Everything You Need To Know About the Chinese Evergrande Crisis (So Far) - How Money Works
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- Опубликовано: 18 сен 2021
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For those of you who are not already aware this has the potential to be far more than a run of the mill corporate bankruptcy. Evergrande employs over 200,000 people directly while also providing work for as many as 4 million subcontractors who work to erect thousands of buildings for the company every year.
Beyond just job losses, the company is also holding deposits for 1.5 million properties that may not be delivered to regular Chinese citizens who were just looking for a home or an investment property.
Now loosing a home is terrible in ANY country, but perhaps nowhere more so than in China. The value of these properties compared to the incomes of people buying them is astronomical, and it often takes multiple family generations to save up for a deposit.
Because of this, real estate has become basically the only thing that most people invest in, and over a million people losing that investment will have massive knock on economic impacts beyond just putting people out on the streets (as is that wasn’t bad enough already)
Despite these social issues and the apparent threat to the national and global economy the Chinese government has said that they are not prepared to bail out the company.
Why? Well politics… but there are a few things that you need to understand about this crisis as we watch it play out in real time.
The first is how this collapse actually started in what looked like an otherwise very healthy company?
The second is how bad could this get if the government does not step in?
And the third is, Will this all be contained? Or could this leak out and cause an economic collapse in countries outside of China?
#Evergrande #ChineseEconomy #HowMoneyWorks
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It amazes me greatly how I go from living an average lifestyle to making over 63k per month; the word "utter shock" comes to mind when I think about how money left for saving always ends up used with no returns. I've learned a lot over the past few years to question the idea that there are plenty of opportunities in the financial markets; all I need to do is know where to put my attention.
That's a lot of money you're making. How do you do this on a regular basis? You have to be a trading genius.
With a good start-up capital, you can certainly earn well. Every week, I earn around $15,000.
I've made a lot of money investing with Sir Zach Micah Demers, but it all comes down to your investment capital.
Thank you for this tip. it was easy to find your coach online. I just looked up his name on google. He is very proficient considering his résumé online...
I have invested with Sir Zach Micah Demers for a while now and I make good profits weekly
I agree that this bear market has contributed significantly to the growth of my portfolio. In a short amount of time, I was able to increase my capital from 20K to 160K. I essentially was just following Zach’s instructions and directions.
If your business model only works with constant high growth isn't it just a variation of a ponzi scheme?
You've got a germ of a good point in there, because both a ponzi scheme and a growth-dependent economic model share the property of being unsustainable in the long run. But otherwise, no, a ponzi scheme is its own specific thing. :)
Matter of Scale.
@@brandtbollers3183 Not gonna go full pedant on you: But no, not a matter of scale, there's a fundamental difference in kind.
That's what the P in CCP ttands for. Ponzi. The C stands for corruption, and the other C also stands for corruption. :P
I think so.
A lot of people don't realize how important Housing is to the overall economy.
How can other companies sell their stuff, when the priority of their customers suddenly shifts to not wanting to get kicked out of their house?
(New cars, Electronics, Retail, Restaurants, etc.)
What your viewers should know:
1) This situation is MUCH worse than you've described, as Evergrande mandated their employees "invest" part of their savings in their Company, or, lose their jobs entirely. Now, not only has the valuation of this Company tanked, they cannot meet payroll. 2) As Evergrande is one of the largest employers in China, 2.8 million(!) of their employees are now going unpaid. 3) The CCP refuses to be "blackmailed" into covering these speculation losses, thus why they won't intervene. 4) Because of the CCPs fighting with Australia, Coal, Iron Ore and other commodities have slowed to a trickle, thus tanking real estate (i.e. building of properties) even further and 5) because there's a paucity of Australian coal, there's rolling blackouts throughout China, slowing down their economy even further. Thank God they're not connected to World Markets as much as they could be, because their Economy is in free fall. I'm not even going to discuss the Infighting at the Top levels of their Government....
Good good the end of China's economy is coming
@@corinthiansdaniels3728 *Grabs bucket of popcorn*
PEACE
PROSPERITY
BONANZA
FREE THINKING
HAPPINESS
@@corinthiansdaniels3728 oh come on you people kept fantasizing about China's fall everytime a small obstacle China encounters it just dosent work like that,you free to keep dreaming tho
@@fluffyseal8782 its always lovely to watch a dictatorship fall. I also put a blame to the people who doesnt want to stand up for their future
“Anyone who believes exponential growth can go on forever in a finite world is either madman or an economist.”
*takes notes*
"in a finite world" but the universe is infinite
@@alanv3185 we're trapped still on earth, so we can't access the infinite universe yet. if we can colonize space, then yes. infinite growth then becomes possible.
@@HVBRSoF Well thats just what the markets are - speculation about the future
"China-US tensions: A closer look at the Five-Eyes intelligence partnership / CGTN" at.., ruclips.net/video/H6nkAVegk0g/видео.html
This has not been a good year for companies starting in "Ever"
Someone warn the battery makers!
Hmw, can I translate all your vids to Polish with an accurate voiceover?
Hmw, can I translate all your vids to Russian with an accurate voiceover?
@@KamikazeMedias why not?
I can do in Portuguese Br
@@mr.sr.461 🇵🇹
I have seen this one before ! it's a classic !
it always ends happily ever after right.... RIGHT?!
@@HowMoneyWorks Key word there is that it ends. Even if the government props up the company, they can’t slow down the pace of building or the Chinese economy would depress, and so they will have to let the bubble continue to grow until it pops, which will result in widespread unemployment and an inevitable economic depression for China.
Back To The Future
@@epicmatter3512 real estate bursting is more than just the run of the mill depression for China. Everyone there uses real estate to invest. It's the retirement plan for most citizens. A majority of those buildings you see in the video are empty and without any furnishings of any kind. They're just traded from person to person like a stock. Most people are in DEEP debt by purchasing their first one, and have to secure loans to do so. However, it's considered a basic investment for all people growing up. Even if they do have a tenant in the building, it doesn't go near into covering their monthly payment towards the loan.
And it's no coincidence that the Housing Market played a role in this.
Just like back in 2008.
Congrats on the 200k subs! From 10k to 200k in two months means you’re doing something very right. And all hail the youtube algorithm’s blessings.
Never forgot this lesson about how money really works: Who made the most money during the California gold rush? The people who made shovels.
I thought it was the people that sold the booze.
@@shawnjavery
Yeah, but they would’ve made money regardless of the gold craze.
@@matthew8153 that's why all those celebs are starting their own booze brands lol. It's easy and profitable as hell just find a company that already makes decent stuff and put your face on it.
How does that story that’s repeated everywhere explain how money works?
@@YTUserOnYT Because people like to simplify economics. They believe they understand economics
One of the craziest things is that I believe real estate is up to 25% of China's GDP... not very diversified.
Yes the country is heavily dependent on building houses and trading them for ever large sums of money. A peculiar result of this is so called ghost cities. Definitely worth checking out if you are interested in this topic.
Sucks for them because they haven't escaped the aging population (and eventual population decline) that mostly all developed nations are feeling. Real estate will lose quite a bit of value after that, right?
@@HowMoneyWorks also tofu construction.... Its amazing.
@@blakehoughton5244 China did it to themselves tbh, thanks to their force one child policy. Their population has aged faster than it should have naturally.
@@blakehoughton5244 at the very least, these sprawling condos will comparatively lose value.
Actual land should be a bit more stable.
*EDIT:* Oh, China doesn't do land ownership... I really wouldn't be comfortable investing in real estate over there...
wow this should be the best situation recap and overview I've seen in 10 minutes!
"Make money, pay me. Make money, pay me."
"Um, sir, it looks like we can't keep this up forever. Eventually, this business model is going to crash the company."
"That's ok. The government will bail us out, and even if they don't, we've each been making tons of money in the meantime."
"Oh, ok. I see. Never mind."
Like addicts.... now they can't get their fix, money money money.
So, basically, Evergrande's business model is less about selling a product and more about gaining new investors...
Where have I seen that before?
Sounds very much like a ponzi scheme.
@@NoovGuyMC Ponzi had an Instagram?
😂
Amazon, Tesla, &many other giant companies who didn't offer value, they just want investors.
The stock market itself is a Ponzi Scheme.
@@crazyshorts4278 fancy seeing you on here, hows the vodka? (Putin has shares in evergrande)
Bank of Scotland
The more I watch channels like this, the more I see the same thing leading to issues. Everyone wants to expand faster and faster, so they take on more and more loans. And once it comes time to pay back loans, the unsustainable expansion miracle behind to wear off.
You just described the boom and bust cycles that occur regularly. I watched a video on it about ten years ago where some dude laid it all out.
@@GregMoress Ray Dalio?
@@artofexistance Me? That pauper?? Pfft.
It makes you realise that companies that have no debt and achieve self funded organic growth are really the ones to invest in doesn't it?
The old saying "never live beyond your means" still has tremendous meaning today.
@@alfredneuman6488 Or companies that have lots of cash on hand. E.G. Apple
To become rich > You must value savings more than spending
@The only way to save up money is to invest in something tangible that brings gain
No
An intelligent investor sees in dip than risk
Behind every success there is always a risk, to take those risk isn't a bad idea to make it in life. Make your investment plans today.
Most people remain poor only because of the negative advices received from friend and family members against investing while the wise invest and grow higher financially.
The whole point of Chinas stance recently is to stop two things:
1. Second homes for rental.
2. To reduce the size and power of China’s biggest companies.
3. Reduce property lease prices by shaking up the industry, but also reduce confidence in the market fixing supporting point 1 and 2.
@randomguy8196 we soon will find out if the Chinese Government is willing to make this gamble, in return for affordable housing, and
more smaller less powerful companies.
More small companies is better for employment numbers as large companies get economy through scale by consolidating roles, and optimising the workloads of each individual. In Chinese this has lead to 996 culture. Which the Government is desperately trying to reverse.
IMO they are waiting to buy up the ashes of evergrande for a big discount and enter the government into property development
No company is too big to fail. That expectation is what drives companies to do dangerous things. When people invest they need to acknowledge a certain amount of risk and look at the fundamentals of the company they’re investing with. Setting a precedent that companies can privatize the gains in publicize the losses sets a dangerous precedent
But if you're in China, the "rules" are made by the CCP to benefit the CCP.
The true term is not "Too big to fail." But is in fact "Too big to let fail" because of the damn to the economy that'll occur from loss of jobs, asset selloff driving down prices and pension funds.
You can say that until the bank you been working with had some investments in it. If it is that big, it too deeply connected to other entities and will cause the entire network to be blown. Look at 2 major recessions in 1934 and 2008, it impacted on other factors of the economic.
to buy a property in china means u (an average earner person) signed a life long contract as slave with developer for 70yrs … a property in china cost million
In China there is no individual investment opportunities besides real estate. So what you're saying might be true in a free market, but not in China where you indirectly forced to invest in those shady companies because it's literally the only available option.
I'm surprised you didn't also mention their Sea Flower project. Evergrande invested US$24 billion into building an artificial archipelago off the northern coast of Hainan Island as a tourist attraction. The Coronavirus epidemic crushed any hopes of returns on that investment, probably contributing to their current collapse.
24 billion is a drop in the sea, they have 400 billion in debt
It wouldn't help at all. It's a big percentage of the debt for being merely one side project.
@@Kznarf 20% is pretty significant..
They also have a shell car manufacturing company that produced nothing among many other businesses
Chinese government bailed them out before….. they are hoping the government will do the same this time But after the big companies purge it’s a different story…. The government actually wants the real estate market to collapse which is align with Xi vision making house cheap again 😬😬😬
Imagine a society where it takes generations to get a deposit on an apartment and there isn't ALREADY "wide spread civil unrest".
The events on 06.04.1989 convinced the Chinese public to not rebel.
@@alexmilchev5395 they didn't describe it as an unrest anyway, even further to not seriously happened.
You also forgot to mention that Evergrande "invested" tons of money in basically every corner that it could. So basically wasting money in other sectors instead of using it for properties.
The sheer quality and quantity with which this man is pumping out content is nothing short of miraculous. Kudos to this channel 🤗
Agreed!
I am a negative person and therefore disagree for some reason and would like to think of an insult but cannot.
It's a whole team though.
The irony of this being a video about a company that grew so hard they killed themselves.
@@howtogaintime739 Twitter guy?
The timing of this video is amazing given the headlines I've read this morning. I think the way this _could_ influence the US markets is through _sentiment_ . Wall Street could take this as one of many other indicators that the bull market run we've been on is ending. If some key investors get spooked, then that'll spook others, etc. We'll see. Love the graphics in this, too. Solid. I need to up my graphic game.
MOASS TIME BOIS
The major thing I see happening, is that chinese companies and US companies are all heavily entwined in crypto. If Chinese companies tank, I can see crypto going down too, and thus liquidity for hedgefunds and those in the market all around the world who depend on it to balance out their overleveraging.....
Ah, yes. The self-fulfilling prophecy. Fear something is coming, so do the things that are characteristic of the event and be a cause of the event yourself.
Truly this comes down to gambling, Do you want to bet your money on China? I don't care about your decision.
This video is about 3 weeks late. Everyone in the finance world has known of this situation for quite awhile. The reason why this video is out now and it's in the media now is because their first missed interest payment was this week and wall st can now "sell you the news". Alot of poor saps gave up their shares today. As long as Yellen can talk everyone into raising the debt ceiling all is well
Wow! Great synopsis, but you left out two key details of note:
1.) Most middle to high income Chinese invest their disposable income in real estate ala land speculation. That is, many people do not live in the realty they buy. They buy property, and wait for the value to increase, so they can sell it off, or collect interest. If land prices fall dramatically, due to evergrande and other companies selling down their assets (as we see already starting to happen) millions of Chinese people will see their savings and investments WIPED OUT.
2.) In China, the tax regime is insufficient for any level of government below the central level to operate on alone. 75% of the tax revenue goes to the central government in Beijing. This leaves a meager 25% of tax revenue for the remaining 5 levels underneath (whereas the USA, Canada, and other countries generally have 3 levels of government, "Federal," "state/provincial," and "local," china has 5~7 levels, depending on which part of the country you are talking about). This revenue is insufficient, and provincial and local governments rely mostly on what's called LOCAL GOVERNMENT FINANCING VEHICLES (LGFVs) to survive. LGFVs are private ventures, owned by local governments, whose earnings fund local governments. In theory, LGFVs can be any type of company, but most LGFVs are just land auction companies. LGFVs raise funds for local governments by leasing land (the 70 year lease thing) to realty companies like evergrande. If there are no more Evergrande-like companies, or if the value of land falls too low, than local governments may not be able to fund themselves. Think about cops, public school teachers, garbage men, and other local government employees marching on the streets, coz they haven't been paid. That's civil unrest.
The problems started long ago and was reported by Andrew Left who then got banned from trading in HK. Even before he reported most knew that Evergrande was swimming in debt.
Talking about debt.
Apple also have 160 billion debts
And lots of bonds.
@@bungkusi2432 And that Debt is mostly because of it's aggressive return to shareholder program. Increased dividend and stock buy backs. It still has massive amounts of real assets, cash reserves and revenues. Evergrande never owned any land, just leases or any real assets. There are lots of ghost cities in China that barely anyone lives in because those projects where never really completed or the workmanship was so poor that they are unsafe to live in.
Evergrande defaults on Monday, FED is expected to tamper on Tuesday ... and the week has 5 more days
Taper?
@@ibingly basically increasing the basis interest rate.
@@brutester I think tapering and increasing the interest rates are two different things, no?
Tapering and interest rate hike is two different things. Fed will not taper soon, and interest rate hike is even further in the horizon.
@@freelikesummer931 yes they are different. But have the same target - reduce inflation.
Given the similarity, I think we also need to acknowledge the Kingold Jewelry situation from last year. China's largest gold mining company was found to have secured loans from multiple banks, using over 80 tons of counterfeit gold as collateral.
what happened to them at the end? did the central bank bail them out?
Wow I had no idea about this!
Bloody hell!! Counterfeit gold??? My God...Is there anything..ANYTHING at all that is produced in China that is not, well...crap??? (When I say China I of course refer to their government. Not the country itself)
@@rickbloke17CR Research the psychology behind tyrannical governments. Hint: it's not just the government causing problems.
Chinese economy is largely artificially primed
Really had to hit that 10 minute mark.
Lol
I really enjoy watching your videos; keep up the great work!!!!!!
This channel is way much better than those so called professional media like economist and bloomberg.
EVERGRANDE has NEVER reported a loss, in any of the quarters. Talkin about accounting haha. But hey, loss is reported as inventory. LOL
You're enjoying this too much, but you're right.
That's why cash flow statements are super valuable. It's harder to BS than income statements.
Sounds like Tesla and how they've been accused of putting warranty repair costs in the asset column under Goodwill.
I think blaming Accounting is a bit too rush , we yet to see was it fancy accounting and valuation or was it was pure greed and growth hunger
@@deanchur Ok paid hater.
When you hear about locals jumping off building because they've lost everything, it'll get worse.
Wait really?
Pretty common
I mean what are they supposed to do? pay back the loans?
The important thing is to keep always in mind that economic hardship is not an exclusively Chinese problem. I mean, the ones who love jumping into trains every morning are others... 👀 🇯🇵🇰🇷
@@pinktide5797 Japan does not have a uniquely high suicide rate amongst 1st world countries. That's a myth.
This is a good video, but unlike Lehmans, Evergrande actually owns tangible assets. ON the other hand the Lehman’s collapse forced the financial markets to actually price in risk, which previously they had not, and this is something which could apply to Evergrande. Thus the government may actually allow Evergrande to collapse to force the other developers to price in risk. As for the investors, those who had already put in money will suffer, but there will be a large stock of low cost housing for other investors, and unlike houses in rent control areas in the US, people would be happy to buy those apartments.
As for impacting the outside world, this would at most only accelerate what is occurring already.
I love that this channel is exploding!
Thanks Josh!
Holy jumping Jesus. Yours has exploded too
@@HowMoneyWorks 1:43 too soon… second time we’re asking if an issue China created can be contained, in 18 months.
RUclips has banded me for speaking the truth please America let all the other Americans know what's going on because RUclips is not there with the Democrats
@@HowMoneyWorks when do you think the Chinese communist government will implode?
We are going to see this world wide as the real estate bubble blows. Young people in the Toronto area where I live will be in trouble when the house they just bought for $1,000,000 with 10% - 20% drops to half,
Do u think it will come down
What evidence is there that this would happen in NA? One of the biggest reasons real estate is so expensive in some cities in NA is that the supply of housing relative to demand is much lower due to zoning. That has nothing to do with underlying financial speculation.
That's scary
Toronto has 100s of thousands of immigrants coming, property will continue to pump as their is a house shortage
@@drainer8073 there* also you are a clown. How is this also your 1st time commenting on this channel? Craven
5:00 "Constant stream of new money coming in" should immediately ring everyone's "Ponzi" alarms.
Yes I understand constant revenue is how every business works, but there's no way 10-15% price growth per year is sustainable. Even in China where everyone is all-in on real estate & almost nothing else.
CCP and connected business is in the industry, heavy industry, infrastructure, global transportation, research and new tech. But even they cant afford to cover all this shit. Not only real estate in China will be sold low. The same will run in US, Europe, somewhat Asia. Africa maybe not much.
All I could think of is that this is the Chinese version of a ponzi scheme.
Fantastic explanation man thank you and your team 👍🏼
Thanks for content! First vid and enjoyed it!
It’s amazing how human silliness cuts across cultures, continents, colours! Dubai did the same thing back in 2007 with outlandish over reach in property projects: artificial islands, islands shaped in to world map sold to celebrities for $100 million! Etc etc and then the 2008 recession hit and everything collapsed! Dubai defaulted (it was state owned property developers that did this) and had to be bailed out by Abu Dhabi to deflect another major market disruption event. And now 12 years later you got the Chinese falling into the same hole!
Well can you blamed dubai? They tried to diversify their economy by building their tourism but failed. Good intention bad execution.
@@kerosblue5609 No one is ‘blaming’ dubai but I think it was more about greed, showing off and reckless impulses than diversifying! If you start diversifying your economy with $50m homes in a place that never allowed property ownership, then we have a deadly combination of ego + invincibility syndrome = disasters 90% of the time!
@@Quantum-1157 on the surface it looks like greed, but they know oil wont last forever
@@kerosblue5609 Dubai’s oil ran out in 1991! It then wanted to go it alone after the success of Emirates airlines and tourism and ignored what Abu Dhabi and others in the UAE federation were saying: ‘hey take one step at a time’ . But In the end, it was the same hydro-carbon rich Abu Dhabi that footed the bill! As the western consultants who made a fortune advising these projects simply said: ‘you play hard, you fall hard’ ‘no one could have predicted this recession’ sorry! Thanks for the cash, we are out of here!
@@Quantum-1157 the UAE still has oil what is your point?
Crazy, especially since real estate is a non-productive asset(residential).
Same issue in Turkey. The government believes construction is the key for strong economy. However we know that it is BS.
It is actually productive. You either rent it (cash flow) or live in it (renting to yourself)
@@henryroberts1233 no it's not it's a piece of metal and wood on a limited resource,land that multiple generations save up for in china . But real estate is adding no intrinsic value to our lives the many are paying 30% of their income for it.
spain too in the early 2000 invested a lot in real estate and construction, then financial crysis hit and unemployment reach 25%
@@Tonyx.yt. yet nobody takes lesson about it
As someone who has recently started in the insolvency business, this is really helpful to me. Great video as usual
This kinda tune has been blowing for more than 20 years, and China is still blooming
Your definition of Bloomimg must not be the normal definition. China is Far Far Far from blooming
In economical terms 20yrs is a very short time scale.
You either dont understand economics or you're just willingly being ignorant.
USA GDP is still higher than China
It will reach equilibrium, at that time, China will stop growing and USA will stop declining
On the surface only
@@bungkusi2432
With Beijin Biden running the country? 🤔
Your living in dream world if you believe that equilibrium crap.
Something I want to point out in the video. At 7:13 when you talk about how evergrande started lowering the prices but it had the opposite intended effect on new buyers. This is kind of inaccurate. From what I heard from a few of my Chinese friends shopping for places back in 2020, evergrande actually had a bait and switch scheme going on. They were selling homes to people who signed up on their app for a limited time offer of 25% discount off the list price for a home. However, most of these homes were in undesirable areas or not even built yet. Other situations where the home was in good areas, they were being sold 25% above the normal price to offset the discount. It's things like this that created a growing discontent with their brand.
So basically, Evergrande is in the business of building pyramids.
When it comes to China everything not just housing is a ponzi as every Chinese person in China does the exact same thing at the exact same time. The same is true for all the Chinese that live outside of China. I live in a city that's 98 percent Chinese and I'm white so I know exactly what I'm talking about. I also witnessed firsthand what the Chinese did to a small city called Agincourt which is in Scarborough, Ontario Canada. This was back in the mid 1970's and was the very first city the Chinese destroyed outside of China. Home values were 20 percent higher than the entire rest of Scarborough and back then anyone white would only pay what a house was worth so the Chinese drove up the price of Agincourt not the locals.
Fei Ro
@@parkerbohnn wow racist bigot much . How much does cia pay u
@@zacksmith5963 How come it was racist if its all true?.. Only idiot hurt their ego if it was real..
@@pwat6311 nope . Try again
real estate gigants going bust, while housing prices in the market with the most unaffordable housing prices go down?
sounds like a good deal for me, from a human point of view.
If you wanna buy a house,yes of course,this situation will be benifited by you definitely,but how about the average person that invested in real estate and having losing the one chance they have of making a profit in investment, you would be wise to know that the rich and powerful always have a way to shift responsibility away, at the end its always the average citizens taking the blow while the rich get away with their responsibilities and mistakes, I've seen it so many times its practically part of the rules of the game
@@andrewchin5583 living in should trump investing in. Period.
@@justaminute3111 Xi agrees. “housing is for living in, not for speculation”.
Thank you. Very informative.
I feel that the African countries and Asian countries that are heavily dependent on Chinese investment would be hit hard if this would became a full blown economic crisis.
@Srika Redhouse The Chinese Yuan is pegged to the US Dollar!
@@bodigames that's the Hong Kong dollar
@@williamcll maybe do some more research. The Chinese yuan is as well.
@@bodigames Yeah that's my conclusion where did you get your sources?
@Srika Redhouse USA has aided their allies so much that they could stop forever and the countries would be fine. Don't lie to yourself
"These assets are NOT liquid" And there's the problem.
Along with the illustration of what “deflation” does to commerce and trade velocity.
Wonderfully succinct and clear explanation.
This channel so informative damn
“Remember me?”
Sincerely, 2008
great Video as always. You're very good at reducing a complex issue to most important points.
Glad you think so!
Wow, this video really helped explain a lot of how this happened. Thanks.
thanks for such knowledgeable information
I don’t know much about economics but this sounds like a ponzi scheme.
Every flavor from the fountain of Fraud has been thoroughly sampled, you can be utterly assured.
Who Knows If it will spill over, but no matter what happens it will definitely shape the future of China and as such the world. I'd say it was probably a good idea by the CCP to try to put the breaks on the housing market now, though methods probably aren't the best.
yeah, you can say a lot about the CCP but they at least have the foresight to be able to see this problem coming and are trying to do something about it
HMW neglects to mention that Chinese citizens and companies buy/invest into foreign markets, like America and the west. So it will effect us through those channels.
Jappards it has massive implications for specific cities like Vancouver, among others
They actually put down some good policies man...what else are they supposed to do? Bubbles are delicate by nature, there is not really a 'good' way going around them, only bad bad or disastrous
@@coreytaylor447 they just said they won't interfere directly as they have made this political image that they are different from west and for them, no company is too big...so they will intervene indirectly since the state owns everything anyway
70 years is also the amount of time a chinese family needs to pay off their debt for the bought property
So... they get nothing in the end. Harsh.
I have seen the same video with similar titles for the last 20 years, but a broken clock is correct twice a day, so keep going, you will get it right one day
Isn't this just a ponzi scheme with more steps?
Well probably, but it didn't necessarily need to be had it just slowly delivered developed properties to a stable stream of buyers.
Asset Bubble, Ponzi Scheme....
The only real distinguishing feature is if the earliest ”investors” managed to cash out and disappear right before the latest investors start trying to jump off roofs.
No. Ponzi never built anything.
@@LyndonLaRoucheArchive Well, the company used non-existent assets to buy more non-existent assets. Most of the assets did come into being eventually but now the assets will remain imaginary because they were never built to begin with.
@@dallascopp4798 Keep in mind what Charles Ponzi did in the first place. He used a few cents difference in exchange rates in postal coupons to get his initial suck... investors, which he was able to pay off by the income from later "investors".
Damn, this is a good lesson why you need to diversify an economy.
Good lesson on why govt needs to keep themselves out of regulating markets
@@imbadrakingmukti1877 Yeah, because the unregulated markets before the 1930s were free of these sorts of problems, eh? And deregulation in the financial industry was just what we needed to do leading up to the 2008 financial bonanza.
There are certainly examples of bad regulations, regulatory capture, and other negative things resulting from governmental errors. It does not follow that all regulation is bad, and there are MANY historical examples that show that zero regulation invariably leads to bad outcomes.
@@jebeda ok.. u know that 1930s was caused by government regulating import tax on goods overseas right? Resulting in counter taxations from other nations that led to the crisis? Also 2008 was caused because government instructed banks to be lenient in giving loans and mortgages to people regardless of financial status, employment status, criminal records etc so the US can have "homes for everyone" and when everyone default on their homes because they can't pay, the banks were left with devalued homes with noone to sell to that led to the crisis.
@@imbadrakingmukti1877 I think you are seeing the issues tinted through the lens of a per-conceived world view (to be fair, I am probably doing the same in the other direction, but I am trying not to). For example, a more accurate interpretation of 2008 would be; the government did not "instruct banks to be lenient"; rather, after intense lobbying by the financial sector, regulations were relaxed which allowed banks to be more lenient and they decided to give out loans willy-nilley, etc. etc.
The blame, of course, should be assigned to those who made the loans, regardless of what the regulations allowed. If regulations REQUIRED bad loans, then of course that should be fixed. My position is that the regulations should prohibit bad loans, or at least greatly dis-incentivise them. I think this is a much better position to hold compared to having no regulations at all.
It harder than say it and in some country can't do that.
There might be an economical turmoil but there is no doubt that this is still the best time to invest.
Best time to invest? thats funny tho because in the last four months I have lost more than $47,900 in stock market which is the biggest I have loss since I ventured into stock investment.
you could be right or wrong depends on your expertise, I once made such loss when i invested thinking i have gathered enough trading skills from youtube videos but now its a different ball game for me because I was lucky to have met "Tamara Diane Hagan", a financial manager and stock expert, I have made more than $165,000 in 6 weeks under her supervisions.
Really? people are cashing in from the stock market and frankly speaking its comforting seeing someone admit to the fact that they actually seek help from professionals. please how can i reach Tamara ?
search her name on the internet to reach her
thanks for the info . Found her website and it really impressive
This is very spoopy.
They're crying when their speculative investments went south,
But they weren't crying when their investments were growing and they weren't selling.
Waghh waghh.
Im curious what they meant by definition of "investment" there.
There’s more to the evergrand crisis, like the company forced their employees to invest their bond, 90% of the employees has to buy it as it will be their KPI, minimum 100k yuan.
wow that is terribly unethical to force people to do that. Also screws them if fthe company fails.
@@Kznarf the company owe a lot of money to the contractors too. And millions of ppl who bought the apt that’s still being built, now the company don’t have money to finish it .
A classic story that I've heard in the past and now it's happening again. It's either people never learn or they are dumb.
Most people are just trying to survive, which makes people relatively predictable.
Both
People are greedy. That’s your answer.
Both. It's always both.
PEACE
PROSPERITY
BONANZA
FREE THINKING
HAPPINESS
Topic suggestion: could you explain how ETFs work? It is easy to understand that it is a passively managed fund and its shares are sold on the stock exchange, but how they are increasing their funds if we are just buying shares?
Being a Chinese who has seen soo many delutional content creators spewing out propaganda, this ones most akin to whast actually happening in CHina. Good work
What do you mean. Is this all false information ?
@@luisr8838 No, he just meant that this channel and specifically this video is the most truthful to what is really happening there.
@@luisr8838 Yeh, the other propaganda videos are all about how the Commies are somehow ruining businsses on purpose and "dont like billionaires" lol yeh mate... haha
@@sharkb8754 well Jack ma
@@npcimknot958 ? I think you might have been misinformed on Jack Ma as well 😂
Remember when the US government bailed out all those banks and none of the executives or held accountable, And all those bank executives were still able to collect hundreds of millions of dollars in salary and benefits?
Pepperidge Farms remembers.
On a more serious note, it's hard to have any faith in the system when those responsible for creating these crises get off lightly and the rest of us are left holding the bag.
That's because the politicians have large stakes in the companies they're bailing out 🤗
They didn’t bailout Lehman Brothers
@@winstonsmith6204 are you a socialist
Our neoliberal establishment is corrupt beyond measure. We need to vote them all out so they can face accountability
I love this channel.❤️❤️..
Great video, it may be bad for next few years but from my experience in Greece in less than 10 years prices will increase atleast 50%.
Not their “Lehman” moment, it’s their “Enron” moment but on steroids.
Did enron try to open buisnesses in several markets too?
🤣🤣🤣🤣
@@whyareyouexisting7285 Evergrande did so cuz surveilliance advice them draw money from open market without expanding debt. Evergrande has so far listed its car industry, health services, property services in the market and collect money without no debt to ease their financial crisis. To surveilliance this action prevent Evergrande from total mess and reserve more valuable property to inverstors even if Evergrande real estate got bankrupt.
At least Evergrande is legitimate and doing something real, unlike Enron
@Willy Wang It's a bit high, but that doesn't make it not legitimate. For example, ATT has 150 billion in debt and Ford has like 125 billion in debt if I recall, and you won't find anyone who doesn't see those companies as legitimate. ATT is so old that my great grandfather worked for them.
A company that large being unable to refund down-payments is shameful.
I understand the carpet was pulled out from under them, but the people who pulled that carpet should have made guarantees for individual investors before changing all the rules while a system was in operation.
For one, they could have said, starting in 1 year, blah blah, and left the current pipeline alone to run to completion.
Its the end for over 15 years.
Epoch Times and Falungong been talking about end/collapse of China and CCP for almost two decades already.
It's getting really boring.
As usual in China, Quantity Over Quality. A serious down fall.
Me and Xi bought a co-share with Evergrande and we are pissed if it doesn't get built, we even paid extra for a heart-shaped bed.
If you ever go to China I think they Will kill you because of this comment. Lol
Can’t like. Sorry. Its already at 69
No one will ever like this comment again, because with 69 likes it's already perfekt
70th like, fuck it
@@robinvikstrom9579 Nope, they won’t. Not that this troll does not deserve it. Who the heck would waste time to create accounts dedicated to smear China? His profile is 3 weeks old. Like most of the paid anti- China trolling accounts.
Yikes it’ll basically be the US, 2008 crisis mixed with Japan’s 90s deflationary crisis.
Deflation in china? Not likely.
@agapp11able that's what the media pitched... But a shrinking internal market (fewer young people buying stuff) is most likely the cause. Demographic decline is a beast
@agapp11able I'm sure it was a whole host of things. But the shrinking demographics makes it incredibly hard to recover. And that's more than likely what's keeping him at their current rate of economic growth.
Of course, economics on everything. Pretty nice for someone starting their career. Your one of a handful of people at the job fair when theirs such a small group of people. And there's environmental benefits to a lower GDP.
@agapp11able It's not about numbers. It's about age ranges. You need more people younger and less people older within a given country. If you live in a place where the majority people are old or retired, that's where the problem comes from. Older people use a lot of state resources.
If it makes you feel any better, every single country will go through this sooner or later. This is a worldwide phenomenon. Like climate change
@@everythingisfine9988 He's right. Plaza accord did it, out of the US's insecurity of losing the #1 economic spot on the world
My mom was an accountant in the US. Massaging figures, or cooking the books, isn't just a Chinese thing.
@@maywalker997 nope . China is anti corruption
I wonder how much a flat like the one at 3:52 would go for in US dollars.
People already knew a long time that there was something not right regarding evergrande's numbers, yet those who continue to buy into it due to their own greed/ incompetence and will now pay for it.
As long as you got more out of it then you put in it was still a good investment.
@@baronvonlimbourgh1716 no im just saying this isnt even a suprised their gov even fucked up the big shot ceos making them to pay back they took, or face even worse punishments.
@@DK-yz9xk they knew this was comming for years. And they instigated the bubble deflation themselves on purpose. Unlike the rest of the world, the chinese actually do seem to know what they are doing.
And they have been pushing for higher domestic consumer consumption for years now and they simply can't get people to do it, which is not that surprising when the property market is that lucrative.
Everyone and their dog is saving everything they can and dumping it in property. I suspect that is why they are deflating and cooling down the real estate market, if appartments no longer skyrocket in value nobody has any reason to put all their money into them. That money will now be spent on consumer goods instead.
This will be a big boom for the chinese economy and jobs market. This is also a lot better for the economy and the people in the long run anyway, real estate is still a non productive asset. In the end they always eventually had to put a stop to the overheated housing market. No better day then the current one i guess.
Anyway, they know what they are doing and had years to prepare for this situation. China will be just fine, this is just anothother bump in the road for them, this isn't going to slow them down one bit i think.
You are very correct. Pls read my comment. This video's content is largely incorrect as no research has been professionally done.
Property bubble pops, property prices drop
Corporations: That's a big problem
Consumers: That's a big win
Except for those consumers that snagged many of those 1.5 m houses (!) and lost down payments and all. The "wealth" products and shenanigans are icing on the s**t cake. The situation is so gross that these people are taking money even before they bought the parcel of land where the "building" was supposed to be built.
It is not that simple. Revenue from leasing land to these development companies make up a huge portion of local government's income. If the property bubble burst, their budget will crumble too and ripple out to other sectors such as public education, health care etc.
@@hughmungus2760 So you're saying people that worked hard and made many many sacrifices to buy a house deserve to get screwed?
@@jarlaxledaerthe4045 they'll get their house. But if their intent is to flip it for money, thats different.
@@hughmungus2760 actually they wont get their house because it was never built.
Any finances or self improvement books that any of you can recommend?
At least China is honest enough to clearly state that land "owners" are leasing occupants.
Facts.
Yes. If you think you own your house outright try not paying your property taxes for a few years
I love the videos, but I was wondering if there's anywhere I can find the sources you've used? I'd like to read more about how it all works!
I would say that these homeowners were betting on turning a huge profit and not just for their own use.
Thats just how real estate works
Yep, the numbers of people that bought 2nd or 3rd home in China is staggering. Most of these homes will never be "used" as a home, they are only speculative assets for Chinese folks that have no trust in the stock market. Trillions of savings in flames because builders and real estate companies got greedy. Makes sense.
well yeah, real estate is lot more reliable and less volatile (until now) than the Chinese stock market, which is why so many people invested in real estate
@@azmodanpc It is so weird seeing a politically communist country with very greedy capitalist elements.
@@FakeAssHandsomeMcGee_ Well, the "socialist" elements are a justa a thin veil on what is for all intents and purposes an authoritarian, unelected and repressive regime that in the last 20 years used its "demographic dividend" to enrich the 1% and the CCP cadres while repressing any and all political liberties in exchange for unequally distributed wealth. China is as much a communist country as Russia is today, unlike Russia where there's an oligopoly of former soviet cadres, in China there's only the CCP and its minions.
The fact that we get free documentaries on RUclips by How Money Works is truly a gift 👍
The difference between US govt and China govt.
USA: In Fanny/Freddy moment, none of the people who made the decision is jailed/fined. Those executive still got big bonus & salary. 👎🏽👎🏽👎🏽
China: Evergrande must finish the development, stop paying big bonus, seized the personal asset of the Evergrande leader & stop paying any bonds owner until all the consumer right were fullfiled. 👍🏻👍🏻👍🏻
Lesson: You can’t grande forever.
Some very knowledgeable and thoughtful analysis in the comments, here. Thanks for posting this.
Thanks for watching
Don’t forget to hit the subscriber button for consultation and investment advice
@@junedwayne873 Already subscribed.
it’s ridiculous!!!!! Of course this will have ramifications around the world I might not even want to buy a house here in the US anymore!,.. 😔🏡companies and governments are scrupulous so let me just rent and save up my money so if I’m going to get thrown out at least I have somewhere else to go with all the money I have saved as opposed to being invested in my home!!!😡🤬
I always caution on investing in companies with a high growth rate in a short amount of time. The business did a good job in massaging the numbers but there was no end game strategy.
Yes, but I guess it depends on your goals and strategy.
As soon as I saw China Ghost cities on RUclips a few years ago, I knew this was coming. Get ready now people.
Pls read my comment. This video's content is largely incorrect as no research has been professionally done.
@@kwjtam I usually do not trust any non Chinese people attempting to be expert in Chinese business. None of any foreign "experts" ever predicted decades ago China would become the biggest economy in the world.
@@dragondescendant1 it still isn't, usa is still the first economy, albeit china is second now.
@@cloudwalker9572 has anyone predicted China became to be number 2 economy decades ago? By some measures, China economy has actually surpassed US right now.
@Tip Toe if they did know about it, US would have sanctioned and sabotage China decades ago. Apparently, no so called experts had predicted China economy would grow so fast and strong. India and many countries alike have factories went up, but nothing is as successful as China. Roll up another your dog feces of yours to smoke it up. How's your wife and my children? Send them my regards.
They love their empty shell homes... Like just a concrete shell... And the 70 year lease has never been tested which is madness.... And rental yields are crazy low
I invested in a flat in China about 15 years ago for rmb 800k which at the time was about 100grand usd, I sold that house for 12 million rmb last year around 2 million usd. Before I sold it it was generating 3k usd a month in rent it was that profitable
over 70sq m I think, 2 bedrooms, kitchen, bathroom and big living room)
@@user-pn3im5sm7k Australia
so it's about a year later.. what happened?
I think a lot could be learned if you did retrospectives on topics like this
This reminds me of Scrum!! Try to limit "in progress" task!!!! 😁 If they had more "ready to move in" apartments, it would be easy to pay debt or part of it or atleast interest!!
One of the few cases of economic damage caused by deflation
The Chinese import steel (among other things) for their construction projects. One of the hottest economies for the last 20 years has many unforeseen connections to the rest of the world. Even if they are "closed off" when it comes to their banking (they're not) they do import things like construction equipment as well. Caterpillar imports a ton of machinery to China, or they did. There really is no way this doesn't have global impact. Just sayin.
Dont bother analyzing based on logical fundaments, the market rise and fall as dictated by the invisible hands
you mean Exported.
I hate when people even suggest governments bail out reckless companies, it just rewards reckless behaviors.
When you on economic boom, don't put it all in property
China: hold my beer
More than Lehman Bros., I am remined of the Japanese situation in the late 20th century. Japanese banks had mortgaged Tokyo for more than 5 times the value of Los Angeles.
10% year over year increase in real estate values? Government mandating new rules to address said inflation? What could possibly go wrong? Also, it's amazing that this hasn't happened before in world history! (sarcasm)
Often governments have been far less willing than the Chinese government to impose rules to stop inflation
The chinese government pretty much planned for this for years and is activly managing the economy to make sure this wont become a problem.
This isn't a surprise and the whole bubble was just a tool. A bubble also has a lot of advantages and if you activly manage and prepare things to deal with the eventual fallout you can have your cake and eat it to.
As long as the bennefits are much bigger then what it costs to fix things in the end it is mainly just a good investment.
Pretty sure the chinese actually understand what they are doing and they keep a short leash on their financial institutions. Instead of leaving financial market to do whatever they want and then panic when they break the system.
@@baronvonlimbourgh1716 Good insightful comment. Also, as I understand Evergrande would more or less be heavily linked / controlled by the Chinese government by virtue of just being a company in China. Also, consider who is getting paid the 70 year lease money. Yes, they have a lot of tools, let's hope a well tended camp fire doesn't cause the entire forest to go up in flames, like a poorly executed baby gender reveal party.
I live in Canada and were experiencing the same shit..
@@stapleman007 i don't know who they actually owe most of the money to. I doubt they allowed the company to expose themselves to international financial markets much.
If it is mostly domestic debt or even debt to the government or the central bank directly they can just write it off. Move the the bad bonds onto the balance sheet of the central bank and just let it be eaten away by inflation for a couple of decades over there.
This really isn't as bad as people make it out to be. China has been seposedly collapsing every week because of one thing or another for 2 decades now and they are still going strong.
China doesn't do free market economics, and they are reaping in all the bennefits that come with it.
They guide their economy properly and make sure there are no nasty surprises hiding in their financial systems.
If you don't let greedy bankers and ceo's break the system, you also don't have to deal with the fallout from it and economic crashes every time over and over and over.
China is a very good example of what proper regulation and active investment management can achieve.
As long as they avoid a deflationary spiral like the one that killed japan in the 90s they will simply keep steaming forward like they have for 30 years now.
The problem with authoritarian government is that it doesn't take a lot of people to completely screw things up.
By definition, if a society is drifting into oligarchy then it is drifting away from democracy. This is why there is so much angst about the political influence of billionaires.
We will see