It was terrible, especially the editing. I stopped watching because this is just 20 min of cuts between stylized buildings and some randoms saying the dumbest cone liners before cutting to more useless buildings looking pretty.
I feel like this video missed a couple key points which make the problem much easier to understand: first, property is the primary investment vehicle for most Chinese people, which is why property values got so high. They don't put their money into financial markets like most of the west does, they pump it into their homes. Second, real estate companies could use these sky high prices to leverage their property assets for debt. And some of them, like Evergrande, seem to have been overestimating the value of their assets in order to get larger loans. Now that demand is falling, they can't sell their assets at anywhere near the estimated value and thus can't pay back their debt.
You can "buy" property in China and it will be yours for 70 years, after that you have to return it to the goverment, thats why they all come buy in the western countries, they buy up blocks of appartments here and rent it out... there are even policies in my country now saying you have to live at the adress you bought for at least 5 years before renting it out to others, that crazy it has become..
I believe the general population does not have the option to buy stock investments. so, the only investment they can do is buying houses. The gov't and the builders got the people in their hands as disposables.
@@stephenc2481 No they can buy houses that they have to give back after 70 years (1 lifetime) so that's why they invest overseas, cars are not worth it in chinese traffic. Everything is government controlled over there. It's communism..
@@TheWuKeng That "70-year property rights" is just a misconception, it is just a matter of renewing the "rights" after 70 years; Chinese people buying bricks overseas because it make them feel stable and fulfilled, or it is just diversified investment choice.
The topic of ghost cities and real estate overdevelopment in China has been a topic of discussion and concern for at least 10 years now. Crazy that this problem was allowed to grow so large when seemingly everyone saw it coming from a mile away. Classic human greed.
It got nothing to do with greed and everything to do with government fund/credit to keep a bubble alive, giving illusion of prosperity. This is the future of every single economic bubble. Fiat money and government control of interest rate are the problem. It's amazing how nobody talks about the greed of federal reserve guys, or the ecb or pboc bureaucrats.
It’s not just construction workers! It also affects manufacturers like glass, steel, etc also gets affected. The real estate business really was an economic driving force because it affects so many more types of jobs.
Why would these manufacturers have any troubles they should be super rich now and never have any troubles agian if there were so many buildings being build u selling Materials should make u super rich so if ure not u a dummy and got scammed by someone lol
Supply chain. The apartment buyers also work in this supply chain. They lose their jobs -> don’t pay the mortgage -> no money in the financial system to borrow/invest and this vice circle feeds over and over. The 1st phase is taking place now. There is no more money for the real estate developers to continue the Ponzi scheme. All construction being on hold.
There’s no lacking of housing in China, that’s the silver linings. Also the speculators who brought those empty apartments as investments are going to get burned. Those who brought the properties to live in, well they still have to live somewhere no matter what their houses cost. The ordinary people who were priced out of the market and really need a home are the winners in a big crash. I think that’s poetic justice.
fear a housing crash due to people buying homes above asking prices with little equity. If prices drop, affordability and potential foreclosures may arise, worsened by future layoffs and rising living costs. I want to invest more than $300k, but I'm not sure on how to mitigate risk.
Consider reallocating from real estate to other reliable investments like stock, crypto or precious metals . Severe recessions offer market buying opportunities with caution, as volatility can yield short-term trading prospects. Not financial advice, but it may be wise to invest, as cash isn't ideal in this period.
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Why does anyone trust Big 4 auditors anymore is beyond my understanding. Every major financial disaster has shown that the Big 4 have certified everything as ok as long as they were well paid.
Auditors can *sometimes* detect *obvious* fraud and *obvious* regulatory non-compliance. I find it absolutely laugable that people think that a business is sound just because it passed an audit. The clever people at the centre of complex transactions can be very confidently incorrect, and there's simply no way that a small team of auditors will be able to find that error.
They're pretty good at detecting minor problems, it's only the big things they tend to miss. Also, it's not their job to predict market bubbles--if they could do that kind of magic they'd be in a more lucrative business.
There is a big miss in this video. The analysis does not take into account one of the key drivers, outside of raw urbanization. This is the use of property as investment. In the West, most people invest in stocks and bonds. In China the populace has little or no understanding of this. Thus, you see people buying multiple properties, mostly apartments, as investments. With rising prices, this made sense to them, and it was something they understood. One of the outcomes of this is the empty cities one sees only in China. Some of these are massive. The sector is massive for another reason. Much of the income for local government comes from selling land. Thus, they encouraged this massive amount of property development.
The Chinese government discourages stocks as an alternative investment strategy with its heavy limits on available shares and projects that traded companies are allowed to undertake.
I’m only surprised by how ppl in the west cares so much about a 300 billion USD debt company, Evergrande. It’s like none of these westerners have a clue of how tiny 300 billion USD is in front of a 15 trillion USD GDP economy. These so called reports are no differences from the China collapse theories.
Another important factor us that the quality of the building is garage, even they call the tofu buildings, they start to fall apart after 5 years, sometimes less, and there is maintenance whatsoever because they thought they just could buy a newer one... so yeah, not only there is a lot of real estate vacant, in the middle of nowhere, but also completely dilapidated to the point it can't be used
@@dongxuzhou4661 You need to look at economics and finance. Lehman Bros. in the US actually had twice the debt, but in a larger economy. That crisis spread worldwide very quickly. It was also about property values and leverage.
They probably also wanted to encourage Chinese investors to buy real estate in China rather than buy in the US or other countries. I knew one Chinese community college student who owned several properties that he bought cash with his father’s money. The government would prefer that money stay in China but that currently doesn’t seem like a good idea, to say the least.
Also the fact that the buildings are shoddily built to siphon as much money from the project to private pockets. Even the finished projects are not of the quality expected by the investment.
An underlooked aspect is that most Chinese people don't actually pay much in taxes, meaning that the local governments, (the party technically owns/is all of the land) makes much of their revenue from selling the 99-year land leases that developers need to build upon. While it's been brought up time and again in China, the incentives and culture were all just too strongly resisting the needed reform.
royalty tax is 100% liquor/tobacco is roughly 70% when you pay for products. the tax is already with in the price of said product even a pack of "Huangshan" cigarettes which is common among peasants/low labor workers are now upto 8/9 rmb a pack! where the true value is/should be 4-5 rmb .. this is a 2nd Tier city ,capital of Anhui,Province 1 bottle of maotai costs 5,000 Rmb.
also, land lease is 70 years not 99 years. however, parents can opt on 'reselling' to their kids 'on paper' of course. then they take it for another 70 years. unless the government has plans on deconstruction which was too common in 2010
In a word scary. Because ultimately the global market is so interlinked and the world has been decoupling from China. This creates massive economic stress and a scenario no model or econometric analysis would have predicted.
Wait, what are your thoughts on the emerging crisis in China (mortgage payment strikes and systemic risk from fractional-reserve banking) and it's likely impact on emerging markets?
@@svengrot7943 Great question, I think it's a really interesting area and so many factors in play right now. I wouldn't let any macro news affect the way I invest at all, otherwise you'd probably never invest a single penny - but that being said, it's a reminder to be well diversified!
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The world isnt decoupling from china, the world just CANT, just like europe just CANT break away from the Russian gas and energy supplies. If u cant see that then u shouldnt comment on this topic.
It always amazes me when people seem surprised by extensive growth, which surely cannot last in the long term, tailing off and even resulting in bankruptcy due to over-reaching. I've seen it happen time and time again, even in companies I've worked for, and that level of growth always seems to be the forerunner of just as stunning a collapse. I am no financial or strategic expert, but I wonder why lessons from worldwide organisations aren't learnt?
It’s quite simple: they don’t think long-term. If you can secure 5-10% growth during a two-year tenure and then get promoted, who cares what happens in 5 years?
umm. have you noticed that there are companies that have lasted from around and many times even before WWII? some people do actually learn. however, 50% of the population has an IQ less than 100. take that as you will.
A huge change that started over 15 years ago. That’s when I started seeing posts of the abandoned Chinese shopping malls on the internet. Thanks for the videos.
You don't know what the Chinese (stock)market will do, owning Chinese stock does not mean you own a part of the company, please be aware of that. BYD is making mini cars, hybrids and ice cars, not so much BEVs. Numbers are not looking that great too. Their batteries are great tho and will be used by Tesla as well.
Only if I had more time to play around in the market, retirement is around the corner and my primary concern is how to grow my reserve of $300k which has been sitting duck since forever with zero to no gains, I'm having serious anxiety.
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@@bobbymainz1160 my 401k lost everything it’s gained since early 2019. wouldn’t mind looking into the advisor that guides you, I believe the best way to beat this recession and inflation is to earn more.
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It seems to me that the Chinese govt needs to figure out away of transferring at least some of the benefits of economic growth away from the cities back to the countryside. There remain around 400 million Chinese who do not live in cities and many never will - the demand for their manufactured goods is tailing off , though still very high. Without redress this problem of imbalance could be their undoing.
They have been rather successfully with the rural country side,including massive transportation schemes, cadres to deal with poverty and their belt and road initiatives. I think they have it pretty well figured out tbh.
@@nigelcheriyan5693 right on! You hit the nail right on its head...Those smart a_s comments of haters were after the facts. They got a sickly kick out of bad mouthing China, the world 2nd largest economy for HER tremendous success, which was not seen in past human history.
Right on! You had the exact same thought as the Chinese gov. They call this program “Rural Revitalization”, which is part of their strategy to deal with overproduction and global economic downturn, in addition to the Belt and Road.
50 years to own a modest apartment? Compared to 10 years in New York?? When you consider the time you can really appreciate the Chinese people who invested everything they had into pre-buying homes that were never finished. Also the foreclosure rate has gone to about 197% within the last 5 years.
@@jakeheez That's a crucial part the did not mention in the video. Real estate has been one of the only market where normal Chinese people could invest in. So it's not only those property developers taking out huge loans but also a massive amount of average people who would also ask family members or friends to leand them money. They were banking on flipping the apartments for a good profit and it worked for quite some years This was a major part of overheating the market, and the demand of migrant workers was only the kindle for it.
Same here in major cities of India. It almost takes all of your life savings. I am in 30s and actually have got an apartment from my company. But the day I will retire I know I cannot afford to buy the same house in my city. It can be possible only if I keep working till my 60 and invest my money in focused way to achieve this goal. It sometimes pains me to see so many people working so hard all of their life just to get a roof over their head in the end. However it is also true that may be this dream has a great meaning and value which keeps people awake and get going inspite of every kind of challenges around them.
I was on holiday from Dubai to Guanzhou with my family in 2013 and stayed at the Ramada Plaza for a week! I was fascinated to see the buildings all over the city ! Truly amazing!
One of the problems that seems to be missed in this documentary is strange to the capitalist mind. A lot of property market is actually a lease, because China does not practice capitalism for individuals. Local governments lease property long term to individuals, using that as an income in place of taxes that do not exist. If buildings are not getting built, many local governments do not get financed from property leases, and thus cannot provide services. Emergency services, health services, etc. The financial impact to the world is going to be heavy, but it will lead to restructuring. In China itself though, the level of chaos and misery is not even known yet.
Evergrande's debt problem is tiny compared to China's High Speed Rails with over USD$2 trillion of debt. It borrows more money just to repay interests owing, excluding railway running cost. China built so many unprofitable high speed railways.
Ehh. In China, high speed rail is a government service much like a public hospital is a service or US military is a service. US military consumes a lot of money yet no one bats an eye.
One thing you should know is that a crash and bullish market provides equal high-yield potential, it's all about information and strategy application, I've seen folks make huge 7figure profit in a crashing market and pull it off much easily in a bull market the recession is getting somebody somewhere rich.
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Its truly amazing how the connection between actual householder demand and apartment values has never been seen as the real determinent of viability in China. Unquestioned credit has driven this process and unless occupier demand suddenly firms up the bonds will be defaulted as developers are wound up and new owners buy in at firesale prices.
loans and debt are based on buyer but also in many cases require another family in case you can't pay your debt. they then go after whomever they can find associated with you.in the last resort.! they post your ID /Photo/real world contact and ID on big posters usually at bus stops .
Nobody in finance even thinks about the very poor quality of construction in many of these projects, the curious Chinese attitude about maintenance and the fact that all these buildings are built on land people don't actually own but are leasing from the government with no clear idea of what happens after 70 years when the leases expire.
@Zack Smith ...it is not funny to see people suffer under dictatorship or communist controls. But no one is stopping you from investing with them. Good luck to you.
@Zack Smith .I have lived in a communist ruled country and are currently living in the USA. I can promise you that the poor in a communist (including China) country cannot be compared to the poor in the US. The standard for comparison is different. The US has way higher standards, 15 times better vs China. Folks in the US get rental assistant, food assistant, free healthcare, free education. But why didn't all of them get out of poverty? that is another discussion in itself. The opportunity is there, they just need to take the initiative (not counting mentally ill/drug users). Under communist, the poor is shoved out of the way so the land can be developed, and the people don't have much voice on it. As for the total welfare equality, lets take China as example, because they arguably has the best among the communist countries. The poor doesn't get the same treatment as everyone else. Job placement, healthcare, and other benefits are heavily corrupted. You have to bribe your way to get good service. In the US, you get safe (not cutting corners) services the same way, for everyone. Of course, the rich can go one step up, by having their own private doctor. That doesn't count. As for privacy, there is none in China. Freedom of speech, none in China. Everyone is constantly watch and cannot say anything political, especially against the current party ruler.
I'm laughing about it. If you invested in a Chinese dictatorship you deserve to lose everything. Wall Street only cares about what it can skim off the top.
No matter how hard you train, if your diet is poor you probably won't make any significant progress. You can't out-train a bad diet and I can't emphasize this enough. It is the same with investment.
Whether it's your superbly researched and immaculately written FT Newspaper and Editorial articles or your short documentary films, the quality of all your content is simply outstanding. Good Work and Keep it up Team FT!
PolyMatter did a series of videos on this subject, but a bit broader, about a year ago, for anyone who's interested: "China's Reckoning" Really good and interesting!
PolyMatter really is just repeating nonsense. For complicated financial issues it’s still best to listen to economists. They don’t guess right often but still closer than people that don’t get it and just repeating nonsense
Polymatter's 4 part series was very good. It broadly explains the finance mechanisms used by local governments, demographic problems, their water problems and more. It's a really good place to start if you're interested in understanding China more deeply.
It's been 4-5 months and nothing too serious happened yet. Lehman Brothers literally collapsed overnight without any obvious sign. It's totally different scenario.
It's just waiting to collapse. The absolute collapse of Evergrande is not happening yet, it won't happen overnight but gradually it will lose bricks and it will fall catastrophically with the economy on a free fall.
China has selected instead of letting it all collapse at once to have it effect their economy over the next 50 years. Long term stagnation is in the future for China.
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China just came out with a better tone toward their tech industry and markets. Assuming that geo political events do not get worse between the USA vs China. I am making a Long term asset accumulation bet on BABA.
Yep, good Talk. 2022 will be a rollercoaster for sure. Stocks valuations are at an all time high while at the same time we have the threat of inflation, rising interest rates and supply chain and productivity issues to deal with. Something is going to have to give. I think it will be the Markets that will have to correct. How much and when - who knows. Sanity hasn't prevailed in this bear market and I suspect it wont prevail in a correction/crash.
I hope everyone have their cash ready to jump in at the right time. Secure your financial future with calculated moves. The stocks market still remain your best bet in becoming a millionaire.
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@@marianparker7502 The crazy part is that advisors are probably outperforming the market and raising good returns. I will give this a look up, lucky i stumbled on this thread.
growth defined by finance rather than utility and sustainability always ends badly. period. take no fancy counter-logic seriously. In this case a genuine need for housing was leveraged into paper growth and the proceeds farmed like an mmo, and i think it is important to choose sides. Housing needs to be understood as a social good, not a luxury commodity or an object of speculation. The alternative is all around us.
Excellent content. As other commentators have already said many apartments were purchased as investments by average investors. Not only are those apartments empty and likely to remain empty but many were constructed to such poor standards (tofu dregs) that they are probably uninhabitable and in some cases in damage of physical collapse. So they are not just homes people don’t want, but literal piles of waste no one wants. How China manages the fallout on citizens who have lost their life savings and contractors who have lost their livelihoods will probably be more critical to China’s survival/direction than how the default is handled.
This video feels very out of date. Didn't Evergrande start having trouble back in July 2021? This video didn't seem like it had much to say beyond Evergrande had trouble paying its bonds back in September 2021. Like one thing it easily could've gone into is how these are dollar denominated bonds, not Chinese RMB bonds.
@@gaoxiaen1 But it does matter. You can skip paying RMB to 500 cement companies for 30 or 60 or 90 days, and they might get mad at you, but mostly no one will notice. Or you can skip paying $-denominated bonds, and the whole world will find out within minutes, literally minutes.
Dude the audio/music selection on this video was INSANE on this film. 10/10. Now i'm completely frustrated because I don't know what genres these tracks come from and where I can get more of it.
This is symptomatic of the end of the long term debt cycle which Ray Dalio talks about in his new book. Ray seems very bullish on China long term but seems to overlook this aspect of debt fuelled growth which will not be immune once the system starts to unravel.
Why would someone want to buy a house when there's a 100 year contract. Your next generation would have to buy it again. The goal is to have generational wealth not generational poverty. Not mention that there are so many Tofu Dreg apartments in China that are cheaply made and fall apart. Most of those empty buildings are Tofu Dreg.
The farmers were evicted off their land if they didn’t go along with the proposal of a better life in the cities. Sad state of affairs that place!!! The Pooh bear communist party leader will never come close to the intelligence of Russia or world dominance of the USA, China will only ever be a population of copycats and immoral behavior…
It takes 15 years in London and 10 years in NY to buy a home?? I don't know where this guys took the numbers...and also that kind of bubbles happen in all parts of the world, is human nature.
@@frenchonion4595 I hear most countries are pursuing expansionary policies nowaday.The US and EU are champions, but many other places are doing it. I wonder, though, how much of that money in chinese real estate comes from the US.
4:04 "Owning your own home after a period of no property rights is a massive aspiration of the 'middle' (read lower) class" Middle class means to have a home and a job. Lower class is just a job, Upper is just a home.
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The issue is the mindset of "investing" not to rent out and get income, but to sit on empty properties in the expectations of future capital gain, as a way to build family wealth. This has worked in the past in particular situations, however when everyone is trying to do it, and you have 90 million unoccupied units, it takes on the characteristics of a pyramid scheme. The Chines govt. should have foreseen this, and taken steps to protect the people at the bottom who are going to lose, the three red lines were too little too late. I think they wanted the kudos that came with "economic growth" too much.
@@lliamjurdom9505 it's ironic, do you know how your "capitalism" works? cuz capitalism also use consumer greed as a tool, when money does its cycle faster then the economy will also growing faster this law is not exclusive to capitalism alone tho, but it's exist in every economic system that use some kind of money for transaction
Thing is, renting in china is cheap. I rented a pretty nice flat in xiamen, which is a wealthy east coast city, perhaps better known as Amoy in the west. $450 a month. Balcony, 2 storeys, 2 toilets. And utilities were just a few dollars a month too. That's 2018. When people say property is unaffordable, they are not talking about the rental market. I would never buy in china. You can't really buy property anyway. You can only obtain a 70 year lease which will probably be extended...but there's no guarantee of this. I believe that property is valued in china because ownership gives you the right to move officially to any given town. In the west, this just isn't an issue as you can move anywhere you want with or without property. Also in china it's very difficult for a guy to get married unless he has a property. Girls it seems just won't marry you unless you're a property owner! That's communism for you.
@@jasperhorace7147 no, they are not empty. Not in places like xiamen or Hangzhou or Shenzhen. Well, maybe there are a few, brought simply as investments. But basically in china, developments are built and they eventually get filled. But on the whole, rents are low. I'm pretty sure that in a place like jiaxing, a prosperous town between Hangzhou and Shanghai, you could rent for maybe $200 a month. It would not be luxurious at all. Bit basic. But liveable. This contrasts heavily with western towns. In London it's impossible really to rent for less than $1000 per month...and that's for something small, on the outskirts in an iffy neighbourhood. Yet to buy property is relatively inexpensive compared with china, especially considering the wage difference. Basically property to buy in china is crazy overpriced, or maybe was overpriced before this correction. Rents are very low. It's a bit like, you can pay $20 a day to hire a Mercedes, or you can pay $200000 to buy it. That's the property market in china.
I don't agree with statements such as "they built all this were there was nothing". There was definitely something there before they started building: whole ecosystems that were razed to the ground and entire species that ceased to exist so they could build these cathedrals to greed. Let's not forget that this genocide was also hidden behind the smiles and the champaigne.
Excellent point. The devastation is extensive. People who come up with such statements certainly comprehend the entire dimension but they prefer to fend off their concerns because they want to stay in the game / play, and they love it...
What I like about China's policy is that they are willing to throw their billionaires under the bus eg. Jack Ma. Here, we would be taking our tax dollars from the poor to give to rich for the reason of too big to fail.
@@lyq232 You have a point, not all billionaires are bad or should be villianised as there are good ones too. But, I would say when their interests out weigh the interests of the majority of the countries citizens.
Excellent piece. Accounting audits are a bit of a scam. They only certify that a few very specific types of financial fraud are not happening. That's it. They don't certify the overall financial health of companies, even though that's how they are usually interpreted.
Jim Chanos did remarkable research into the property sector in the early 200'0s. He was shocked by the incredible waste and folly of the entire real estate industry. The Big Short for Chanos was to leave the market for someone else to find a solution.
Suppliers were not paid since the collapse. Developers who didn’t meet the three red lines find themselves in a situation where suppliers refuse to extend credit for building materials now must complete projects with no money or materials. Those projects that are being completed now are using poor and cheaply made materials.
This is what can happen when a centralized authoritarian regime decides to create cities out of thin air. They are conceived on a modeling table without regard for geography, building codes, construction materials, weather, or even if anyone would want to live there. Consequently you get shoddy workmanship and cheap materials, and nobody living there. Apartments are purchased by investors who simply plan to sell it to a new investor...Even one of these unpopulated behemoths would be fascinating, but there are a dozen or 20 such places. The U.S. has certainly experienced debacles with home buying and too much debt, but what do you do with an entire city that is basically useless and falling apart?
More like 10s of thousands if not hundreds of thousands of these empty apartment blocks across the country. Then there horrible building practices mixed with subpar materials make them basically worthless. They begin to fall apart in a matter of years rather than decades. Hell many of them have collapsed while they’re still being constructed. Plus people start paying their exorbitant mortgage prices before the building has even been built. They have huge sales events where people purchase these and you put a down payment (often people’s life’s savings) and begin paying a mortgage from that day forward with only seeing a scale model of what the apartments will look like. Plus the lease the builders have with the government is only 70-100 years which starts the day they sign the contract. So by the time someone can actually move in they have 60-85 years and it’s not yet clear what the ccp is going to do when the lease is up and that’s if the building even lasts that long which is unlikely. It truly is crazy how the whole system works
@@andrewreynolds2421 - exactly. People in China don’t consider a wide array of investments for their nest egg. This could become an existential crisis for the party regime. It would have to.
Here is just another lesson in Exponential Growth. Dr. Albert Bartlett often lectured about this to his undergrad students. Yet, as everybody knows, Human beings are not rational creatures.
When I worked at Hangzhou on urban planning in 2011 / 12 negotiating between German and Chinese partners the bubble already had bursted. The question was just, whether the landing would be hard or soft. It was very soft, because assets from all over the place were generated in the "Chinese urban revolution", taking place actually less than 30 years after the "Cultural Revolution". And building and real estate industry have become quite powerful. Local governments are also emphasized in the film as key stakeholders. After my return in 2012 I told some colleges here in Germany, that I had worked in phase 0.2 till 0.5 of our German system of work phases of engineers and architects: evaluating land, that was owned by the People's Republic of China since the Revolution in 1949 and in many cases had been given to locals and farmers for private markets and their stakeholders. Amongst them also many local party hacks. Land grabbing and other ways of greedy exploitation all inclusive.
I think Financial Times needs to film an update since China's economy is pretty much crashing, and someone in the comment had mentioned China's Tech.... Tech companies are pulling out of China now and moving to India.
China, a communistic-kapatalistic market. With free trade, but also communistic controlled markets. Yeah, building housing was a great way to make money. And for a while it was how cities and businesses made a lot of money. Making houses quick and cheap at high prices, don't ask about the quality of the materials used to build them. Many of them are falling apart just under the new fresh outer layer. While not far away in a village old temples stand, thousands years old. It is sad really.
I was in the building business in a very small way.. went through 3 booms and busts. During a boom the mortgage brokers gave loans without income documentation. the appraiser would ask me how much the appraisal needed to be.. They all worked on commission....perfect recipe for disaster...after the first cycle I could see the next two busts coming from a mile away as the saying goes.... everyone in the business could see...
@@steveestebon2079 Do you read any newspapers that describe banks or other similar financial institutions that are in trouble today? How safe are you and your pension...
Great video. Part of the story has been the financing provided by western companies, like the large mutual fund houses, investment banks etc. While ex-post, it may worst case become very clear why all of that has been built on very wrong assessment (the government will bail them out anyway), it may be very interesting to give some more insights on the 'psychology' of those portfolio managers, analysts etc. which made them believe for quite some time there is no issue at all... Thanks
Dude, ALL the money comes from the west. What do you think they are making in all those factories that all the peasants moved into the cities to manufacture? This is what happens when centrally planned idjuts are given trillions from westerners buying cheap crap from them. A giant Ponzi.
Less than you might think - China will not permit Chinese currency be exported. Chinese companies cannot pay interest to offshore holders of debt or equity. Tesla for example, can only export profits in the form of vehicles. Building companies can’t export anything to pay offshore debt (which was was why Evergrand was looking at car manufacturing). Evergrand was also using its developments in Hong Kong (whose currency is convertible) to pay its overseas debt.
How come there are never any legal repercussions for auditing firms like pwc and EY? Shouldn't they lose their licences and be banned from business for decades?
People need houses, so therefore the deposits taken by Evergrande have indicated an interest in the particular building, so why not give the building away to someone who promises to finish and upgrade the building to enable these apartment owners to move in and enjoy their housing investment. Oh I forgot..... we are dealing with the Chinese government ( and their care for their people ) !
I'm slightly afraid to continue with stock due to the risks fueled by inflation and the recent announcements by the fed and the stock market crash forecasts. I have not been living my normal life since then. even tho it hasn't happened yet but I'm genuinely looking for alternative places to invest in. I would consider myself to be a socially responsible investor. What are your thoughts on cryptocurrency?
Don't think of crypto as an investment. It would fall within your "high risk" share of the investing budget. Only invest in it if you support the ideological implications of crypto. For most of the budget, put it in mutual funds. Don't think of investments as a way to get rich, use it just as a nice nest egg.
The ghost cities can wait, who animated this! That jenga tower collapse was VERY detailed for a 1 second clip, like actually very impressive. Move over pixar.
Built monumental personal wealth by feeding off from average home buyers deposit, bond holders saving, and easy financial institution credit worked out really well for Chinese property developers in the past. Seem like the party is coming to an end sooner than expected.🥴🥴
Curious as to whether this is just a glimpse of what is happening in China and that there are more issues then we know about. It’s likely that the Chinese economy isn’t as strong as we would think.
I dated a Chinese woman a couple of years ago. She claimed to have sold an apartment she owned as part of her divorce settlement. She and her husband had bought a couple of units as an investment. By the time the asset settlement was finished so she was free to sell it, the boom was just starting to bust. She was able to sell it, but the price had dropped $200,00 USD, below what similar apartments had been selling for before the divorce proceedings. She was distraught, but honestly, she should consider herself fortunate, as right now I don’t think she could give it away, yet her HMO monthly bill would still have to be paid. That was two years ago. Also, the Chinese local governments don’t “sell”land. You’re paying a 100 year lease. If you don’t think the Chinese won’t let the property be improved and take it back, just ask the British about Hong Kong. Britain had a 100 year lease, and look what happened.
The person who did the graphics should get a raise. Very intuitive and nice.
Totally!
Was it you?
It’s not hard? Once you know, you know.
@@markgrech1866 no it was not
It was terrible, especially the editing. I stopped watching because this is just 20 min of cuts between stylized buildings and some randoms saying the dumbest cone liners before cutting to more useless buildings looking pretty.
I feel like this video missed a couple key points which make the problem much easier to understand: first, property is the primary investment vehicle for most Chinese people, which is why property values got so high. They don't put their money into financial markets like most of the west does, they pump it into their homes. Second, real estate companies could use these sky high prices to leverage their property assets for debt. And some of them, like Evergrande, seem to have been overestimating the value of their assets in order to get larger loans. Now that demand is falling, they can't sell their assets at anywhere near the estimated value and thus can't pay back their debt.
You can "buy" property in China and it will be yours for 70 years, after that you have to return it to the goverment, thats why they all come buy in the western countries, they buy up blocks of appartments here and rent it out... there are even policies in my country now saying you have to live at the adress you bought for at least 5 years before renting it out to others, that crazy it has become..
I believe the general population does not have the option to buy stock investments. so, the only investment they can do is buying houses. The gov't and the builders got the people in their hands as disposables.
@@stephenc2481 No they can buy houses that they have to give back after 70 years (1 lifetime) so that's why they invest overseas, cars are not worth it in chinese traffic. Everything is government controlled over there. It's communism..
@@TheWuKeng That "70-year property rights" is just a misconception, it is just a matter of renewing the "rights" after 70 years; Chinese people buying bricks overseas because it make them feel stable and fulfilled, or it is just diversified investment choice.
@@al-tes At one stage they were talking about a fee of up to 1/3 of the property value to renew the lease though.
The topic of ghost cities and real estate overdevelopment in China has been a topic of discussion and concern for at least 10 years now. Crazy that this problem was allowed to grow so large when seemingly everyone saw it coming from a mile away. Classic human greed.
It got nothing to do with greed and everything to do with government fund/credit to keep a bubble alive, giving illusion of prosperity. This is the future of every single economic bubble.
Fiat money and government control of interest rate are the problem. It's amazing how nobody talks about the greed of federal reserve guys, or the ecb or pboc bureaucrats.
Classic state funded corruptive communism.
@@swagatopablo It's not that nobody talks about them, it's just that nobody listens
@@davidcarlsson1396 yeah because this is all "communism's" fault. Anymore brilliant takes?
@@swagatopablo Greed plays a factor too, that credit was taken out to amass fortunes into the future.
It’s not just construction workers! It also affects manufacturers like glass, steel, etc also gets affected. The real estate business really was an economic driving force because it affects so many more types of jobs.
Why would these manufacturers have any troubles they should be super rich now and never have any troubles agian if there were so many buildings being build u selling Materials should make u super rich so if ure not u a dummy and got scammed by someone lol
Supply chain. The apartment buyers also work in this supply chain. They lose their jobs -> don’t pay the mortgage -> no money in the financial system to borrow/invest and this vice circle feeds over and over.
The 1st phase is taking place now. There is no more money for the real estate developers to continue the Ponzi scheme. All construction being on hold.
There’s no lacking of housing in China, that’s the silver linings.
Also the speculators who brought those empty apartments as investments are going to get burned.
Those who brought the properties to live in, well they still have to live somewhere no matter what their houses cost.
The ordinary people who were priced out of the market and really need a home are the winners in a big crash.
I think that’s poetic justice.
The other sector is the building of infrastructure like roads, high speed rail, airport and etc.
fear a housing crash due to people buying homes above asking prices with little equity. If prices drop, affordability and potential foreclosures may arise, worsened by future layoffs and rising living costs. I want to invest more than $300k, but I'm not sure on how to mitigate risk.
Consider reallocating from real estate to other reliable investments like stock, crypto or precious metals . Severe recessions offer market buying opportunities with caution, as volatility can yield short-term trading prospects. Not financial advice, but it may be wise to invest, as cash isn't ideal in this period.
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
nice! once you hit a big milestone, the next comes easier.. who is your advisor please, if you don't mind me asking?
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Melissa Terri Swayne” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
Why does anyone trust Big 4 auditors anymore is beyond my understanding. Every major financial disaster has shown that the Big 4 have certified everything as ok as long as they were well paid.
Auditors can *sometimes* detect *obvious* fraud and *obvious* regulatory non-compliance. I find it absolutely laugable that people think that a business is sound just because it passed an audit. The clever people at the centre of complex transactions can be very confidently incorrect, and there's simply no way that a small team of auditors will be able to find that error.
They hire people unable to grasp the complexities of such subterfuge and send them out to audit businesses.
They're pretty good at detecting minor problems, it's only the big things they tend to miss. Also, it's not their job to predict market bubbles--if they could do that kind of magic they'd be in a more lucrative business.
Weird how they are only able to retroactively detect malfeasance in their audits, and that they're not able to predict unprecedented future events!!
Chi Na people are so funny
There is a big miss in this video. The analysis does not take into account one of the key drivers, outside of raw urbanization. This is the use of property as investment. In the West, most people invest in stocks and bonds. In China the populace has little or no understanding of this. Thus, you see people buying multiple properties, mostly apartments, as investments. With rising prices, this made sense to them, and it was something they understood. One of the outcomes of this is the empty cities one sees only in China. Some of these are massive.
The sector is massive for another reason. Much of the income for local government comes from selling land. Thus, they encouraged this massive amount of property development.
The Chinese government discourages stocks as an alternative investment strategy with its heavy limits on available shares and projects that traded companies are allowed to undertake.
I’m only surprised by how ppl in the west cares so much about a 300 billion USD debt company, Evergrande. It’s like none of these westerners have a clue of how tiny 300 billion USD is in front of a 15 trillion USD GDP economy. These so called reports are no differences from the China collapse theories.
Another important factor us that the quality of the building is garage, even they call the tofu buildings, they start to fall apart after 5 years, sometimes less, and there is maintenance whatsoever because they thought they just could buy a newer one... so yeah, not only there is a lot of real estate vacant, in the middle of nowhere, but also completely dilapidated to the point it can't be used
@@dongxuzhou4661 You need to look at economics and finance. Lehman Bros. in the US actually had twice the debt, but in a larger economy. That crisis spread worldwide very quickly. It was also about property values and leverage.
They probably also wanted to encourage Chinese investors to buy real estate in China rather than buy in the US or other countries. I knew one Chinese community college student who owned several properties that he bought cash with his father’s money. The government would prefer that money stay in China but that currently doesn’t seem like a good idea, to say the least.
Also the fact that the buildings are shoddily built to siphon as much money from the project to private pockets. Even the finished projects are not of the quality expected by the investment.
Adv China has a great few videos on the lack of any enforced Chinese building codes...if China has any building codes...
Tofu Dreg buildings
Paper Buildings, no wonder China is called a Paper Tiger, lol
That’s,, “made in China” for you!
10 billion iphones have exploded. Killimg 3 billion people
All made in china
An underlooked aspect is that most Chinese people don't actually pay much in taxes, meaning that the local governments, (the party technically owns/is all of the land) makes much of their revenue from selling the 99-year land leases that developers need to build upon. While it's been brought up time and again in China, the incentives and culture were all just too strongly resisting the needed reform.
royalty tax is 100% liquor/tobacco is roughly 70%
when you pay for products. the tax is already with in the price of said product
even a pack of "Huangshan" cigarettes which is common among peasants/low labor workers are now upto 8/9 rmb a pack! where the true value is/should be 4-5 rmb ..
this is a 2nd Tier city ,capital of Anhui,Province
1 bottle of maotai costs 5,000 Rmb.
also, land lease is 70 years not 99 years.
however, parents can opt on 'reselling' to their kids 'on paper' of course. then they take it for another 70 years. unless the government has plans on deconstruction which was too common in 2010
In a word scary. Because ultimately the global market is so interlinked and the world has been decoupling from China. This creates massive economic stress and a scenario no model or econometric analysis would have predicted.
Wait, what are your thoughts on the emerging crisis in China (mortgage payment strikes and systemic risk from fractional-reserve banking) and it's likely impact on emerging markets?
@@svengrot7943 Great question, I think it's a really interesting area and so many factors in play right now. I wouldn't let any macro news affect the way I invest at all, otherwise you'd probably never invest a single penny - but that being said, it's a reminder to be well diversified!
@@elizabethyork590 Emotion is the biggest enemy of investors. It’s one of the toughest things to control. I’ve paid the price also plenty of times and However, overall invstment ought to significantly improve your net worth so I had to work with "Katherine Duffy Burke ," whom is a fiduciary. She clarified my mistakes and enabled me to make clear progress.
@@blaquopaque There is only bad news out there but yet stock prices are up which shows that even though the market is meant to be forward looking it is clear the string results are the only things they are interested . Also, i searchon Katherine using her full name and found her official-onlinepage, read through her resume and it was really impressive. She is a fiduciary who will act in my best interest. So, I booked a session with her
The world isnt decoupling from china, the world just CANT, just like europe just CANT break away from the Russian gas and energy supplies. If u cant see that then u shouldnt comment on this topic.
It always amazes me when people seem surprised by extensive growth, which surely cannot last in the long term, tailing off and even resulting in bankruptcy due to over-reaching. I've seen it happen time and time again, even in companies I've worked for, and that level of growth always seems to be the forerunner of just as stunning a collapse. I am no financial or strategic expert, but I wonder why lessons from worldwide organisations aren't learnt?
It’s quite simple: they don’t think long-term. If you can secure 5-10% growth during a two-year tenure and then get promoted, who cares what happens in 5 years?
umm. have you noticed that there are companies that have lasted from around and many times even before WWII? some people do actually learn.
however, 50% of the population has an IQ less than 100. take that as you will.
Well so as US stock market, which is now collapsing.
@@andreaskallstrom9031 Yeah the mindset to make quick money. Prevalent in China.
@@jonathanodude6660 , and they are mostly senior managers and above!
A huge change that started over 15 years ago. That’s when I started seeing posts of the abandoned Chinese shopping malls on the internet. Thanks for the videos.
Makes sense, housing bubble happens for decades, some people forget about these.
Shopping malls without shoppers. Cities without citizens.LOL!
To Russell Birkett, the person who did the graphics for this FT segment - Bravo! Amazing visuals. Keep up the good work 👍👍
After 1 year, i endorse and appreciate financial time, which is responsible news group
You don't know what the Chinese (stock)market will do, owning Chinese stock does not mean you own a part of the company, please be aware of that. BYD is making mini cars, hybrids and ice cars, not so much BEVs. Numbers are not looking that great too. Their batteries are great tho and will be used by Tesla as well.
Only if I had more time to play around in the market, retirement is around the corner and my primary concern is how to grow my reserve of $300k which has been sitting duck since forever with zero to no gains, I'm having serious anxiety.
@@claraclouse9086 I agree with clara, I have been pretty much on the sideline observing for awhile, figuring out the best strategy to get in, until I came by a coach, commended by a pundit on Reddit, reluctant at first but I went ahead and reached the coach, long story short, it's over 3years and counting and I've made over 1.5million simply following the guidance of my coach.
@@bobbymainz1160 my 401k lost everything it’s gained since early 2019. wouldn’t mind looking into the advisor that guides you, I believe the best way to beat this recession and inflation is to earn more.
@@joesphcu8975 The coach that guides me is Eileen Ruth Sparks, it shouldn't be a hassle finding her, she's quite known among her peers, so just search her name.
@@bobbymainz1160 Thanks, her website popped up on the first page immediately I searched her, I read through her resume and seems pretty tight, so I booked a call to discuss with her.
It seems to me that the Chinese govt needs to figure out away of transferring at least some of the benefits of economic growth away from the cities back to the countryside. There remain around 400 million Chinese who do not live in cities and many never will - the demand for their manufactured goods is tailing off , though still very high. Without redress this problem of imbalance could be their undoing.
Once they figure that out then they have to tell the rest of the world how to do it.
They have been rather successfully with the rural country side,including massive transportation schemes, cadres to deal with poverty and their belt and road initiatives. I think they have it pretty well figured out tbh.
@@nigelcheriyan5693🤏😢😥😰😭🥵
@@nigelcheriyan5693 right on! You hit the nail right on its head...Those smart a_s comments of haters were after the facts.
They got a sickly kick out of bad mouthing China, the world 2nd largest economy for HER tremendous success, which was not seen in past human history.
Right on! You had the exact same thought as the Chinese gov. They call this program “Rural Revitalization”, which is part of their strategy to deal with overproduction and global economic downturn, in addition to the Belt and Road.
China has been off the spotlight lately, the war sure helped them to shift the focus out of their economic issues
You always need a enemy on TV
#ChineseVirus still spreading though.
It will come back to hurt us. Evergrande started to come back into the news and it isn't looking pretty.
50 years to own a modest apartment? Compared to 10 years in New York?? When you consider the time you can really appreciate the Chinese people who invested everything they had into pre-buying homes that were never finished. Also the foreclosure rate has gone to about 197% within the last 5 years.
What I don't get is why apartments cost so much when there's 90 million apartments unused?! The system has failed hard...
that's how communism works, lol
@@jakeheez
That's a crucial part the did not mention in the video.
Real estate has been one of the only market where normal Chinese people could invest in. So it's not only those property developers taking out huge loans but also a massive amount of average people who would also ask family members or friends to leand them money.
They were banking on flipping the apartments for a good profit and it worked for quite some years This was a major part of overheating the market, and the demand of migrant workers was only the kindle for it.
Same here in major cities of India. It almost takes all of your life savings. I am in 30s and actually have got an apartment from my company. But the day I will retire I know I cannot afford to buy the same house in my city. It can be possible only if I keep working till my 60 and invest my money in focused way to achieve this goal. It sometimes pains me to see so many people working so hard all of their life just to get a roof over their head in the end. However it is also true that may be this dream has a great meaning and value which keeps people awake and get going inspite of every kind of challenges around them.
@@RN-yo4qm lol, china don’t really run on the communist system.
I was on holiday from Dubai to Guanzhou with my family in 2013 and stayed at the Ramada Plaza for a week! I was fascinated to see the buildings all over the city ! Truly amazing!
One of the problems that seems to be missed in this documentary is strange to the capitalist mind. A lot of property market is actually a lease, because China does not practice capitalism for individuals. Local governments lease property long term to individuals, using that as an income in place of taxes that do not exist. If buildings are not getting built, many local governments do not get financed from property leases, and thus cannot provide services. Emergency services, health services, etc. The financial impact to the world is going to be heavy, but it will lead to restructuring. In China itself though, the level of chaos and misery is not even known yet.
FT totally missed the point Chinese government message to its citizens: flat/apartments are for people to live in, it's not for speculation.
Isn’t that message a bit late?
@@jasperhorace7147 it was at least two to three years ago.
The ccp has been saying it since 2013.
How naive to believe the thin veneer of communist propaganda masking the world's most exploitative capitalist economy.
Is that an important message? Clearly it made no impact to stop the bubble
Evergrande's debt problem is tiny compared to China's High Speed Rails with over USD$2 trillion of debt. It borrows more money just to repay interests owing, excluding railway running cost. China built so many unprofitable high speed railways.
But those high speed railways really boost Chinese economy without doubt.
Tiny compared to Evergrande alone, but dwarfed by the entire real estate market which is almost entirely in trouble
Ehh. In China, high speed rail is a government service much like a public hospital is a service or US military is a service. US military consumes a lot of money yet no one bats an eye.
@@dseven8756 exactly
Railways underused are still used
But empty flats are total liabilities.
@@dseven8756 yeah definitely. Enough to get close of offsetting losses? I don’t think so.
Extraordinary that any Chinese would pay 100% up front for anything - let alone property!
One thing you should know is that a crash and bullish market provides equal high-yield potential, it's all about information and strategy application, I've seen folks make huge 7figure profit in a crashing market and pull it off much easily in a bull market the recession is getting somebody somewhere rich.
Access to good information is what we investors need to progress financially and generally in life, this is a good one and I appreciate...
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This is not the first time I am hearing of Mrs Amela Friedman and her exploits in the trading world but I have no idea how to reach her.
@@tracynguyen726 You can communicate with her on telegram, with the Username below
@@tracynguyen726 Investwithamela✔
Its truly amazing how the connection between actual householder demand and apartment values has never been seen as the real determinent of viability in China. Unquestioned credit has driven this process and unless occupier demand suddenly firms up the bonds will be defaulted as developers are wound up and new owners buy in at firesale prices.
loans and debt are based on buyer but also in many cases require another family in case you can't pay your debt. they then go after whomever they can find associated with you.in the last resort.! they post your ID /Photo/real world contact and ID on big posters usually at bus stops .
Nobody in finance even thinks about the very poor quality of construction in many of these projects, the curious Chinese attitude about maintenance and the fact that all these buildings are built on land people don't actually own but are leasing from the government with no clear idea of what happens after 70 years when the leases expire.
@hognoxious You miss the part where the people are usually compensated.
You can renew the 70 year lease for a registration fee ranging from 1% to 20% depending on local policy
@hognoxious There is no private land ownership in China. There's no way to own it. You can only extend the lease.
it's literally manifestation of a bubble in physical form, buildings will start to crumble on their own.
@@pinzazzzz LOL! Pennies on the dollar!
I am choking on my tears of sympathy for those international investors who thought buying Chinese bonds was a good idea.
Greed trumps integrity. People will just do anything for some profits. I don't invest with countries who are on the bad side of the human right scale.
@Zack Smith ...it is not funny to see people suffer under dictatorship or communist controls. But no one is stopping you from investing with them. Good luck to you.
@Zack Smith .I have lived in a communist ruled country and are currently living in the USA. I can promise you that the poor in a communist (including China) country cannot be compared to the poor in the US. The standard for comparison is different. The US has way higher standards, 15 times better vs China. Folks in the US get rental assistant, food assistant, free healthcare, free education. But why didn't all of them get out of poverty? that is another discussion in itself. The opportunity is there, they just need to take the initiative (not counting mentally ill/drug users).
Under communist, the poor is shoved out of the way so the land can be developed, and the people don't have much voice on it.
As for the total welfare equality, lets take China as example, because they arguably has the best among the communist countries. The poor doesn't get the same treatment as everyone else. Job placement, healthcare, and other benefits are heavily corrupted. You have to bribe your way to get good service. In the US, you get safe (not cutting corners) services the same way, for everyone. Of course, the rich can go one step up, by having their own private doctor. That doesn't count.
As for privacy, there is none in China. Freedom of speech, none in China. Everyone is constantly watch and cannot say anything political, especially against the current party ruler.
I'm laughing about it. If you invested in a Chinese dictatorship you deserve to lose everything. Wall Street only cares about what it can skim off the top.
Totally agree, ppl in Communist China have little human rights. Look at their ridiculous zero Covid policy…..
No matter how hard you train, if your diet is poor you probably won't make any significant progress. You can't out-train a bad diet and I can't emphasize this enough. It is the same with investment.
@@philipcooper1636 *Mary brigid Mullin* she is amazing. you just need to look her up
@@richardmadison9670 Thank you very much, for the heads up
To be honest, my diet is shite as a student yet the muscles still are growing at a reasonable pace.
Whether it's your superbly researched and immaculately written FT Newspaper and Editorial articles or your short documentary films, the quality of all your content is simply outstanding. Good Work and Keep it up Team FT!
Whoever did the graphics/animation for this video - great job!
PolyMatter did a series of videos on this subject, but a bit broader, about a year ago, for anyone who's interested: "China's Reckoning"
Really good and interesting!
Thanks man
I watched all the parts and the conclusion is that China is just a Pathetic Paper Tiger.
PolyMatter really is just repeating nonsense. For complicated financial issues it’s still best to listen to economists. They don’t guess right often but still closer than people that don’t get it and just repeating nonsense
Polymatter's 4 part series was very good. It broadly explains the finance mechanisms used by local governments, demographic problems, their water problems and more. It's a really good place to start if you're interested in understanding China more deeply.
It's been 4-5 months and nothing too serious happened yet. Lehman Brothers literally collapsed overnight without any obvious sign. It's totally different scenario.
Summer buddy, it’s starting, I’m seeing a future now, and it won’t be good. Yet, there’s money to be made.
@@thinhngo7244 How are you going to make money?
It's just waiting to collapse. The absolute collapse of Evergrande is not happening yet, it won't happen overnight but gradually it will lose bricks and it will fall catastrophically with the economy on a free fall.
@@sammy_trix cope
China has selected instead of letting it all collapse at once to have it effect their economy over the next 50 years. Long term stagnation is in the future for China.
Very good storyline. Excellent Video
I pray to God 🙏 with both hands folded 🙏🙏 for the wellbeing and happiness for everyone in the Global World based on LOVE LIGHT PEACE AND JUSTICE FOR ALL
China just came out with a better tone toward their tech industry and markets. Assuming that geo political events do not get worse between the USA vs China. I am making a Long term asset accumulation bet on BABA.
Yep, good Talk. 2022 will be a rollercoaster for sure. Stocks valuations are at an all time high while at the same time we have the threat of inflation, rising interest rates and supply chain and productivity issues to deal with. Something is going to have to give. I think it will be the Markets that will have to correct. How much and when - who knows. Sanity hasn't prevailed in this bear market and I suspect it wont prevail in a correction/crash.
I hope everyone have their cash ready to jump in at the right time. Secure your financial future with calculated moves. The stocks market still remain your best bet in becoming a millionaire.
in order for us to prepare for the future we need to look into safer investment with good prospect . If you have the mindset of investing 5 years ahead and just keep DCA every time you get paid. My portfolio have accrued gains of about $130k under the guidance of my investment -Advisor "Nicole Ann Sabin" whose skills in portfolio diversification are unmatched and client-centered
@@marianparker7502 The crazy part is that advisors are probably outperforming the market and raising good returns. I will give this a look up, lucky i stumbled on this thread.
growth defined by finance rather than utility and sustainability always ends badly. period. take no fancy counter-logic seriously. In this case a genuine need for housing was leveraged into paper growth and the proceeds farmed like an mmo, and i think it is important to choose sides. Housing needs to be understood as a social good, not a luxury commodity or an object of speculation. The alternative is all around us.
Ludicrous. You have learned nothing from this video about leftist central planning.
Such a great statement! I like when finance and reality go hand and hand.
Excellent content. As other commentators have already said many apartments were purchased as investments by average investors. Not only are those apartments empty and likely to remain empty but many were constructed to such poor standards (tofu dregs) that they are probably uninhabitable and in some cases in damage of physical collapse. So they are not just homes people don’t want, but literal piles of waste no one wants. How China manages the fallout on citizens who have lost their life savings and contractors who have lost their livelihoods will probably be more critical to China’s survival/direction than how the default is handled.
Agree.
This video feels very out of date. Didn't Evergrande start having trouble back in July 2021?
This video didn't seem like it had much to say beyond Evergrande had trouble paying its bonds back in September 2021.
Like one thing it easily could've gone into is how these are dollar denominated bonds, not Chinese RMB bonds.
Yes, and they also didn't mention the form the bail out of Evergrande has taken: SOEs buying it up in pieces, under Xi's orders.
When you're broke, the particlar currency does't matter Zero is zero in dollars or renmenbi.
@@gaoxiaen1 But it does matter. You can skip paying RMB to 500 cement companies for 30 or 60 or 90 days, and they might get mad at you, but mostly no one will notice. Or you can skip paying $-denominated bonds, and the whole world will find out within minutes, literally minutes.
Dude the audio/music selection on this video was INSANE on this film. 10/10.
Now i'm completely frustrated because I don't know what genres these tracks come from and where I can get more of it.
This is symptomatic of the end of the long term debt cycle which Ray Dalio talks about in his new book. Ray seems very bullish on China long term but seems to overlook this aspect of debt fuelled growth which will not be immune once the system starts to unravel.
Why would someone want to buy a house when there's a 100 year contract. Your next generation would have to buy it again. The goal is to have generational wealth not generational poverty. Not mention that there are so many Tofu Dreg apartments in China that are cheaply made and fall apart. Most of those empty buildings are Tofu Dreg.
The farmers were evicted off their land if they didn’t go along with the proposal of a better life in the cities.
Sad state of affairs that place!!!
The Pooh bear communist party leader will never come close to the intelligence of Russia or world dominance of the USA, China will only ever be a population of copycats and immoral behavior…
It takes 15 years in London and 10 years in NY to buy a home?? I don't know where this guys took the numbers...and also that kind of bubbles happen in all parts of the world, is human nature.
Probably using Average pay instead of median. The Wall street types pull the Average up significantly.
@Alex Haughton could be, but I live in London and have seen houses a 4 million pound. Pretty good mortgage.
@@franciscojavierruizmanchon8177 they said apartments
NYC median income is $67000. Median home price is $650000. Pretty simple math. Just check the census bureau's data.
@@basilmagnanimous7011 Cool story, but I don't see anyone here who asked about that.
Just the beginning. If you do not protect your assests now then good luck to you. This is a worldwide debt problem.
Love this. Please share fellow Comrades.
This is a good documentary, GDP is not the measurement of a wealth of a country but productivity is.
I love the Jenga analogy.
"Do you smell that? What's that smell? Money" - Jared Vennet
Loved that line.
First answer was " opportunity "
19:05 come on FT you're better than that. Everybody knows the big 4 accountancy firms are incredibly inept at audit. It's part of the service!
Hahahah yeah being "bad" at audit is actually one of the features dodgy companies pay for
jajajajaj
Real Estate debt plays a major role in Sweden as well.
@@frenchonion4595 I hear most countries are pursuing expansionary policies nowaday.The US and EU are champions, but many other places are doing it. I wonder, though, how much of that money in chinese real estate comes from the US.
wow I've been waiting for a new video for a very long time. finally it came out
It really surprises me that no one figures out these schemes, until it's too late.
4:04 "Owning your own home after a period of no property rights is a massive aspiration of the 'middle' (read lower) class" Middle class means to have a home and a job. Lower class is just a job, Upper is just a home.
Brilliant work from the Financial times team
This is good work, solid.
Since 2008, the pendulum between Greed and Fear seems to be swinging much more towards fear.
Amazing! Lots of good data here. Absolute madness. Eventually chickens come home to roost.
For a foreigner such as me ( an Australian) this program was informative, tempered and high quality. Excellent.
its not just people moving into cities, cities are being built where it used to farm land
Outstanding - well done FT
too late. The story of EVERGRAND is first known in 2020.
@@galecarp I'm aware of the timeline, I like the production, editing and composition, which you'd know about if you'd researched
@@PRAR1966 thx for sharing. TIMELINE is a good channel.
Obviously, they never did a financial model for each property. It was basically a Ponzi scheme. The future project was paying for the last project.
That's not what a Ponzi scheme is.
This advice has been instrumental in helping me become a more successful trader. Thanks to your strategy, I have achieved 11 consecutive wins - the best result I've had in ages. Thank you for sharing your knowledge with me
The issue is the mindset of "investing" not to rent out and get income, but to sit on empty properties in the expectations of future capital gain, as a way to build family wealth. This has worked in the past in particular situations, however when everyone is trying to do it, and you have 90 million unoccupied units, it takes on the characteristics of a pyramid scheme. The Chines govt. should have foreseen this, and taken steps to protect the people at the bottom who are going to lose, the three red lines were too little too late. I think they wanted the kudos that came with "economic growth" too much.
No one is living in these apartments, not the homeowner or a renter. What is the quality of the construction?
Property greed and excess does this to people eventually .... it was going to happen and there is no sympathy for them ....
The founder is cleaning the toilets of the communist party .....
@@lliamjurdom9505 it's ironic, do you know how your "capitalism" works? cuz capitalism also use consumer greed as a tool, when money does its cycle faster then the economy will also growing faster
this law is not exclusive to capitalism alone tho, but it's exist in every economic system that use some kind of money for transaction
Thing is, renting in china is cheap. I rented a pretty nice flat in xiamen, which is a wealthy east coast city, perhaps better known as Amoy in the west. $450 a month. Balcony, 2 storeys, 2 toilets. And utilities were just a few dollars a month too. That's 2018. When people say property is unaffordable, they are not talking about the rental market. I would never buy in china. You can't really buy property anyway. You can only obtain a 70 year lease which will probably be extended...but there's no guarantee of this. I believe that property is valued in china because ownership gives you the right to move officially to any given town. In the west, this just isn't an issue as you can move anywhere you want with or without property. Also in china it's very difficult for a guy to get married unless he has a property. Girls it seems just won't marry you unless you're a property owner! That's communism for you.
But aren’t many of these properties empty? They are not let so therefore make no income for the owner at all.
@@jasperhorace7147 no, they are not empty. Not in places like xiamen or Hangzhou or Shenzhen. Well, maybe there are a few, brought simply as investments. But basically in china, developments are built and they eventually get filled. But on the whole, rents are low. I'm pretty sure that in a place like jiaxing, a prosperous town between Hangzhou and Shanghai, you could rent for maybe $200 a month. It would not be luxurious at all. Bit basic. But liveable. This contrasts heavily with western towns. In London it's impossible really to rent for less than $1000 per month...and that's for something small, on the outskirts in an iffy neighbourhood. Yet to buy property is relatively inexpensive compared with china, especially considering the wage difference. Basically property to buy in china is crazy overpriced, or maybe was overpriced before this correction. Rents are very low. It's a bit like, you can pay $20 a day to hire a Mercedes, or you can pay $200000 to buy it. That's the property market in china.
There's also not many good investment vehicles in China so it's all channeled into real estate.
@@jasperhorace7147 Those building they've shown were years ago or when they were still being built. Most of those are inhabited now.
Supremely instructive!!! Thank you! 👍🏻
I don't agree with statements such as "they built all this were there was nothing". There was definitely something there before they started building: whole ecosystems that were razed to the ground and entire species that ceased to exist so they could build these cathedrals to greed. Let's not forget that this genocide was also hidden behind the smiles and the champaigne.
Excellent point. The devastation is extensive. People who come up with such statements certainly comprehend the entire dimension but they prefer to fend off their concerns because they want to stay in the game / play, and they love it...
What I like about China's policy is that they are willing to throw their billionaires under the bus eg. Jack Ma. Here, we would be taking our tax dollars from the poor to give to rich for the reason of too big to fail.
I wouldn't mind if the government here in the US did something about our obnoxious billionaires
@hognoxious lol
Yeah but then here comes the conundrum: When is it exactly good to throw a certain billionaire under the bus?
@@lyq232 You have a point, not all billionaires are bad or should be villianised as there are good ones too. But, I would say when their interests out weigh the interests of the majority of the countries citizens.
Billionaire without blood ties to the CCP, that is.
Excellent piece.
Accounting audits are a bit of a scam. They only certify that a few very specific types of financial fraud are not happening. That's it. They don't certify the overall financial health of companies, even though that's how they are usually interpreted.
International Audit Standards have been a key issue for decades. An even bigger problem than unprincipled credit rating agencies.
Jim Chanos did remarkable research into the property sector in the early 200'0s. He was shocked by the incredible waste and folly of the entire real estate industry. The Big Short for Chanos was to leave the market for someone else to find a solution.
3:35 Love the vibe of the music!
Suppliers were not paid since the collapse. Developers who didn’t meet the three red lines find themselves in a situation where suppliers refuse to extend credit for building materials now must complete projects with no money or materials. Those projects that are being completed now are using poor and cheaply made materials.
Thats been going on for years (bad materials)
They aren’t finishing their projects…
They already STARTED building using cheap
materials… more $ in evergrandes pockets
Great analysis and very informative!
A great video. One question - will the FT please use chapters on their YT content to allow us to re-watch certain portions more easily?
Классный видос. Спасибо что запариваешься и выклдаываешь)🧤
Really good production - good music, video, presentation - my new fav subscription.
Fantastic video. Very informative on the build up of how it got to this point. Keep up the good work.
This is what can happen when a centralized authoritarian regime decides to create cities out of thin air. They are conceived on a modeling table without regard for geography, building codes, construction materials, weather, or even if anyone would want to live there. Consequently you get shoddy workmanship and cheap materials, and nobody living there. Apartments are purchased by investors who simply plan to sell it to a new investor...Even one of these unpopulated behemoths would be fascinating, but there are a dozen or 20 such places. The U.S. has certainly experienced debacles with home buying and too much debt, but what do you do with an entire city that is basically useless and falling apart?
More like 10s of thousands if not hundreds of thousands of these empty apartment blocks across the country. Then there horrible building practices mixed with subpar materials make them basically worthless. They begin to fall apart in a matter of years rather than decades. Hell many of them have collapsed while they’re still being constructed. Plus people start paying their exorbitant mortgage prices before the building has even been built. They have huge sales events where people purchase these and you put a down payment (often people’s life’s savings) and begin paying a mortgage from that day forward with only seeing a scale model of what the apartments will look like. Plus the lease the builders have with the government is only 70-100 years which starts the day they sign the contract. So by the time someone can actually move in they have 60-85 years and it’s not yet clear what the ccp is going to do when the lease is up and that’s if the building even lasts that long which is unlikely. It truly is crazy how the whole system works
@@andrewreynolds2421 - exactly. People in China don’t consider a wide array of investments for their nest egg. This could become an existential crisis for the party regime. It would have to.
from 0 to $150B in 10 years... sounds like a sports car ad
😂😂😂
Spettacolare lavoro di FT.
Amazing video! Thank You very much!
Please add timestamps
Here is just another lesson in Exponential Growth. Dr. Albert Bartlett often lectured about this to his undergrad students. Yet, as everybody knows, Human beings are not rational creatures.
As of 08-18-2023 they have filed for bankruptcy!
When I worked at Hangzhou on urban planning in 2011 / 12 negotiating between German and Chinese partners the bubble already had bursted. The question was just, whether the landing would be hard or soft. It was very soft, because assets from all over the place were generated in the "Chinese urban revolution", taking place actually less than 30 years after the "Cultural Revolution". And building and real estate industry have become quite powerful. Local governments are also emphasized in the film as key stakeholders. After my return in 2012 I told some colleges here in Germany, that I had worked in phase 0.2 till 0.5 of our German system of work phases of engineers and architects: evaluating land, that was owned by the People's Republic of China since the Revolution in 1949 and in many cases had been given to locals and farmers for private markets and their stakeholders. Amongst them also many local party hacks. Land grabbing and other ways of greedy exploitation all inclusive.
I think Financial Times needs to film an update since China's economy is pretty much crashing, and someone in the comment had mentioned China's Tech.... Tech companies are pulling out of China now and moving to India.
China, a communistic-kapatalistic market.
With free trade, but also communistic controlled markets.
Yeah, building housing was a great way to make money. And for a while it was how cities and businesses made a lot of money. Making houses quick and cheap at high prices, don't ask about the quality of the materials used to build them. Many of them are falling apart just under the new fresh outer layer.
While not far away in a village old temples stand, thousands years old.
It is sad really.
I was in the building business in a very small way.. went through 3 booms and busts. During a boom the mortgage brokers gave loans without income documentation. the appraiser would ask me how much the appraisal needed to be..
They all worked on commission....perfect recipe for disaster...after the first cycle I could see the next two busts coming from a mile away as the saying goes.... everyone in the business could see...
Tell me. Is it coming again?
@@steveestebon2079 Do you read any newspapers that describe banks or other similar financial institutions that are in trouble today? How safe are you and your pension...
@@billjohansson88 yes
Great video. Part of the story has been the financing provided by western companies, like the large mutual fund houses, investment banks etc. While ex-post, it may worst case become very clear why all of that has been built on very wrong assessment (the government will bail them out anyway), it may be very interesting to give some more insights on the 'psychology' of those portfolio managers, analysts etc. which made them believe for quite some time there is no issue at all... Thanks
Dude, ALL the money comes from the west. What do you think they are making in all those factories that all the peasants moved into the cities to manufacture? This is what happens when centrally planned idjuts are given trillions from westerners buying cheap crap from them. A giant Ponzi.
Less than you might think - China will not permit Chinese currency be exported. Chinese companies cannot pay interest to offshore holders of debt or equity.
Tesla for example, can only export profits in the form of vehicles.
Building companies can’t export anything to pay offshore debt (which was was why Evergrand was looking at car manufacturing). Evergrand was also using its developments in Hong Kong (whose currency is convertible) to pay its overseas debt.
How come there are never any legal repercussions for auditing firms like pwc and EY? Shouldn't they lose their licences and be banned from business for decades?
People need houses, so therefore the deposits taken by Evergrande have indicated an interest in the particular building, so why not give the building away to someone who promises to finish and upgrade the building to enable these apartment owners to move in and enjoy their housing investment. Oh I forgot..... we are dealing with the Chinese government ( and their care for their people ) !
Surprising how much Amy Adams knows about the Chinese real estate market
You got to remember the construction was counted towards there gdp. So the ccp kept the construction going to artificially inflate their gdp.
I'm slightly afraid to continue with stock due to the risks fueled by inflation and the recent announcements by the fed and the stock market crash forecasts. I have not been living my normal life since then. even tho it hasn't happened yet but I'm genuinely looking for alternative places to invest in. I would consider myself to be a socially responsible investor. What are your thoughts on cryptocurrency?
@Alice woodward Good read, thumbs!!
@Alice woodward I would like to get in touch with her for advisory purposes. Can you tell me how?
Gold silver and XMR
@@remsee1608 crypto is the new gold
Don't think of crypto as an investment. It would fall within your "high risk" share of the investing budget. Only invest in it if you support the ideological implications of crypto.
For most of the budget, put it in mutual funds. Don't think of investments as a way to get rich, use it just as a nice nest egg.
Great insight into the looming danger. Loved the video!
The ghost cities can wait, who animated this! That jenga tower collapse was VERY detailed for a 1 second clip, like actually very impressive. Move over pixar.
i've been seeing pictures of Chinese ghost cities on the internet for years,... now I understand why there are such structures
Built monumental personal wealth by feeding off from average home buyers deposit, bond holders saving, and easy financial institution credit worked out really well for Chinese property developers in the past. Seem like the party is coming to an end sooner than expected.🥴🥴
Curious as to whether this is just a glimpse of what is happening in China and that there are more issues then we know about. It’s likely that the Chinese economy isn’t as strong as we would think.
where do you think the world's strongest economy is? Healthiest?
@@titusp9488 If you’re just looking at GDP you’d have to go with the USA. China has a strong economy but I don’t think they’re telling us everything.
Likely? Guaranteed.
@@gaoxiaen1 when you are so very abosolute ... you are LIKELY to be wrong
@@titusp9488 When you're a fake account like you, you're nothing.
Sound recording is marvelous.
I dated a Chinese woman a couple of years ago. She claimed to have sold an apartment she owned as part of her divorce settlement. She and her husband had bought a couple of units as an investment. By the time the asset settlement was finished so she was free to sell it, the boom was just starting to bust.
She was able to sell it, but the price had dropped $200,00 USD, below what similar apartments had been selling for before the divorce proceedings. She was distraught, but honestly, she should consider herself fortunate, as right now I don’t think she could give it away, yet her HMO monthly bill would still have to be paid.
That was two years ago.
Also, the Chinese local governments don’t “sell”land. You’re paying a 100 year lease. If you don’t think the Chinese won’t let the property be improved and take it back, just ask the British about Hong Kong. Britain had a 100 year lease, and look what happened.
Toby 🤔