I begin with a question, is the chinese real estate market at risk?
It’s been a few months that I had no interesting topics on the real estate market, analyzing the data in the various countries in the world I have not found much reliability if not price increases in the most famous cities.
2 days ago opening at 6:30 in the morning Bloomberg terminal I saw a news that reminded me of 2008 with the subprime mortgage crisis or if someone is more familiar with Lehman Brothers.
What on earth will I have seen from the terminal at that time of the morning? Crisis of the Chinese real estate sector and the name of Evergrande, the company of China’s richest man Xu Jiayin, has come up.
Someone may have seen his face on television, I anticipate that for Forbes he has a wealth of 13 billion dollars, not bad for being a person of humble origins. I will not go into detail about how he managed to earn so many billions, but I am interested in underlining how much his company Evergrande can hit the world financial markets.
Proceeding in order, Evergrande is a giant in the real estate and construction sector, in numbers it reaches 15% of China’s GDP, employing 4 million people. Yes you read correctly 15% how is it possible that a single company can cover so much?
Before I say that if this company were to fail, I like to understand how we got to this point?
Chinese government in recent months through restrictive measures has begun to avoid an overheating of the real estate market causing a boomerang effect in the sector.
New home sales plummeted in the summer months (-20%), the rating firm Standard and Poor gave a negative rating on Evergrande’s debt because it lacks access to new liquidity. Since so many use the financial markets to speculate, why not also look at the charts of Sunac China and Country Garden?
Since Evergrande is exposed to banks and other financial companies and is more than 80% indebted, what will workers and savers do?
Do you think that the other day they suspended the trading of all the company’s bonds, what will the Chinese government be thinking?
How is it possible that one day we wake up in the morning and see such a situation on our terminal?
No one realized anything?
How much is the Chinese government involved?
What is the relationship between Xu Jiayin and the Chinese government?
You know the systemic risk, if Evergrande were to fail, what would happen in China and the rest of the world?
How many funds or hedge funds are exposed to the chinese bond market?
If there were a collapse, savers would have bad nightmares at night or do I just want to scare those who read me because in the meantime the Chinese government will plug its nose and solve the situation?
Do you remember the phrase of Richard Fuld former CEO of Lehman Brothers “Too to fail”?
How come these billionaires who have been speculating for years and systematically stealing money through political aid are never punished?
The answer is always the same: money, those unfortunately buy material goods and people, if there were honest people in power certain situations would never have happened.
I hope that citizens will begin to understand the people who govern us, how these authorities behave towards their “friends” and how certain situations caused by them out of “greed” can endanger the savings of millions of honest workers.