently incorrect, and there's simply no way that a small team of auditors will be able to find that error.
They hire people unable to grasp the complexities of such subterfuge and send them out to audit businesses.
They're pretty good at detecting minor problems, it's only the big things they tend to miss. Also, it's not their job to predict market bubbles--if they could do that kind of magic they'd be in a more lucrative business.
Weird how they are only able to retroactively detect malfeasance in their audits, and that they're not able to predict unprecedented future events!!
Chi Na people are so funny
In a word scary. Because ultimately the global market is so interlinked and the world has been decoupling from China. This creates massive economic stress and a scenario no model or econometric analysis would have predicted.
Wait, what are your thoughts on the emerging crisis in China (mortgage payment strikes and systemic risk from fractional-reserve banking) and it's likely impact on emerging markets?
@@svengrot7943 Great question, I think it's a really interesting area and so many factors in play right now. I wouldn't let any macro news affect the way I invest at all, otherwise you'd probably never invest a single penny - but that being said, it's a reminder to be well diversified!
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@@blaquopaque There is only bad news out there but yet stock prices are up which shows that even though the market is meant to be forward looking it is clear the string results are the only things they are interested . Also, i searchon Katherine using her full name and found her official-onlinepage, read through her resume and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her
The world isnt decoupling from china, the world just CANT, just like europe just CANT break away from the Russian gas and energy supplies. If u cant see that then u shouldnt comment on this topic.
With the way the markets are moving, we might have to hold longer than expected, I think a video on "How to profit from the present market admist the recession will be more appreciated. I mean I have heard of people still making more than 100K within few months, and I'd like to know if it still possible.
The market is a zero-sum game, there are good days, and there are bad days. However, always follow these tips: Study the charts thoroughly; Make sure to diverse your portfolἰo so when another is down, the other will be up. You can do so by getting an experἰenced specἰalἰst whose platform has dἰverse investment choἰces to choose from. Lastly don't put what you can't lose. By doing this, you gἰve lἰttle room for regrets and perhaps gain more.
@@buryatiaducky4233 Great tips. Generally, diversification is a key factor. Pragmatic... I have been into all of these for some time and though I won't say I have lost a fortune, I have squandered quite a lot... Do you mind recommending a specialist whose platform has diverse investing choices? I anticipate your response.
@@buryatiaducky4233 Exactly! This whole thing is a zero-sum game.
@@buryatiaducky4233 This is the second time I am coming across that name Sandra Yvonne Webster last Tuesday, I saw a telecast on the economic bubble there were lots of testimonies from her clientele on how her strategies turned them into miIlionaires overnight. The testimonies were so impressive and sounded too good to be true. I am a bit skeptical, though she's one of the oldest around. Do you work with her? Thanks if you reply.
@@buryatiaducky4233 Nice one. I study the charts thoroughly. 2 -3 months back.
Also the fact that the buildings are shoddily built to siphon as much money from the project to private pockets. Even the finished projects are not of the quality expected by the investment.
Adv China has a great few videos on the lack of any enforced Chinese building codes...if China has any building codes...
Tofu Dreg buildings
Paper Buildings, no wonder China is called a Paper Tiger, lol
That’s,, “made in China” for you!
10 billion iphones have exploded. Killimg 3 billion people All made in china
There is a big miss in this video. The analysis does not take into account one of the key drivers, outside of raw urbanization. This is the use of property as investment. In the West, most people invest in stocks and bonds. In China the populace has little or no understanding of this. Thus, you see people buying multiple properties, mostly apartments, as investments. With rising prices, this made sense to them, and it was something they understood. One of the outcomes of this is the empty cities one sees only in China. Some of these are massive. The sector is massive for another reason. Much of the income for local government comes from selling land. Thus, they encouraged this massive amount of property development.
The Chinese government discourages stocks as an alternative investment strategy with its heavy limits on available shares and projects that traded companies are allowed to undertake.
I’m only surprised by how ppl in the west cares so much about a 300 billion USD debt company, Evergrande. It’s like none of these westerners have a clue of how tiny 300 billion USD is in front of a 15 trillion USD GDP economy. These so called reports are no differences from the China collapse theories.
Another important factor us that the quality of the building is garage, even they call the tofu buildings, they start to fall apart after 5 years, sometimes less, and there is maintenance whatsoever because they thought they just could buy a newer one... so yeah, not only there is a lot of real estate vacant, in the middle of nowhere, but also completely dilapidated to the point it can't be used
@@dongxuzhou4661 You need to look at economics and finance. Lehman Bros. in the US actually had twice the debt, but in a larger economy. That crisis spread worldwide very quickly. It was also about property values and leverage.
They probably also wanted to encourage Chinese investors to buy real estate in China rather than buy in the US or other countries. I knew one Chinese community college student who owned several properties that he bought cash with his father’s money. The government would prefer that money stay in China but that currently doesn’t seem like a good idea, to say the least.
China just came out with a better tone toward their tech industry and markets. Assuming that geo political events do not get worse between the USA vs China. I am making a Long term asset accumulation bet on BABA.
Yep, good Talk. 2022 will be a rollercoaster for sure. Stocks valuations are at an all time high while at the same time we have the threat of inflation, rising interest rates and supply chain and productivity issues to deal with. Something is going to have to give. I think it will be the Markets that will have to correct. How much and when - who knows. Sanity hasn't prevailed in this bear market and I suspect it wont prevail in a correction/crash.
I hope everyone have their cash ready to jump in at the right time. Secure your financial future with calculated moves. The stocks market still remain your best bet in becoming a millionaire.
in order for us to prepare for the future we need to look into safer investment with good prospect . If you have the mindset of investing 5 years ahead and just keep DCA every time you get paid. My portfolio have accrued gains of about $130k under the guidance of my investment -Advisor "Nicole Ann Sabin" whose skills in portfolio diversification are unmatched and client-centered
@@marianparker7502 The crazy part is that advisors are probably outperforming the market and raising good returns. I will give this a look up, lucky i stumbled on this thread.
One thing you should know is that a crash and bullish market provides equal high-yield potential, it's all about information and strategy application, I've seen folks make huge 7figure profit in a crashing market and pull it off much easily in a bull market the recession is getting somebody somewhere rich.
Access to good information is what we investors need to progress financially and generally in life, this is a good one and I appreciate...
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China has been off the spotlight lately, the war sure helped them to shift the focus out of their economic issues
You always need a enemy on TV
#ChineseVirus still spreading though.
It will come back to hurt us. Evergrande started to come back into the news and it isn't looking pretty.
A huge change that started over 15 years ago. That’s when I started seeing posts of the abandoned Chinese shopping malls on the internet. Thanks for the videos.
Makes sense, housing bubble happens for decades, some people forget about these.
Shopping malls without shoppers. Cities without citizens.LOL!
An underlooked aspect is that most Chinese people don't actually pay much in taxes, meaning that the local governments, (the party technically owns/is all of the land) makes much of their revenue from selling the 99-year land leases that developers need to build upon. While it's been brought up time and again in China, the incentives and culture were all just too strongly resisting the needed reform.
royalty tax is 100% liquor/tobacco is roughly 70% when you pay for products. the tax is already with in the price of said product even a pack of "Huangshan" cigarettes which is common among peasants/low labor workers are now upto 8/9 rmb a pack! where the true value is/should be 4-5 rmb .. this is a 2nd Tier city ,capital of Anhui,Province 1 bottle of maotai costs 5,000 Rmb.
also, land lease is 70 years not 99 years. however, parents can opt on 'reselling' to their kids 'on paper' of course. then they take it for another 70 years. unless the government has plans on deconstruction which was too common in 2010
One of the problems that seems to be missed in this documentary is strange to the capitalist mind. A lot of property market is actually a lease, because China does not practice capitalism for individuals. Local governments lease property long term to individuals, using that as an income in place of taxes that do not exist. If buildings are not getting built, many local governments do not get financed from property leases, and thus cannot provide services. Emergency services, health services, etc. The financial impact to the world is going to be heavy, but it will lead to restructuring. In China itself though, the level of chaos and misery is not even known yet.
To Russell Birkett, the person who did the graphics for this FT segment - Bravo! Amazing visuals. Keep up the good work 👍👍
Extraordinary that any Chinese would pay 100% up front for anything - let alone property!
I was on holiday from Dubai to Guanzhou with my family in 2013 and stayed at the Ramada Plaza for a week! I was fascinated to see the buildings all over the city ! Truly amazing!
As of 08-18-2023 they have filed for bankruptcy!
FT totally missed the point Chinese government message to its citizens: flat/apartments are for people to live in, it's not for speculation.
Isn’t that message a bit late?
@@jasperhorace7147 it was at least two to three years ago.
The ccp has been saying it since 2013.
How naive to believe the thin veneer of communist propaganda masking the world's most exploitative capitalist economy.
Is that an important message? Clearly it made no impact to stop the bubble
It always amazes me when people seem surprised by extensive growth, which surely cannot last in the long term, tailing off and even resulting in bankruptcy due to over-reaching. I've seen it happen time and time again, even in companies I've worked for, and that level of growth always seems to be the forerunner of just as stunning a collapse. I am no financial or strategic expert, but I wonder why lessons from worldwide organisations aren't learnt?
It’s quite simple: they don’t think long-term. If you can secure 5-10% growth during a two-year tenure and then get promoted, who cares what happens in 5 years?
umm. have you noticed that there are companies that have lasted from around and many times even before WWII? some people do actually learn. however, 50% of the population has an IQ less than 100. take that as you will.
Well so as US stock market, which is now collapsing.
@@andreaskallstrom9031 Yeah the mindset to make quick money. Prevalent in China.
@@jonathanodude6660 , and they are mostly senior managers and above!
Its truly amazing how the connection between actual householder demand and apartment values has never been seen as the real determinent of viability in China. Unquestioned credit has driven this process and unless occupier demand suddenly firms up the bonds will be defaulted as developers are wound up and new owners buy in at firesale prices.
loans and debt are based on buyer but also in many cases require another family in case you can't pay your debt. they then go after whomever they can find associated with you.in the last resort.! they post your ID /Photo/real world contact and ID on big posters usually at bus stops .
After 1 year, i endorse and appreciate financial time, which is responsible news group
50 years to own a modest apartment? Compared to 10 years in New York?? When you consider the time you can really appreciate the Chinese people who invested everything they had into pre-buying homes that were never finished. Also the foreclosure rate has gone to about 197% within the last 5 years.
What I don't get is why apartments cost so much when there's 90 million apartments unused?! The system has failed hard...
that's how communism works, lol
@@jakeheez That's a crucial part the did not mention in the video. Real estate has been one of the only market where normal Chinese people could invest in. So it's not only those property developers taking out huge loans but also a massive amount of average people who would also ask family members or friends to leand them money. They were banking on flipping the apartments for a good profit and it worked for quite some years This was a major part of overheating the market, and the demand of migrant workers was only the kindle for it.
Same here in major cities of India. It almost takes all of your life savings. I am in 30s and actually have got an apartment from my company. But the day I will retire I know I cannot afford to buy the same house in my city. It can be possible only if I keep working till my 60 and invest my money in focused way to achieve this goal. It sometimes pains me to see so many people working so hard all of their life just to get a roof over their head in the end. However it is also true that may be this dream has a great meaning and value which keeps people awake and get going inspite of every kind of challenges around them.
@@RN-yo4qm lol, china don’t really run on the communist system.
No matter how hard you train, if your diet is poor you probably won't make any significant progress. You can't out-train a bad diet and I can't emphasize this enough. It is the same with investment.
@@philipcooper1636 *Mary brigid Mullin* she is amazing. you just need to look her up
@@richardmadison9670 Thank you very much, for the heads up
To be honest, my diet is shite as a student yet the muscles still are growing at a reasonable pace.
I pray to God 🙏 with both hands folded 🙏🙏 for the wellbeing and happiness for everyone in the Global World based on LOVE LIGHT PEACE AND JUSTICE FOR ALL
Dude the audio/music selection on this video was INSANE on this film. 10/10. Now i'm completely frustrated because I don't know what genres these tracks come from and where I can get more of it.
Why would someone want to buy a house when there's a 100 year contract. Your next generation would have to buy it again. The goal is to have generational wealth not generational poverty. Not mention that there are so many Tofu Dreg apartments in China that are cheaply made and fall apart. Most of those empty buildings are Tofu Dreg.
The farmers were evicted off their land if they didn’t go along with the proposal of a better life in the cities. Sad state of affairs that place!!! The Pooh bear communist party leader will never come close to the intelligence of Russia or world dominance of the USA, China will only ever be a population of copycats and immoral behavior…
It seems to me that the Chinese govt needs to figure out away of transferring at least some of the benefits of economic growth away from the cities back to the countryside. There remain around 400 million Chinese who do not live in cities and many never will - the demand for their manufactured goods is tailing off , though still very high. Without redress this problem of imbalance could be their undoing.
Once they figure that out then they have to tell the rest of the world how to do it.
They have been rather successfully with the rural country side,including massive transportation schemes, cadres to deal with poverty and their belt and road initiatives. I think they have it pretty well figured out tbh.
@@nigelcheriyan5693🤏😢😥😰😭🥵
@@nigelcheriyan5693 right on! You hit the nail right on its head...Those smart a_s comments of haters were after the facts. They got a sickly kick out of bad mouthing China, the world 2nd largest economy for HER tremendous success, which was not seen in past human history.
Right on! You had the exact same thought as the Chinese gov. They call this program “Rural Revitalization”, which is part of their strategy to deal with overproduction and global economic downturn, in addition to the Belt and Road.
Whether it's your superbly researched and immaculately written FT Newspaper and Editorial articles or your short documentary films, the quality of all your content is simply outstanding. Good Work and Keep it up Team FT!
It really surprises me that no one figures out these schemes, until it's too late.
Nobody in finance even thinks about the very poor quality of construction in many of these projects, the curious Chinese attitude about maintenance and the fact that all these buildings are built on land people don't actually own but are leasing from the government with no clear idea of what happens after 70 years when the leases expire.
@hognoxious You miss the part where the people are usually compensated.
You can renew the 70 year lease for a registration fee ranging from 1% to 20% depending on local policy
@hognoxious There is no private land ownership in China. There's no way to own it. You can only extend the lease.
it's literally manifestation of a bubble in physical form, buildings will start to crumble on their own.
@@pinzazzzz LOL! Pennies on the dollar!
Just the beginning. If you do not protect your assests now then good luck to you. This is a worldwide debt problem.
Whoever did the graphics/animation for this video - great job!
I don't agree with statements such as "they built all this were there was nothing". There was definitely something there before they started building: whole ecosystems that were razed to the ground and entire species that ceased to exist so they could build these cathedrals to greed. Let's not forget that this genocide was also hidden behind the smiles and the champaigne.
Excellent point. The devastation is extensive. People who come up with such statements certainly comprehend the entire dimension but they prefer to fend off their concerns because they want to stay in the game / play, and they love it...
PolyMatter did a series of videos on this subject, but a bit broader, about a year ago, for anyone who's interested: "China's Reckoning" Really good and interesting!
Thanks man
I watched all the parts and the conclusion is that China is just a Pathetic Paper Tiger.
PolyMatter really is just repeating nonsense. For complicated financial issues it’s still best to listen to economists. They don’t guess right often but still closer than people that don’t get it and just repeating nonsense
Polymatter's 4 part series was very good. It broadly explains the finance mechanisms used by local governments, demographic problems, their water problems and more. It's a really good place to start if you're interested in understanding China more deeply.
Evergrande's debt problem is tiny compared to China's High Speed Rails with over USD$2 trillion of debt. It borrows more money just to repay interests owing, excluding railway running cost. China built so many unprofitable high speed railways.
But those high speed railways really boost Chinese economy without doubt.
Tiny compared to Evergrande alone, but dwarfed by the entire real estate market which is almost entirely in trouble
Ehh. In China, high speed rail is a government service much like a public hospital is a service or US military is a service. US military consumes a lot of money yet no one bats an eye.
@@dseven8756 exactly Railways underused are still used But empty flats are total liabilities.
@@dseven8756 yeah definitely. Enough to get close of offsetting losses? I don’t think so.
This is symptomatic of the end of the long term debt cycle which Ray Dalio talks about in his new book. Ray seems very bullish on China long term but seems to overlook this aspect of debt fuelled growth which will not be immune once the system starts to unravel.
International Audit Standards have been a key issue for decades. An even bigger problem than unprincipled credit rating agencies.
It takes 15 years in London and 10 years in NY to buy a home?? I don't know where this guys took the numbers...and also that kind of bubbles happen in all parts of the world, is human nature.
Probably using Average pay instead of median. The Wall street types pull the Average up significantly.
@Alex Haughton could be, but I live in London and have seen houses a 4 million pound. Pretty good mortgage.
@@franciscojavierruizmanchon8177 they said apartments
NYC median income is $67000. Median home price is $650000. Pretty simple math. Just check the census bureau's data.
@@basilmagnanimous7011 Cool story, but I don't see anyone here who asked about that.
It's been 4-5 months and nothing too serious happened yet. Lehman Brothers literally collapsed overnight without any obvious sign. It's totally different scenario.
Summer buddy, it’s starting, I’m seeing a future now, and it won’t be good. Yet, there’s money to be made.
@@thinhngo7244 How are you going to make money?
It's just waiting to collapse. The absolute collapse of Evergrande is not happening yet, it won't happen overnight but gradually it will lose bricks and it will fall catastrophically with the economy on a free fall.
@@infinitrixtv5847 cope
China has selected instead of letting it all collapse at once to have it effect their economy over the next 50 years. Long term stagnation is in the future for China.
Supremely instructive!!! Thank you! 👍🏻
The issue is the mindset of "investing" not to rent out and get income, but to sit on empty properties in the expectations of future capital gain, as a way to build family wealth. This has worked in the past in particular situations, however when everyone is trying to do it, and you have 90 million unoccupied units, it takes on the characteristics of a pyramid scheme. The Chines govt. should have foreseen this, and taken steps to protect the people at the bottom who are going to lose, the three red lines were too little too late. I think they wanted the kudos that came with "economic growth" too much.
from 0 to $150B in 10 years... sounds like a sports car ad 😂😂😂
I love the Jenga analogy. "Do you smell that? What's that smell? Money" - Jared Vennet
Loved that line. First answer was " opportunity "
As long as China had a high current account surplus in USD there has been plenty of liquidity to finance the property boom. Yet this is now over.
Jim Chanos did remarkable research into the property sector in the early 200'0s. He was shocked by the incredible waste and folly of the entire real estate industry. The Big Short for Chanos was to leave the market for someone else to find a solution.
growth defined by finance rather than utility and sustainability always ends badly. period. take no fancy counter-logic seriously. In this case a genuine need for housing was leveraged into paper growth and the proceeds farmed like an mmo, and i think it is important to choose sides. Housing needs to be understood as a social good, not a luxury commodity or an object of speculation. The alternative is all around us.
Ludicrous. You have learned nothing from this video about leftist central planning.
Such a great statement! I like when finance and reality go hand and hand.
I am choking on my tears of sympathy for those international investors who thought buying Chinese bonds was a good idea.
Greed trumps integrity. People will just do anything for some profits. I don't invest with countries who are on the bad side of the human right scale.
@Zack Smith ...it is not funny to see people suffer under dictatorship or communist controls. But no one is stopping you from investing with them. Good luck to you.
@Zack Smith .I have lived in a communist ruled country and are currently living in the USA. I can promise you that the poor in a communist (including China) country cannot be compared to the poor in the US. The standard for comparison is different. The US has way higher standards, 15 times better vs China. Folks in the US get rental assistant, food assistant, free healthcare, free education. But why didn't all of them get out of poverty? that is another discussion in itself. The opportunity is there, they just need to take the initiative (not counting mentally ill/drug users). Under communist, the poor is shoved out of the way so the land can be developed, and the people don't have much voice on it. As for the total welfare equality, lets take China as example, because they arguably has the best among the communist countries. The poor doesn't get the same treatment as everyone else. Job placement, healthcare, and other benefits are heavily corrupted. You have to bribe your way to get good service. In the US, you get safe (not cutting corners) services the same way, for everyone. Of course, the rich can go one step up, by having their own private doctor. That doesn't count. As for privacy, there is none in China. Freedom of speech, none in China. Everyone is constantly watch and cannot say anything political, especially against the current party ruler.
I'm laughing about it. If you invested in a Chinese dictatorship you deserve to lose everything. Wall Street only cares about what it can skim off the top.
Totally agree, ppl in Communist China have little human rights. Look at their ridiculous zero Covid policy…..
The funny thing is none of the giant apartment buildings have windows in the so , they will probably have to be torn down.
Steak 🥩
This is a good documentary, GDP is not the measurement of a wealth of a country but productivity is.
This video feels very out of date. Didn't Evergrande start having trouble back in July 2021? This video didn't seem like it had much to say beyond Evergrande had trouble paying its bonds back in September 2021. Like one thing it easily could've gone into is how these are dollar denominated bonds, not Chinese RMB bonds.
Yes, and they also didn't mention the form the bail out of Evergrande has taken: SOEs buying it up in pieces, under Xi's orders.
When you're broke, the particlar currency does't matter Zero is zero in dollars or renmenbi.
@@gaoxiaen1 But it does matter. You can skip paying RMB to 500 cement companies for 30 or 60 or 90 days, and they might get mad at you, but mostly no one will notice. Or you can skip paying $-denominated bonds, and the whole world will find out within minutes, literally minutes.
Real Estate debt plays a major role in Sweden as well.
@@frenchonion4595 I hear most countries are pursuing expansionary policies nowaday.The US and EU are champions, but many other places are doing it. I wonder, though, how much of that money in chinese real estate comes from the US.
5 months later and borrowers have stopped paying their mortgages. Banks have refused to allow any bank withdrawals. The failure of China’s banking system is closer than it appears.
Building empty cities has drawback? Who would have thought?
One thing that has not been mentioned is the greed on the buyers side ! They didn't all bought their flat(s) to live in it, for many is was pure speculation. Thinking that real estate prices will always go up and that something they buy today at 1000 they will be able to flip it over at 2 or 3 times more in less than 5 years. I have lived 8 years in HKG, and the same game was going on. As a result real estate prices have gone to absurd levels, with as consequence that the new generation, starting in life will never be able to own a flat. Or like said in this report, they'll need 50 years to pay it off. And in a culture / country where there is no real government system to take care of the elders, as traditionally the kids take care of them. But now, if the kids can't buy a flat, what is going to happen ?
Excellent content. As other commentators have already said many apartments were purchased as investments by average investors. Not only are those apartments empty and likely to remain empty but many were constructed to such poor standards (tofu dregs) that they are probably uninhabitable and in some cases in damage of physical collapse. So they are not just homes people don’t want, but literal piles of waste no one wants. How China manages the fallout on citizens who have lost their life savings and contractors who have lost their livelihoods will probably be more critical to China’s survival/direction than how the default is handled.
Agree.
When I worked at Hangzhou on urban planning in 2011 / 12 negotiating between German and Chinese partners the bubble already had bursted. The question was just, whether the landing would be hard or soft. It was very soft, because assets from all over the place were generated in the "Chinese urban revolution", taking place actually less than 30 years after the "Cultural Revolution". And building and real estate industry have become quite powerful. Local governments are also emphasized in the film as key stakeholders. After my return in 2012 I told some colleges here in Germany, that I had worked in phase 0.2 till 0.5 of our German system of work phases of engineers and architects: evaluating land, that was owned by the People's Republic of China since the Revolution in 1949 and in many cases had been given to locals and farmers for private markets and their stakeholders. Amongst them also many local party hacks. Land grabbing and other ways of greedy exploitation all inclusive.
People need houses, so therefore the deposits taken by Evergrande have indicated an interest in the particular building, so why not give the building away to someone who promises to finish and upgrade the building to enable these apartment owners to move in and enjoy their housing investment. Oh I forgot..... we are dealing with the Chinese government ( and their care for their people ) !
19:05 come on FT you're better than that. Everybody knows the big 4 accountancy firms are incredibly inept at audit. It's part of the service!
Hahahah yeah being "bad" at audit is actually one of the features dodgy companies pay for
jajajajaj
its not just people moving into cities, cities are being built where it used to farm land
Here is just another lesson in Exponential Growth. Dr. Albert Bartlett often lectured about this to his undergrad students. Yet, as everybody knows, Human beings are not rational creatures.
i've been seeing pictures of Chinese ghost cities on the internet for years,... now I understand why there are such structures
Obviously, they never did a financial model for each property. It was basically a Ponzi scheme. The future project was paying for the last project.
That's not what a Ponzi scheme is.
Property greed and excess does this to people eventually .... it was going to happen and there is no sympathy for them ....
The founder is cleaning the toilets of the communist party .....
@@lliamjurdom9505 it's ironic, do you know how your "capitalism" works? cuz capitalism also use consumer greed as a tool, when money does its cycle faster then the economy will also growing faster this law is not exclusive to capitalism alone tho, but it's exist in every economic system that use some kind of money for transaction
It's one year since this video was aired, but Evergrande is just about "live and kicking" on March 9 2023 subject to Bankruptcy Spirit not taking hold by Easter, Evergrande will live on wounded but not dead!
The ghost cities can wait, who animated this! That jenga tower collapse was VERY detailed for a 1 second clip, like actually very impressive. Move over pixar.
My Chinese friends said that the property market would never go down, that the Chinese government would not get it, that they could count on the government to protect them. I tried to have them consider the Western model of "what goes up must come down". So now we know.
In the longer run, properties would just go up. Of course, disruption to growth happens all the time. I own 8 properties. I know... Lol
"AMERICA HAVE NO IDEA WHAT'S COMING.." (2022)
@@ociiu its simply not true, it only keep going up now because the boomers havent died yet. Once there are less ppl in the west our prices will also fall.
So far, the prices in the Chinese property market have not dropped significantly. In theory, they do not have to drop. China could grow its way out of the problem. At 3% growth, with flat property prices, China would reach American levels of affordability in ~30 years.
Very good storyline. Excellent Video
Empty cities with thousands of unfinished or unoccupied buildings. How did this go unnoticed for so long.
Amazing! Lots of good data here. Absolute madness. Eventually chickens come home to roost.
Great video. Part of the story has been the financing provided by western companies, like the large mutual fund houses, investment banks etc. While ex-post, it may worst case become very clear why all of that has been built on very wrong assessment (the government will bail them out anyway), it may be very interesting to give some more insights on the 'psychology' of those portfolio managers, analysts etc. which made them believe for quite some time there is no issue at all... Thanks
Dude, ALL the money comes from the west. What do you think they are making in all those factories that all the peasants moved into the cities to manufacture? This is what happens when centrally planned idjuts are given trillions from westerners buying cheap crap from them. A giant Ponzi.
Less than you might think - China will not permit Chinese currency be exported. Chinese companies cannot pay interest to offshore holders of debt or equity. Tesla for example, can only export profits in the form of vehicles. Building companies can’t export anything to pay offshore debt (which was was why Evergrand was looking at car manufacturing). Evergrand was also using its developments in Hong Kong (whose currency is convertible) to pay its overseas debt.
Final words were "You can't just grow the economy by borrowing, borrowing borrowing." Um isn't this what the USA has been doing for the past 2 years? How is that turning out?
@C Those apartments were bought even before they the construction started, that is why a lot of buyers got left in the lurch when Evergrande stopped operations.
3:35 Love the vibe of the music!
For a foreigner such as me ( an Australian) this program was informative, tempered and high quality. Excellent.
So much more complex than can be presented here. Everything from greed to lack of oversight to conflicting interests to cultural insecurities to planning failures to willingness to turn a bind eye to the impact on the future.
I can sum it up with more clarity without all the rambling… DECEPTION!
Excellent piece. Accounting audits are a bit of a scam. They only certify that a few very specific types of financial fraud are not happening. That's it. They don't certify the overall financial health of companies, even though that's how they are usually interpreted.
You got to remember the construction was counted towards there gdp. So the ccp kept the construction going to artificially inflate their gdp.
Really good production - good music, video, presentation - my new fav subscription.
No one is living in these apartments, not the homeowner or a renter. What is the quality of the construction?
Brilliant work from the Financial times team
This is good work, solid.
Sound recording is marvelous.
The trouble is they didn’t build apartments, they built large concrete, ( supposedly), skyscraper shells. Fairly unusable and worthless in themselves. They might as well have taken the money to a casino on Macau!!😬🤨😏
Thing is, renting in china is cheap. I rented a pretty nice flat in xiamen, which is a wealthy east coast city, perhaps better known as Amoy in the west. $450 a month. Balcony, 2 storeys, 2 toilets. And utilities were just a few dollars a month too. That's 2018. When people say property is unaffordable, they are not talking about the rental market. I would never buy in china. You can't really buy property anyway. You can only obtain a 70 year lease which will probably be extended...but there's no guarantee of this. I believe that property is valued in china because ownership gives you the right to move officially to any given town. In the west, this just isn't an issue as you can move anywhere you want with or without property. Also in china it's very difficult for a guy to get married unless he has a property. Girls it seems just won't marry you unless you're a property owner! That's communism for you.
But aren’t many of these properties empty? They are not let so therefore make no income for the owner at all.
@@jasperhorace7147 no, they are not empty. Not in places like xiamen or Hangzhou or Shenzhen. Well, maybe there are a few, brought simply as investments. But basically in china, developments are built and they eventually get filled. But on the whole, rents are low. I'm pretty sure that in a place like jiaxing, a prosperous town between Hangzhou and Shanghai, you could rent for maybe $200 a month. It would not be luxurious at all. Bit basic. But liveable. This contrasts heavily with western towns. In London it's impossible really to rent for less than $1000 per month...and that's for something small, on the outskirts in an iffy neighbourhood. Yet to buy property is relatively inexpensive compared with china, especially considering the wage difference. Basically property to buy in china is crazy overpriced, or maybe was overpriced before this correction. Rents are very low. It's a bit like, you can pay $20 a day to hire a Mercedes, or you can pay $200000 to buy it. That's the property market in china.
There's also not many good investment vehicles in China so it's all channeled into real estate.
@@jasperhorace7147 Those building they've shown were years ago or when they were still being built. Most of those are inhabited now.
Thanks for this balanced and factual overview, without the unnecessary fear mongering and misleading drama typical of Western reporting on China.
Really u didn't see any fear mongering throughout this baked report
@@wickywak1 there are genuine concerns which have already required CCP firefighting and the stress testing of banks to any contagion. It has likely shaved off a few percentage points of gdp growth too. Now if we have further shocks like the Russia Ukraine conflict and the West goes into stagflation because of their horrible balance sheets, it leaves even less room for China to manouvere if any. If all the major economies fall into a serious recession, we are screwed.
We are here one year later, and a Hong Kong court issued a liquidation.
The first class in macroeconomics should be "An Introduction to Bubbles".
Since 2008, the pendulum between Greed and Fear seems to be swinging much more towards fear.
I'm slightly afraid to continue with stock due to the risks fueled by inflation and the recent announcements by the fed and the stock market crash forecasts. I have not been living my normal life since then. even tho it hasn't happened yet but I'm genuinely looking for alternative places to invest in. I would consider myself to be a socially responsible investor. What are your thoughts on cryptocurrency?
@Alice woodward Good read, thumbs!!
@Alice woodward I would like to get in touch with her for advisory purposes. Can you tell me how?
Gold silver and XMR
@@remsee1608 crypto is the new gold
Don't think of crypto as an investment. It would fall within your "high risk" share of the investing budget. Only invest in it if you support the ideological implications of crypto. For most of the budget, put it in mutual funds. Don't think of investments as a way to get rich, use it just as a nice nest egg.
Love this. Please share fellow Comrades.
Way back when these ghost cities were built and consequently units were purchased, and then the properties lay empty……did no one ever question how these properties would be maintained to keep their value, or did that not have much effect as the properties gained value just sitting empty…….whether they were deteriorating or not……..ANYBODY?
This was an amazing insight. Really puts the scale of this in perspective
"AMERICA HAVE NO IDEA WHAT'S COMING.." (2022)
Does it?
Suppliers were not paid since the collapse. Developers who didn’t meet the three red lines find themselves in a situation where suppliers refuse to extend credit for building materials now must complete projects with no money or materials. Those projects that are being completed now are using poor and cheaply made materials.
Thats been going on for years (bad materials)
They aren’t finishing their projects… They already STARTED building using cheap materials… more $ in evergrandes pockets
Huge assets that cannot be 'realized'. The poor can never own these properties but they have fundamentally built them and bought into them! It's a mess for sure!
the problem is that they do not build the tower one by one. There are so many uncompleted tower.
The usual misleading statement, generalizes Beijing housing affordability to the entire country. Saying it takes 50 years to buy an apartment in China is like projecting New York onto the entire US, it takes 24 years to buy a house in US.
This video came too late for me. Anyway cut my UBS China fund investment last week and took a 28% lost! Well maybe not too late, may lose more if I’m still holding it going forward Lesson learned, never trust wealth management bankers!
If you have wealth management you're rich.
I’ve sorta been following the Chinese stock market. A 28% loss isn’t as bad as some articles I’ve read.
@@thunder881 But not for long.
Use bitcoin instead
Am no economist, or with a fancy degree, but I work in construction, 40 years, I see things that only builders like me see.. All these high rise building look all wrong.. I see dozens of high rise buildings but all in the same stage of construction or first fix, as it’s called, namely the bones of the building or concrete and rebar.. that’s not how it’s done. You start on 1,or 2 complete it and move on and start more, almost a wave effect. If there is ten you start on one and move along so that , for example as building 1 fully completed and snag list done and ready to be handed over, building 10 should still be still doing foundations almost.. then building 1 is sold off which finances the next building and so on.. But all I see is dozens of high rise all build at same time but still at the first fix stage and no where near completion, it might look half build but it’s no where near half built, and sites empty too in daylight.. I just see disaster.. no other word comes to mind.. pure disaster 💁
Fantastic video. Very informative on the build up of how it got to this point. Keep up the good work.