Evergrande Files Chapter 15 Bankruptcy Protection - The State of Chinese Real Estate
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- čas přidán 28. 06. 2024
- 00:00 - Intro
01:39 - Recap
04:06 - Chapter 15 filing
05:52 - China’s real estate market
08:13 - The concerns
09:03 - How this differs from 2008
12:20 - Closing thoughts
Evergrande recently filed for Chapter 15 bankruptcy - let's dive into what this means, and where China's real estate market (and economy) stand today.
DISCLAIMER: I do not hold positions in any of the mentioned companies.
This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).
Lesson learned: do not pre-order, not video games, not real estates
They will be in an unfinished state and you have to pay for them to fix it.
My family pre-ordered a condo in the Philippines, the discount of getting it before it’s built is very attractive. Luckily ours is finished and has been handed over to us. I feel sorry for those families who got screwed.
it's not that you shouldn't ever do it, but you should be prepared to lose the money or expect significant delays. if you've built in that expectation and you can afford it, then go ahead
In civilized countries, pre-development payments are placed into an escrow or trust account, not to be touched by the developers until they hand over the keys to you. In China, the developers take your money and immediately spend it to cover the cost of future buildings and random vanity projects like electric car manufacturing. It’s almost like a ponzi scheme.
Same shit is happening in my country now. Its call Meikarta
It's refreshing someone actually qualified talking about finance. I am tired of "Everything is going to collapse" videos by people who are clueless.
I love it when those guys set a date, it passes and then they set another date for China to collapse for it to inevitably not
No kidding, the real kicker is those other channels have millions of subs more in comparison. Quite alarming in my view.
Smh
Ironically, if U go their comment sections, it’s full of bots and scammers. it just shows how clickbaity titles only goes so far of having a core audience
Exactly! The ignorance about economic subjects and overall macro conditions is truly staggering. Especially dangerous from those who go viral saying we are in a recession or there is some impeding economic disaster
Everyone thinks they are an expert because they read 2 paragraph article from a "free thinking" (B.S) source. Similar to self diagnosing with Google instead of consulting a doctor... People think they know it all
What a neat business model! Taking money from new customers and using that to fulfill obligations to past customers, while scraping a tidy profit off the top? What ingenious marketing! I can't help but feel like I heard of that model somewhere else, though... nah, it's probably nothing.
You’d have thought Chinese regulators would have made these companies use escrow accounts to tie the buyers mortgage funds to a specific property development so that companies couldn’t over leveraged themselves.
It's not a pyramid, it's a triangle hahaha
ppppponzi :D
Name definitely starts with letter P. ;)
It’s called the get rich scam model.
“… money from new commitments to fund old commitments …”
Ah yes, the timeless ponzi.
The Chinese real estate flywheel
Also the exact same reason that the US is so fucked; our infrastructure is a Ponzi scheme because we abandoned sane and gradual development plans and strategies after WW2 in favor of car-centric and accelerated plans.
Also how us social security works
It can work in theory if there's limitless demand for what they're selling, which there isn't.
@@carlc6486well not really since the obligations are backed by the treasury, who can print any shortfall the social security program has. Which ant much better but you’ll get your SSP, those dollars might not be able to get you much at that time then…. But you’ll get em. Just like treasuries lol.
Clear, simple and no hysteria. I love your videos.
I just caution you tho. No hysteria shouldn’t be a complement, it means you’re looking for a certain bias in coverage. And when the ship sinks, you’ll still be listening to tells you it’s fine.
Just be careful.
Clear and simple is good tho
Thank God Richard and I live in Canada, where the real estate market is totally balanced, under control, and will never, EVER warrant a video like this one. EVER!
Apples and oranges. The chinese market has a much greater dependence on real estate, both as a total component of their GDP and how they store their individual wealth.
And, comparing a state-run market to a relatively unrestricted market isnt really a useful exercise in this case.
You give god to much credit, he after all also determine the destinies of the other countries.
...stay tuned for the video I post next month...
Lol balanced.
@@rhythmandacousticswhat was unbalanced about this video?
I'm just in cambodia atm and seeing the level of unused chinese investment is alarming. Rows of skyscrapers in central Phnom Penh, all empty as well as literal mega mansions littered outside the city each $0.5million each. All empty. Asking the locals, nobody knows who it's for. If Phnom Penh is an indication of other belt and road initiatives that could be a lot more pressure on China than we thought... it's not just the ghost cities in China....
$.5 Mil in Phon Phen? US? 😅 They just wanted to get loans and run with it.
That has nothing to do with the belt and road initiatives. That's just real state especulation, which is stupid, but it's not a goverment initiative, nor is it unique to China. It's the same reason NY tallest buildings are ghost skyscrappers... It's billionaires trying to tie their money to land.
Definitely corrupt Chinese officials laundering their dirty money in real estate overseas. Buildings that no one buys nor occupies. Sounds like karma.
it was a casino center mostly for Chinese market ,than suddenly become illegal. the story of who invest it bankrupt is wildly spread in China (English ont so good）
This is an online gambling and telecommunications fraud center，use Live gambling online it soon become a city of sin which mostly only Chinese live in ，Many
wants to speculation in real estate. finnal it becomes too famous then illegal then no one live in.locals won't know there was
base of China's online crime
When I first went solo as an attorney I did some funds-tracing and petition-drafting work for EB-5 visa cases, mostly for Chinese nationals. Obviously I am unable to share any client information. But I can tell you many petitioners relied upon real estate value as their source of funds, and during the time I did this work I developed a weird facial tic where I furrowed my brow a lot. Entirely coincidental, of course.
Yeah, this never happened. My guy here flips burgers at a fuckin In-n-Out.
@@IAmTheDawnAre you projecting?🤨
@@IAmTheDawnwhat is the point of your comment here? How would a fry cook even know how to fake that kind of info? And if they did, why would they want to??
@@IAmTheDawn big-time cope here
@@IAmTheDawn +5 social credit
Thanks so much for another level-headed and incredibly well researched video. I especially appreciate the variety of sources you cite as supporting evidence. I would ask if you could start linking citations in the description so that viewers could check out the sources themselves, as it's not always possible to track down the original by a screenshot alone. Thank you!!!
Analysts like Plain Bagel apologise for mispronounced Chinese names while clueless influencers dont hesitate about their misinformed pronouncements! BTW Bloomberg is the one source you need to check all his key sources
Thanks for always keeping it neutral and drama free 🎉
Plain Bagel posts, I hit like and THEN I watch. You know it's going to be good even before watching.
Another Weekend relaxing treat, enjoy watching w popcorn while learning new & relevant good stuff. Thx a lot Richard!
Am I imagining thing or every time, recession or financial crisis happened that have a very large or long lasting impart to the world economy, that damn real-estate sector is always on the top three spot of why said financial crisis happened
I think it's because most wealth that most people have are tied to the most common asset they have (technically, everyone should have it at some point in their adult lives), which is land/property.
If every employee gets a piece of the company as part of their compensation, then almost all financial crises would be centered about capital and stock exchanges.
No
Real estate is a good indicator of a country's wealth, the land has value, and you can't create more land, when your savings are tied up to real estate, no matter how much money is printed it wont affect you, unless world population got a sharp declined real estate will only go up.
70 years of Communist China's guaranteed wealth of such property~@@robymaru03
@@LawlessLawyertechnically we should all have property/land/territory? If you work in residential, and to a certain extent commercial construction, we would agree that most tenants and owners don't know about upkeep. It seems a seemingly insurmountable situation considering the level of education and labor required, in the US at least. I'd appreciate a response to the contrary.
Caveat to the falling house prices: The fall is much more severe than you think because there is very little trading volume and in some cases the only buyers are state firms bailing out their cronies.
i happen to see something different here in T1 city.
Considering there is just under 200 million people living in Tier 1 cities alone, your logic is entirely flawed and extremely orientalist. Do you really think state firms are managing to simulate the demand of a 200 million populace? (Not only simulate stable demand, but also see a 6-7% increase in prices 9:55 . Average Occident Logic.)
I found out you are Canadian like me and I just want to say I really appreciate your work and videos.
It’s nice to see someone who have knowledge and willing to objectively analyze the situation. Keep up the good work!
thank you mr bagel
FINALLY! I HAVE BEEN WAITING FOR THIS FOR SO LONG!
Thanks for putting all this research together and sharing it, it was very informative. Keep up the great work!
Definitely more optimistic about not having a global meltdown after listening-thanks, I do tend to over-react unless otherwise explained.
That's most humans in a nutshell. You are not alone.
Thank you for this excellent explanation. Your editing skills are very nice as well!
Balanced and level headed as always! I didn't really notice anything with your voice but I hope you feel better nonetheless :)
Saw several videos in my feed about this, clicked on yours because you are not hyperbolic. Thank you for that.
Hello ❤ How Are You Doing?
i hope you feel better and not sick!
Wonderfully analyzed man! Your videos are on point!
Thank you for this.
I am happy to have stumbled upon your channel. It is refreshing to hear unskewed information.
As a grandma, I must ask, "Do you always talk this fast?" I don't seem to be able to listen that fast.
Thank you again for presenting this information.
Yes, finally a new vid! Thanks as always.
A western content creator depicting a fair coverage of Chinese news? That’s rare stuff right there!
Plain bagel is just diff🐐🐐
You put two spaces between That's and rare.
Yes, I noticed.
No, it doesn't matter.
Yes, I'm pointing it out anyway.
Fair coverage is a bit of a weird term when China, the country, runs a ponzi scene
@@samsonsoturian6013but he didn't add any racist bullshit or fearmongering tho, he just explained how this bankruptcy works
@@creepersonspeed5490western content creators are far better when talking about China 😂 now the CCP talking about the west is extremely biased
It is to good to hear from someone who knows what they are taking about instead of click bait.
Thanks for this clear explanation.
A well researched video. Thanks
Thank you for information
Thx for the video!
Thanks for the explainer especially on the gdp % of debt ratio and low household debt. Very interesting
Evergrand’s chapter 15 filing doesn’t mean much because it’s a legal formality addressing what has already happened. The news investors should be worried about is country garden. Plain bagel briefly mentioned them in the video, but they’re bigger than ever grande.
Good advice, so much easier to follow the economy with someone who is sounding reasonable - I think you gave a good long-term perspective which investors need to navigate the short term choppy waters
Plain bagel. Great video. 👍
Very educational’ thank you
great numbers. i think the best information on real estate situation in china
Thanks for another great video, with relevant information well explained, providing us with the context to understand what's really going on.
You’re awesome ❤
Not informed enough to have a useful comment on the topic but here to help with the algo. Hope your throat gets better!
good explain
Very good. Measured. Thanks. I finally subscribed - which I should've done a long time ago.
Great Job with this content....Keep Up the Great Work....Let the Scammers be Cool.... We're Here for Knowledge.....✌🏾🙋🏾😁💰🔥🌏🤑
@Plain Bagel, great vid! But I wish you went into detail about LGFV's, hidden debt obligations, growing non-debt liabilities - not just presales but also the increasing amount and severity of past-due receivables/payables that keep getting "evergreened", and declining government revenues and services in many provinces - e.g. dibao, their provincial "social security"-like welfare systems.
Hopefully you can cover some of that stuff in the future! Would love to hear your thoughts.
Excellent analysis as always, thank you!
i dont know how china drop the ball on this one, any rookie playing cities skylines knows you dont build new building and structure before there is any excessive demand. There is dramatic upkeep where it is completed or not
They got to a point where everything depended on new customers putting money in then place them on hold while they find more new customers to sucker.
China believes in "Build and they will come" strategy.
They overbuilt because that’s how they pad their gdp calculations. China had a bunch of empty houses since the 2000s which coincides when the world start noticing China’s skyrocketing GDP. Coincidence? I think not.
I'm optimistic Richard
i am cfa candidate live in Toronto i really enjoy your content true and pure content thanks.
Great video, subscribed!
That nearly two thirds of Chinese household investment is tied up in what rhymes with a Jonzi Team will make the pain very severe for the people. China is going to have a tough go for a while as they reinvent their economy out of necessity.
You should do an analysis into the Canadian real estate market next, and if its on the verge of a bubble. Some analysts are now saying it openly cause of the 5 yr interest rates shocks, but then there is narrative of immigration + policy leading to supply shortage for years to come - so would that sustain the bubble? Would love to see your acute analysis.
Would love to see a video on how hedge funds short treasuries
Can you do a vid on the state of the Canadian economy (real estate, the dollar, it’s stocks, etc)
13:50 Hope you feel better soon man
love this guy, states facts no b.s .
Excellent! Well done.
😊
Oh no! Now every finance CZcamsr that doesn't actually have a finance degree or job in finance has told me that everything is going to collapse like a house of cards!
He's a CFA and a CFP ya gronk
He literally has/has had both
@@JetJockey87I think OP means that this topic will get milked once again by non-credible finance bros, like they did with every other finance news taken out of proportion.
Guys, he’s actually defending Bagel.
@@JetJockey87he's making fun of *other* CZcamsrs
How much this will hurt other countries? No clue. But more than Evergrande country garden is doing poorly also, and they're bigger.
Sky isn't falling but China having big economic issues is still going to introduce some sort of instability to world markets given how big they are. So who knows what the ultimate ripple effects are if other companies have struggles in china
It’s hard to find non polarized information regarding China, thank you.
Is there an award for information density per minute on CZcams?
youre great
I would love it if you did a video on valorization, because it looks like China has a valorization problem
Thanks again for clearing things up with zero inflammatory opinions! What you do is important
Richard, you missed a key problem, local gov'ts were funded by R.E. land sales. There's a fundamental structural issue the way China has set up their economy and with this implosion has caused far more damage to the economies than would be expected. The knock on effects are deeper and far more resistant to fixes than might otherwise be expected.
Local governments are also putting in price controls to prevent the list price from crashing too hard, but the extreme reduction of actual real estate sales transactions reveals the damage.
It’s like a bank account you can live in but can’t withdrawal from
And the us gov,, how they are being funded if they are in net negative for many years ?
@@kitolzapparently people are getting by that by selling the place for the same price but giving the buyer post discounts by giving them stuff like gold bars. Complete madness.
Cover the Chinese property developer Country Garden matter which is going bust
LETS GOOO RICHARD WEIGHS IN ON CHINA ECONOMY!
Hello ❤ How Are You Doing?
Whoever is your video editor is a genius of comedy.
The Chinese government has much more levers to pull compared to western governments, and their incentives clearly are to protect export industries of China. I don’t think they will hesitate to step in aggressively, so extrapolating what the natural affect to the market would be is largely pointless.
If necessary Chinese government could simply nationalise the big companies of the industry, restructure their development plans while honoring old contracts, by printing the funds to do so. Then start a few big infrastructural projects elsewhere to keep the industrys employment in check, while keeping a tight grip on the value of their currency: maybe force the Chinese billionaires to keep more wealth inside China.
The moral of the story is: if you have the powerful market actors in a tight leash, can force your citizens to only invest in ways desirable for the national economy, and make private ownership conditional on loyalty to the nation, you can generate any demand and any supply you choose for. And as long as other nations get paid what they own and can buy actual goods with your currency, they have little reason to care how the sausage gets made.
Of course China could fail to do so, but that seems unlikely. Anything that isn’t rainbow and sunshine can be kept insulated from big cities and international trade.
Aye bruh imma be honest idk what you’re saying half the time but another great video as always🐐🐐
I like this
You should also cover the size of the shadow banking sector in China!
Please do a video on what the government approach should be on the housing crisis in Canada.
It's roughly the same as the US needs to do as per people like Charles McMohan Jr. and Jane Jacobs (I think that is her name);
Namely the government (or governments if we count the US too) needs to stop supporting the suburban and car-centric lifestyle that has dominated since WW2 if not actively try to discourage it and instead focus on and reward medium-density (or medium-high density depending on region) mixed-used zoning (particularly car-free or reduced car-usage) that lets developers build a mix of housing types and units. That will let a variety of housing and home types get built and put on the market rather than the only options being the ridiculously expensive, slow to build and inefficient single-family housing typically built nowadays.
@@ParagonFury density and high prices go hand in hand. High density is where you get the most expensive properties not the cheapest.
Tax incentives in problem areas with restrictions on foreign investment in residential housing would go a long way in fixing the issue. Just like New York and California Canada suffers from massive unhealthy investment driving prices ever upwards.
Its much worse in Canada than the U.S@@ParagonFury
@@badger_ninja8681Yes, because high density housing is only permitted to be built in areas that already have exceedingly high demand. Outside of those areas, the construction of car dependent suburbs generates far greater profits for the automotive, fossil energy, and construction interests which dominate U.S. policy.
In other words, high density planning is not intrinsically expensive.
Every time I think about this situation, I freak out.
Im surprised there was no mention of hidden debt.
Your vids are a breath of fresh air-- thank you :)
Hello ❤ How Are You Doing?
hola mami@@VictoriaMill
@@Mikerty391 can we chat privately? I will like to know you more if that’s ok by you
Hey if the lenders reject any restructuring deal from Evergrande how much money do you think can be recovered from Evergrande liquidation?
So, does that mean now is the best time to buy your NFTs?
It’s never NOT a good time to pick up a bagel butt
Winners invest in Monopoly money.
I'm not a finance guy, so forgive me, but the taking money from new customers to fulfill past obligations mentioned @2:44... is that not more-or-less the textbook definition of a Ponzi scheme?
Such a level headed take! As always, so refreshing!
I keep hearing all this stuff about how it is the end of the world and it's like... It just doesn't make sense. That isn't to say it will be a walk in the park. And it also isn't to say that the real numbers are not worse than what is being reported (because of course they are). But China just isnt the USA.
The issue with the 2008 financial crisis was that risk was not appropriately labeled, and there were compounding institutional investments that made bad situations worse. This then made the banks crash quickly, which then froze up liquidity and lending capacity. When you can't pay your loan because your bank can't come up with the cash to make the transfer, it causes the whole system to grind to a halt.
China frankly isn't like that. Housing is so extremely valued simply because there aren't other options for normal people to take on debt, or buy into an investment. The whole issue of it becoming so huge is because there is nowhere else to put money.
On the down side, it means that if things get worse, then the housing prices may be more dramatically affected. But on the plus side, it means that it is very much limited to housing, with minimal spillover to other areas.
The much bigger story going on is the belt and road defaults. China is getting a lot of pushback about their land grab plans, so they are absorbing a lot of defaults with no gained assets. I'm curious to see how that ends up playing out, as that was a huge industry for employment and pulling in foreign currency.
I won't even pre-purchase a video game, yet the Chinese are crazy enough pre-purchase a house.
That is absolutely nuts.
It's the wild west (not capitalised intentionally) here, man~
and they still have to pay the mortgage after the house is destroyed or they file for bankruptcy, what a great system!
I think is based off of how Hong Kong did their real estate. You can only do this if there too much demand. If the US/ Canada has too much demand, you would see the same thing. The sellers would be in control.
Is buying off the plans not done in NA and Europe? It's pretty common in Australia
@@lmnisop5516 Australians are concentrated in the capital cities. Higher population density means many off the plans apartments. Americans cities with the exception of a few are all sparsely populated with huge metropolitan area. Most people would probably be buying second hand houses. There is actually a big unfinished apartment project in Richmond, BC. I guess these things are not limited to China.
Good vid
The one inquiry I have regarding household debt is solvency. An individual or family's debt may be low, but given the numerous issues over the last year with banks not giving customers access to their funds, well even minimal debt is an issue when you have no way to pay it back.
To be clear I'm not trying to assert that the majority of Chinese citizens are about to go bankrupt. It looks like a lot of people in China are having trouble getting their money out of banks, but even if "a lot" is a million people, that may very well just be a rounding error in a country with over a billion people.
Why I can't find the amount of BlackRock exposure to Evergrande and Country Garden? Do you have these numbers.
"Restructuring" while they laugh at you all the way to the bank!
I reckon your overview was good, but perhaps a chapter how how local governments in China need financing from real estate developers from special vehicles (which allow them to borrow while it is not really legal otherwise for them to do so). In particular, the CCP would need to rescue these local governments which is a pretty bad signal to send given their ideological line.
Building homes in decades advance makes you go bankrupt. Its the same thing that happened with commercial shipping in the 2010s. Some hedge funds threw money to build up ships in order to get a pie from the shipping industry only to find out that revenue wasnt good enough and just sell their ships or bankrupt with loss.
If theres no demand you shouldn't overbuild stuff
Wow.
Could you make a a video on adyen?
guess we will have country garden next
sheesh the bots are in full force
For anyone a little more interested, the channel "China Update" does reasonably good china economy / policy specific videos, short and daily.
Maybe a slant negative, but overall mostly informative.
That’s a very kind take on that channel.
I wouldn't have noticed anything about your voice, if you didn't mention it.
Even then, you don't sound bad.
"Less developed" is an oxymoron since living standards are low across the board. There were some cities offerring ok wages for a time, but their cost of living was sky high while in rural regions cost of living was low but so were wages
But, but, but cHiNa iS spIraLlInG iNtO dEflAtIoN
Kinda. They're having heavy inflationary pressures due to real counterfeit bills and aggressive monetary policies, and extreme deflationary pressures due to falling wages, de-banking, and deliberate export of Yuan@@johnyossarian9059
You should make a video on the facts around the US commercial market right now. I’ve heard a lot of buzz around a potential defaulting on loans by holders of the real estate which is gonna dump a whole bunch of unleased commercial real estate on the banks which they will have to down value.
The borrowers could go into forbearance
Except there's nothing happening
@@samsonsoturian6013 not yet
what a gorgeous shirt you're wearing, where did you buy it please ? thank you !
Evergrande isnt the only domino though..
The US should focus on their own real estate market.
The biggest problem is the amount of savings backed by Real Estate in China. Investments usually held by middle class people, if it gets marked down that could generate a confidence problem inside their system.
Thank you. Its worth the wait for the Plain Bagel to speak before we all believe the doomers and gloomers. Cheers M8