John Fedup
The Bunker Group
Same thing as their losses in casinos, hard times.
China - Geostrategic & Geopolitical.
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- #502
Yep it's going to be a major concern for the CCP because we are talking about real money here. I wouldn't be surprised if someone at the top of Evergrande have a meeting with the executioners.
I don't know how valid this source is, but taken at face value, but if accurate this means that the Chinese economy is suffering further turmoil because the foreign investors and companies are a significant part of the economy. The loss in export earnings, jobs and subsequent drop in economic activity will be a significant negative mpact upon the GDP. The resulting unemployment will also increase dependency upon social services and discord within the society. This is a self inflicted wound and the CCP will eventually come to rue its stupidity.
Ananda
The Bunker Group
It will depend also what kind of Job that's loosing. Chinese labor market is not the cheapest in Asia anymore for sometime. Thus some high labor work/Low tech like in Textile, Garment, Shoes, Furniture, etc, already moving out from China to countries like Bangladesh and Vietnam.
CCP it self already possitioning China industry to more vallue added, higher tech industries. This to give proper compensation to their Labor that getting expensive but also increasing in skill. The Labor that can not compete/suitable for that kind of Industries usually beeing absorb on their domestic market, especially in Property and Infrastructure.
That's why CCP is very protective on Property and Infrastructure market. Big shock on Property industry will create big impact on domestic market. It will create havoc to all downline ecosystem, from steel production toward overall household consumption power.
China still for most part already become efficient manufacturer. Thus except for the low tech high labor intensive industries like I mention above, they still handle most efficient manufacturing ecosystem. Example in Smart Phone, you can move some of your production line to Vietnam, Malaysia and Indonesia. However those countries does not provide complete Smart Phone production ecosystem. Like they can provide final assembly line, some casing manufacturing, some electrical components, but not yet on complete supply chain on battery, LCD, chips, software development etc.
This is where the important of Property market is. They can take away some brunt due to downturn in some export industries. However if property collapsing, where CCP has to cover the population work force that can not be send to high labor intensive export market (that already leaving) ?
This why the financial industry is very concern on China domestic property situation.
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- #504
Panasonic and Toshiba have completely moved out of China. Samsung is mostly gone. Believe Apple has moved its computer, tablet and phone manufacturing to India. Think that they will be looking for non Chinese chip suppliers as well because China is becoming too unreliable to do business with. A lot of the workers at those foreign owned companies had mortgages or rents to pay. No jobs; no mortgage or rent payments, so that means mortgage defaults on an already stressed banking system.
the sheer size of china consumerism, supply chain, infrastructure means most company will keep presence there. vietnam dont have the size as china, india dont have overall expertise/infrastructure as china.
www.reuters.com
the deficit is even higher now than pre covid
apnews.com
China's stunning export comeback has factories scrambling for workers
China's manufacturing recovery, fuelled in part by demand from COVID-constrained consumers abroad, has soared past expectations this year, so much so that factories are now struggling to fill a shortage of blue-collar workers to clear mounting orders.
www.reuters.com
the deficit is even higher now than pre covid
US trade deficit hits record $75.7 billion in June
The U.S. trade deficit increased to a record $75.7 billion in June as a rebounding American economy sent demand for imports surging.
apnews.com
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- #506
Why should they when the political landscape becomes to risky for them? They have decided that the risk is to great and are moving their manufacturing elsewhere. Also their operating costs in the PRC have subsequently risen over time so the political risks and that have driven their decision. Don't knock Indian expertise, because they have a quite well educated cohort.the sheer size of china consumerism, supply chain, infrastructure means most company will keep presence there. vietnam dont have the size as china, india dont have overall expertise/infrastructure as china.
China's stunning export comeback has factories scrambling for workers
China's manufacturing recovery, fuelled in part by demand from COVID-constrained consumers abroad, has soared past expectations this year, so much so that factories are now struggling to fill a shortage of blue-collar workers to clear mounting orders.
the deficit is even higher now than pre covid
US trade deficit hits record $75.7 billion in June
The U.S. trade deficit increased to a record $75.7 billion in June as a rebounding American economy sent demand for imports surging.
Musashi_kenshin
Well-Known Member
I'm not sure if you two may have been talking about slightly different things, but I think weaponwh was saying that when the dust has settled most companies, whether by number or total value, will stay in China. Some have certainly left, but I'm not certain if we have overall data yet.
There are increasing risks of doing business in China, and I would perhaps unsurprisingly say that foreign companies should re-evaluate their prescence in the PRC, asking whether they have looked at all the possibilities or they've just assumed China is the best option. However, it may be some companies continue to chase that pot o' gold by staying put, much like certain financial institutions staying in HK and telling themselves there's no need to worry about the national security law, despite the fact it drastically changes legal rights in the territory and criminalises wrongthink.
No doubt we'll know in the next year or so whether this is part of an overwhelming trend or a more limited movement.
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- #508
That's true. Apparently the CCP has been confiscating land in some areas for "social needs" or other uses. That's one of the reasons why some of the overseas manufacturing companies are leaving. It will be interesting to watch.
From different sources that I have been reading and viewing recently the CCP is clamping down on people's excesses with things like online gaming being deemed as harmful and unsocialist. People are expected to devote more time to reading and understanding Xi Jinping Thought and that is given priority in schools now over subjects such as maths and sciences. The tutoring industry is being destroyed with families who used to pay for extra tuition of their children now being told that is no longer allowed and the family should spend that time studying Xi Jinping Thought.
The real estate situation, as already discussed previously, is another problem and the Evergrande collapse will have serious consequences. We live in interesting times.
John Fedup
The Bunker Group
Also, WRT India, a large pool of English speaking citizens, is an asset.
John Fedup
The Bunker Group
I wonder which is more harmful to an economy, replacing math and science with Xi thought or producing more lawyers. Both result in fewer engineers and scientists, kind of important IMO.
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- #511
The Evergrande financial position is becoming worse. They apparently owe in excess of US$300 billion and are trying to raise money to continue trading. To put that sum into context, the NZ GDP is around US$230 billion. The hope is that the government will bail the company out. It's a huge sum and if the CCP agree to pay it, that's a significant portion of the annual PRC GDP.
Musashi_kenshin
Well-Known Member
If the Chinese government does a bailout they'll probably just order the central bank to print money to do so, which officials will do without question. But it won't fix the underlying problem that the property market is massively overheated.
The other option is to start to lance the boil by allowing Evergrande to fall in a structured way, making the investors take a hit on their investments and sending a signal to others to invest more wisely. Otherwise they're sending a signal to other investors that they'll always get bailed out so won't correct their behaviour.
I was appalled to hear that Evergrande tried blackmailing their employees by demading short term loans else bonuses would be withheld. Now the loans aren't being repaid, so instead of being honest the management has indebted the people who have worked hard for them. I wouldn't say "only in China", but this is what happens when there's no independent regulation and companies think they can get away with anything so long as they bribe Chinese politicians.
EDIT: Uh oh. Another Chinese property company is getting shafted. Sinic's shares have lost 87%.
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About 2% of China's $14 Trillion GDP, assuming the government ends up covering the full debt (no "hair cuts for investors" and neglecting any assets that can be used to offset the debt). Non-trivial but far from catastrophic.
Of cause, it does establish a precedent that other large construction companies are "too big to fail", thus raising the chances of other construction companies doing much the same dodgyness that got 'em to the current situation.
John Fedup
The Bunker Group
I think another issue is what other lurking financial horror shows are about to implode?
War is not the only outcome in a contest for influence
1. If peace is desired, it is much better to be slightly better prepared for war — without a capability for deterrence. At the end of 2020, the size of China’s navy— was approximately 360, compared to the United States’ 297, according to the US Office of Naval Intelligence. It also projected that China’s navy will increase to 400 ships in 2025 and 425 in 2030. Given the growth of the Chinese Navy, there are two paths to peace — (a) the absolute surrender of a country’s national interests (eg. the Philippines and Cambodia); or (b) working with a coalition of countries to align economic and security interests (eg. Australia, South Korea, Indonesia, Vietnam and Singapore).
2. In this respect, I value the counter weight provided by the Japanese and the Australians to magnify ASEAN’s voice on matters of regional concerns. These include the ongoing insurgencies within the various ASEAN member states, the ballistic missile arms race in a nuclear Korean Peninsula, the military coup in Myanmar and the regional disputes on EEZs in the South China Sea between ASEAN members and the 9-dash line claims.
3. China’s Foreign Minister Wang Yi concluded a 3-nation tour of Southeast Asia (Vietnam, Cambodia and Singapore) and Korea aimed at shoring up Beijing’s diplomatic engagement with the region following a number of visits by high-ranking U.S. officials. Visiting Chinese State Councilor and Foreign Minister Wang Yi told Singapore’s Prime Minister Lee Hsien Loong that the long-standing China-Singapore relation has become an important stabilizing factor in the region. During their meeting, Wang conveyed greetings from the Chinese leaders to Singapore’s prime minister.
4. South Korea’s quest to become a middle power, articulated through autonomy in foreign policy, has been challenged in the ambience of great power competition. Korea’s President Moon said South Korea attaches great importance to its relationship with China. Despite the pandemic challenge, South Korea and China have maintained close high-level communication, and their economic and trade cooperation has grown, setting a good example for international cooperation against the epidemic. Moon said South Korea hopes China will continue to play a constructive role in maintaining peace and contributing to the realization of the denuclearization of the Peninsula.
1. If peace is desired, it is much better to be slightly better prepared for war — without a capability for deterrence. At the end of 2020, the size of China’s navy— was approximately 360, compared to the United States’ 297, according to the US Office of Naval Intelligence. It also projected that China’s navy will increase to 400 ships in 2025 and 425 in 2030. Given the growth of the Chinese Navy, there are two paths to peace — (a) the absolute surrender of a country’s national interests (eg. the Philippines and Cambodia); or (b) working with a coalition of countries to align economic and security interests (eg. Australia, South Korea, Indonesia, Vietnam and Singapore).
2. In this respect, I value the counter weight provided by the Japanese and the Australians to magnify ASEAN’s voice on matters of regional concerns. These include the ongoing insurgencies within the various ASEAN member states, the ballistic missile arms race in a nuclear Korean Peninsula, the military coup in Myanmar and the regional disputes on EEZs in the South China Sea between ASEAN members and the 9-dash line claims.
3. China’s Foreign Minister Wang Yi concluded a 3-nation tour of Southeast Asia (Vietnam, Cambodia and Singapore) and Korea aimed at shoring up Beijing’s diplomatic engagement with the region following a number of visits by high-ranking U.S. officials. Visiting Chinese State Councilor and Foreign Minister Wang Yi told Singapore’s Prime Minister Lee Hsien Loong that the long-standing China-Singapore relation has become an important stabilizing factor in the region. During their meeting, Wang conveyed greetings from the Chinese leaders to Singapore’s prime minister.
(a) Wang said the bilateral relationship has benefited from the strategic leadership of the leaders of the two countries, the joint efforts of people from all walks of life in both countries and the fact that the Singapore’s side has always viewed China’s development objectively and rationally. He highlighted that Singapore is adept at finding cooperation opportunities from China’s development and striving for win-win prospects.
(b) Coming about two weeks after US Vice President Kamala Harris' trip to the region that sought to pit countries against China, Wang's trip showed that China and the neighboring countries are aiming to work in partnership to strengthen diplomatic relations. According to the Secretary-General of ASEAN, China, Singapore and Japan have finished ratification of RCEP, as a key move to enable post-pandemic economic recovery.
(c) During the Singapore-China Defence Policy Dialogue (DPD) held on 14 Sep 2021, via video conferencing, both sides:
(i) expressed their commitment to strengthen defence cooperation as agreed under the enhanced Agreement on Defence Exchanges and Security Cooperation signed in Oct 2019, that includes the regularisation and scaling up of bilateral exercises and interactions across the Services such as the flagship bilateral army and naval exercises Exercise Cooperation and Exercise Maritime Cooperation; and
(ii) discussed ways to strengthen cooperation under the ASEAN Defence Ministers' Meeting-Plus framework and broaden ASEAN-China defence cooperation to build mutual understanding and confidence among the defence establishments.
(d) Chinese State Councilor and Foreign Minister Wang Yi said that his recent four-nation tour to Vietnam, Cambodia, Singapore and South Korea has helped upgrade mutually-beneficial cooperation among all sides. This trip follows upon the Apr 2021 trip by Philippine Foreign Secretary Teodoro Locsin Jr, Singapore Foreign Minister Vivian Balakrishnan, Malaysian Foreign Minister Hishammuddin Hussein, and Indonesian Foreign Minister Retno Marsudi to China upon Wang’s invitation.
4. South Korea’s quest to become a middle power, articulated through autonomy in foreign policy, has been challenged in the ambience of great power competition. Korea’s President Moon said South Korea attaches great importance to its relationship with China. Despite the pandemic challenge, South Korea and China have maintained close high-level communication, and their economic and trade cooperation has grown, setting a good example for international cooperation against the epidemic. Moon said South Korea hopes China will continue to play a constructive role in maintaining peace and contributing to the realization of the denuclearization of the Peninsula.
(a) Wang's trip comes amid stalled negotiations aimed at dismantling North Korea's nuclear and missile programmes in return for U.S. sanctions relief, which fell apart in 2019.
(b) When it comes to security matters, China made clear that it would protect North Korea if the United States and South Korea attacked it first, even when Beijing was imposing sanctions on Pyongyang and the risks of a US-North Korea escalation was high back in 2017. This is in line with the Chinese government’s commitment to only aid North Korea if the North is subjected to armed attack under Article II of the China-North Korea Treaty of Friendship, Co-operation and Mutual Assistance was signed on 11 July 1961 and renewed for another 20 years in Jul 2021. It is also worth noting that China’s alliance with North Korea is Beijing’s sole formal security commitment.
(c) A reactivation of inter-Korean hotlines in Jul 2021 boosted hopes for a restart of the denuclearisation talks. But North Korea stopped answering the hotlines as South Korea and the United States began their annual military exercises last month.
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Ananda
The Bunker Group
Why Evergrande has suddenly exploded into a potential global financial market crisis
Evergrande is the non-COVID and non-inflation event rattling stock markets around the world.
www.marketwatch.com
So, this seems what market expectations:
Positive one: CCP will bail out Evergrande, the market calm down. Give times to Investors to back off from Greater China Property Market, and give time for CCP regulators to stabiles other big players in property.
Negative one: CCP let Evergrande fail, the Investors panic, dump their portfolio in Chinese Market. Contagion effect to mostly Asian market first, and later on to big investors house portfolio holding. Due to already 'hot' political condition, blaming games begin. CCP close fund flow from their market to stabilise their own holding. Foreign investors panic, which can go to multiple direction scenarios on Geopolitical impact.
So there's big incentives for CCP to bail out Evergrande. Taking it over under state control could give confidence to Investors domestic and international. Question will Evergrande the only one need to bail out ? Thats the billions dollars questions.
John Fedup
The Bunker Group
I suspect there are indeed likely other problems. The trust scale on China is now very low and for good reason.Why Evergrande has suddenly exploded into a potential global financial market crisis
Evergrande is the non-COVID and non-inflation event rattling stock markets around the world.
So, this seems what market expectations:
Positive one: CCP will bail out Evergrande, the market calm down. Give times to Investors to back off from Greater China Property Market, and give time for CCP regulators to stabiles other big players in property.
Negative one: CCP let Evergrande fail, the Investors panic, dump their portfolio in Chinese Market. Contagion effect to mostly Asian market first, and later on to big investors house portfolio holding. Due to already 'hot' political condition, blaming games begin. CCP close fund flow from their market to stabilise their own holding. Foreign investors panic, which can go to multiple direction scenarios on Geopolitical impact.
So there's big incentives for CCP to bail out Evergrande. Taking it over under state control could give confidence to Investors domestic and international. Question will Evergrande the only one need to bail out ? Thats the billions dollars questions.
Trillion dollar, perhaps. It's been reported (e.g. by the Economist) that Evergrande has about US$300 billion of debt, including $200 billion taken from buyers for dwellings which haven't been completed. If the panic spreads . . .Why Evergrande has suddenly exploded into a potential global financial market crisis
Evergrande is the non-COVID and non-inflation event rattling stock markets around the world.
So, this seems what market expectations:
Positive one: CCP will bail out Evergrande, the market calm down. Give times to Investors to back off from Greater China Property Market, and give time for CCP regulators to stabiles other big players in property.
Negative one: CCP let Evergrande fail, the Investors panic, dump their portfolio in Chinese Market. Contagion effect to mostly Asian market first, and later on to big investors house portfolio holding. Due to already 'hot' political condition, blaming games begin. CCP close fund flow from their market to stabilise their own holding. Foreign investors panic, which can go to multiple direction scenarios on Geopolitical impact.
So there's big incentives for CCP to bail out Evergrande. Taking it over under state control could give confidence to Investors domestic and international. Question will Evergrande the only one need to bail out ? Thats the billions dollars questions.
Ananda
The Bunker Group
A property giant in China is on the brink of collapse. The government might let it fail.
The developer’s predicament could deal a serious blow to the world’s second-biggest economy as Beijing faces what might be one of its largest defaults.
Talk with colleagues in Financial Market, seems what NBC article wrote also reflected on Market sentiment. The sentiment that CCP will bail them out, getting eroded with sign that they will let Evergrande to fail, if they can't make agreement with their creditors.
Seems Beijing also come to same conclusion with many Market analyst talk this last few years, that China property market is already bloated. Thus some corrections needed. The property market also for many years already become play ground for speculators. Correction in the market will also needed to leveling with much of average urban Chinese actual buying power.
Markets in the region already being warned on contagion effect. This will have big potential to slow down growth. However considering the growth already low due to COVID, some analyst prediction so far also put potential contagion will not be as big relative to the market conditions during strong Economics era.
Still it will be big blow to China, and seems so far CCP already told each regional administration to prepare the effect. The rhetoric that come out from Xi Jinping administration so far shown crack down to the rich. Before to Tech Mogul, then to High Profile artist, and now considering the situation with Evergrande, the real estate players.