Chinese construction Mega-Bankruptcy. Evergrande about to crash for 355B

[paxmao]

Lehman Brothers went bankrupt with passives of 619B. Evergrande, a Chinese firm with ties to the CCP has admitted an insurmountable debt and has recently hired the same lawyers that prepared Lehman´s case for bankruptcy. 128 banks and 121 societies have claims against the company. The shockwaves may be felt through China and all the Asian region. The direct impact is around 2% of Chinese PIB and may cause more collapses.

Evergrande is a Real State / Construction company which works mostly in China and owns its own bank.

https://www.theguardian.com/world/2021/sep/14/china-property-giant-evergrande-admits-debt-crisis-as-protesters-besiege-hq

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[DaveF]

It's nowhere as bad as Lehman Brothers. In 2008 Lehman had over $600 billion in debt.
13 years later this is $300 billion.

Not saying it's not bad, just not to the scale that the Lehman situation was.

It also goes back to the fact that there is no such thing as 'too big to fail' no matter what country / culture you are dealing with.
Greed and poor management is universal.

-Dave

[Lucius]

As far as I can see, this is a matter for China and their banks, and I really doubt that the whole company will collapse just like that, and that the Chinese authorities will not do anything. There is speculation that the company rejects, but if it cannot remain operational and repay the debts - I do not see what is the other logical option.

Many analysts believe Evergrande will be forced to restructure its debt and possibly faces being dismantled under a government-orchestrated operation to ensure a soft landing that does not capsize the country’s bloated property market.

The company offers debt repayment over a multi-year period, but it is speculated that it could go bankrupt by the end of this year - unfortunately, as always in such situations, the highest price is paid by small investors. Yet this situation hasn’t arisen recently, so I’m a little surprised that the Chinese authorities have allowed (and I don’t believe they didn’t know what was going on) the whole thing to escalate to this point.

The good thing about Bitcoin is that the Chinese have practically banned it (trading&mining), so I don't believe that bad news from China can be used for a new FUD.

[stompix]

It's nowhere as bad as Lehman Brothers. In 2008 Lehman had over $600 billion in debt.
13 years later this is $300 billion.

There are other differences too, Evergrande is deeply in debt without a crisis looming. I wonder what's the real value of the assets Evergrande has and how much were overvalued to get more loans to expand more, betting on their exposure being far worse than Lehman as it is nothing new in China for a lot of them to end with far more debts than their assets. Probably it will end without anything really happening, the government "restructuring" the company, splitting it into thousands of pieces, and then erase from history the ones left with no assets and just debts to the local governments and banks.

Yet this situation hasn’t arisen recently, so I’m a little surprised that the Chinese authorities have allowed (and I don’t believe they didn’t know what was going on) the whole thing to escalate to this point.

It's starting to happen more often, sometimes the fear of coming across something that is really not right but still being supported by top officials is keeping people from sending alarms, local politicians don't want anything bad to be discussed about anything in their province so they are more interested in silencing critics than fixing problems.  HNA went down in an even worse way.

[dkbit98]

You can't compare this with Lehman Brothers, different time and country, but they have the option for bailout or to print more money, and I would say that ''...brink of bailout'' is more likely.
This is a big for China, because dominos will start to fall when one of their companies ends up like this, and I suspect this can all be staged so they can introduce their digital yuan in later stages.
I saw that people are starting to organize Evergrande related protests and communist dictator will not be happy with that part.
Real State and housing is one huge bubble ready to pop, but so is everything else today and next few months are going to be very interesting for Bitcoin and everything else.

[amishmanish]

This is also linked to the real estate market. Somehow, i keep hearing about this overheated real estate market in China akin to the Housing bubble which led to the 2008 crisis in USA. I have no love lost for China but at a time when the whole world is struggling, any sort of upheaval in the second largest economy of the world won't do any good to anyone. Especially in the backdrop of the pandemic and all the money printing that went on to support people and businesses out of job.

As far as a bailout is concerned, if the CCP judges that it is important enough to protect investor confidence, they'll do it without doubt. CCP has always supported businesses in one way or other. Most businesses in China are linked to the highest echelons of CCP so it is possible that they will bail it out before the shock can spread.

[The Sceptical Chymist]

I love this quote from the article:

The company blamed “ongoing negative media reports” for dampening investor confidence, resulting in a further decline in sales in September – usually a strong month for sales in China.

That's what other companies have said when they're in deep shit, although the excuse may vary and the company might blame short sellers for their dire financial position.  Either way, it's usually never the media or anybody else's fault when something like this happens--it's the corporation's.

This is also linked to the real estate market. Somehow, i keep hearing about this overheated real estate market in China akin to the Housing bubble which led to the 2008 crisis in USA. I have no love lost for China but at a time when the whole world is struggling, any sort of upheaval in the second largest economy of the world won't do any good to anyone.

I'm not on top of what's happening in China's real estate market, but it wouldn't shock me to learn that it's in a bubble.  Asset prices across the board have been inflated past all reasonable valuation methods for the last few years (including the stock market and maybe even crypto).  I'm not sure how this is going to affect the world, but it's probably not going to be good for China.  Can't say I'd be sad about that, because I'm not a fan of their government or their country in general--mostly because they're the source of most of the counterfeit goods in the world.  We'll see what happens.

[Fortify]

Lehman Brothers went bankrupt with passives of 619B. Evergrande, a Chinese firm with ties to the CCP has admitted an insurmountable debt and has recently hired the same lawyers that prepared Lehman´s case for bankruptcy. 128 banks and 121 societies have claims against the company. The shockwaves may be felt through China and all the Asian region. The direct impact is around 2% of Chinese PIB and may cause more collapses.

Evergrande is a Real State / Construction company which works mostly in China and owns its own bank.

https://www.theguardian.com/world/2021/sep/14/china-property-giant-evergrande-admits-debt-crisis-as-protesters-besiege-hq

China has been running hot for decades now, any normal country would know that the economic cycle of boom and bust is as natural as the sunrise and sunset. However the Chinese leadership refuse to accept the belt slackening and tightening of a well functioning capitalistic system - people borrow and spend too much, then credit tightens up and at least a mini recession has to happen. Unfortunately there is a weird concept of "losing face" or honor in their weird governmental system, a recession would show a sign of weakness and the CCP won't allow it. In such a governmental system it allows the rot to build up much worse as officials never want to be the one who takes the blame, so they cover it all up until the top leadership only hear about butterflies and roses. Due to the weird insular nature of the economy, it is unlikely that the true extent will be discovered until it is too late and possibly send the world into a shocking recession similar to 2008 subprime property crisis.

[hugeblack]

I think that theguardian.com newspaper exaggerates the impact of such news on the Chinese economy, and the problem is the delay in transferring real estate and other assets quickly enough and putting pressure on financial flows.

It is a temporary problem and I think it will be solved in a short period. Real estate exists, but no, there is not enough speed to sell these real estate, as it is not a debt crisis or debt instruments.

I also believe that the global economy has expanded greatly in the last year which makes the possibility of absorbing liquidity easy.

[Hydrogen]

As far as I know, the reason behind the crash of Evergrande (and many other chinese business ventures, banks and businesses).

Involves CCP forcing CEO's like Jack Ma who founded & ran alibaba to step down. So they can be replaced with CCP loyalists who are simply inadequate to the task of successfully running a large enterprise.

There are many chinese capitalists who successfully found and run a large business venture in china. Who are forced to resign and step down. So that the chinese communist party can take over. That's the reason behind there being a long list of spectacular failures for large chinese businesses.

It is possible something similar is happening in the united states. Jeff Bezos may have been forced to resign from amazon. So that political special interests could seize control of it. Something similar may have been attempted with Elon Musk and tesla. Elon tweeted tesla would be guaranteed to fail without him as acting CEO.

There is considerably more political interference in the private sector today, than there was in years past.

[tinkerNamedFerro]

As far as I can see, this is a matter for China and their banks, and I really doubt that the whole company will collapse just like that, and that the Chinese authorities will not do anything. There is speculation that the company rejects, but if it cannot remain operational and repay the debts - I do not see what is the other logical option.

Many analysts believe Evergrande will be forced to restructure its debt and possibly faces being dismantled under a government-orchestrated operation to ensure a soft landing that does not capsize the country’s bloated property market.

The company offers debt repayment over a multi-year period, but it is speculated that it could go bankrupt by the end of this year - unfortunately, as always in such situations, the highest price is paid by small investors. Yet this situation hasn’t arisen recently, so I’m a little surprised that the Chinese authorities have allowed (and I don’t believe they didn’t know what was going on) the whole thing to escalate to this point.

The good thing about Bitcoin is that the Chinese have practically banned it (trading&mining), so I don't believe that bad news from China can be used for a new FUD.

Agreed CCP is definitely letting the shadow banks feel the heat as they have always assume CCP would bail them out. I'm curious if this is a part of the NWO plan. China has definitely been biding their time and collecting assets and US debt.

[tinkerNamedFerro]

As far as I know, the reason behind the crash of Evergrande (and many other chinese business ventures, banks and businesses).

Involves CCP forcing CEO's like Jack Ma who founded & ran alibaba to step down. So they can be replaced with CCP loyalists who are simply inadequate to the task of successfully running a large enterprise.

There are many chinese capitalists who successfully found and run a large business venture in china. Who are forced to resign and step down. So that the chinese communist party can take over. That's the reason behind there being a long list of spectacular failures for large chinese businesses.

It is possible something similar is happening in the united states. Jeff Bezos may have been forced to resign from amazon. So that political special interests could seize control of it. Something similar may have been attempted with Elon Musk and tesla. Elon tweeted tesla would be guaranteed to fail without him as acting CEO.

There is considerably more political interference in the private sector today, than there was in years past.

 I know that general Chinese populace has a pretty low settlement to the stock market as it's easy to manipulate.  The situation with Jack Ma  exacerbated this, although China's real estate bubble has been a systemic issue for years. I suspect the inconsistent  supply chains of commodities used to construct new homes disincentivized new investors which derailed the whole operation.

[Darker45]

Well, at least it is not yet a bankruptcy at this point, although the future looks really grim for Evergrande. I'm now curious if strong ties with the CCP will save the company. Quite the contrary, it looks like the Chinese government is not keen on bailing it out. Perhaps this is just one way for the red government to absorb another giant company. The CCP might just let it fall freely and when it finally hit rock bottom it would take it in the name of saving its clients and its 1.4 million unfinished properties.

[Poker Player]

It is possible something similar is happening in the united states. Jeff Bezos may have been forced to resign from amazon.

Can you expand on that?

I have searched the internet and I don't see anything. I am quite surprised and I can see many reasons for it not to be so, since the political system of the USA and the USA are essentially different, but maybe if you explain the theory we can still see the logic behind it.

[Kong Hey Pakboy]

This won't just affect the Chinese and Asian region but also the African regions since they might have some contracts in that place since China wants to expand it's influence in that region too. That's a lot of losses but I think that China will brush it off like a dust since they still have other companies out there.

[davis196]

The Chinese government will have to step up and save this mega-corporation from bankruptcy.
The comparisons between Evergrande and Leman Brothers are far-fetched.
The US government had to save Leman Brothers,but they were too late and the LB bankruptcy caused a financial domino effect over the US and global financial systems.That was a big mistake.
I'm not a fan of government intervention,but the "too big to fail" corporations will have to be saved before it's too late.We don't need another major financial and economic crisis,in times of high inflation and a pandemic.
 

[Wind_FURY]

As far as I can see, this is a matter for China and their banks, and I really doubt that the whole company will collapse just like that, and that the Chinese authorities will not do anything. There is speculation that the company rejects, but if it cannot remain operational and repay the debts - I do not see what is the other logical option.

Many analysts believe Evergrande will be forced to restructure its debt and possibly faces being dismantled under a government-orchestrated operation to ensure a soft landing that does not capsize the country’s bloated property market.

The company offers debt repayment over a multi-year period, but it is speculated that it could go bankrupt by the end of this year - unfortunately, as always in such situations, the highest price is paid by small investors. Yet this situation hasn’t arisen recently, so I’m a little surprised that the Chinese authorities have allowed (and I don’t believe they didn’t know what was going on) the whole thing to escalate to this point.

The good thing about Bitcoin is that the Chinese have practically banned it (trading&mining), so I don't believe that bad news from China can be used for a new FUD.

Shower thought. Did China truly ban Bitcoin for more restrictive capital controls, because the government is expecting an economic crisis? OR it’s expecting to BRRRRR trillions of Yuan, and the CCP don’t want that extra cash to go to the Bitcoin market.

[dkbit98]

I am reading today that Evergrande could seriously affect crypto markets because there are some connections with stablecoins like USDT Tether and USDC that have exposure to commercial papers,
even if they are not directly from Evergrande this could affect global markets of commercial papers.
Tether is holding billions of dollars in commercial papers and they are probably in top 10 holders for that, and USDC issuer Circle have 9% of assets in commercial papers.
This is much more serious than people think and shares of other Chinese property developers and banks continue falling.


https://cointelegraph.com/news/does-evergrande-s-300b-debt-crisis-pose-systemic-risk-to-crypto-industry

[Lucius]

It's starting to happen more often, sometimes the fear of coming across something that is really not right but still being supported by top officials is keeping people from sending alarms, local politicians don't want anything bad to be discussed about anything in their province so they are more interested in silencing critics than fixing problems.  HNA went down in an even worse way.

It seems that the Chinese have softened up a lot when things like this happen to them. I was somehow convinced that CP still keeps things under control and does not tolerate such incompetence, because how else to call such company management. Perhaps @Hydrogen is right when he says that capable people are being replaced by suitable political governance structures, which generally destroy everything they are involved in. This is not necessarily a problem of China alone, because the world is undoubtedly ruled by politically eligible people, not those with expertise and competencies.

If we remember George W. Bush who practically destroyed everything he touched in his life, and became the president of the most powerful country in the world, then it is clear to us how the world works - the last name is important, and which political party you belong to - everything else is irrelevant.

Shower thought. Did China truly ban Bitcoin for more restrictive capital controls, because the government is expecting an economic crisis? OR it’s expecting to BRRRRR trillions of Yuan, and the CCP don’t want that extra cash to go to the Bitcoin market.

I would not speculate as to why they did it, but it is only important that they did it, and in fact did us a great service, because someone wanted to admit it or not, China has always been a hidden danger for Bitcoin - communist methods and human freedoms never could function together.

[Wind_FURY]

Shower thought. Did China truly ban Bitcoin for more restrictive capital controls, because the government is expecting an economic crisis? OR it’s expecting to BRRRRR trillions of Yuan, and the CCP don’t want that extra cash to go to the Bitcoin market.

I would not speculate as to why they did it, but it is only important that they did it, and in fact did us a great service, because someone wanted to admit it or not, China has always been a hidden danger for Bitcoin - communist methods and human freedoms never could function together.

Do you truly believe that? It was a danger to the PRICE of Bitcoin, but Bitcoin was never in real danger from China. They banned it, but did it “die”? Can the CCP censor Bitcoin transactions after the “ban”? Never, and the Honey Badger don’t care. Plus communist methods is why Bitcoin should be used in China.