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Get Ready for China’s Epic Property Meltdown

On August 24, 2023 By Awake-In-3D

China’s “Lehman Moment”? Maybe.

Ever thought about China’s property market going belly up? Picture this: the world’s number two economy is teetering on the edge of its very own “Lehman moment”.

What’s Happening Now:

China’s property market disaster.
The “Lehman moment” – why you should be concerned.
Beijing’s desperate scramble to keep the ship afloat.

China’s Property Crisis: It’s Worse Than You Think

China’s real estate sector is a ticking time bomb. China Evergrande Group, a big-shot developer, is drowning in losses – a staggering 812 billion yuan (US$112 billion) for 2021 and 2022. And it’s not the only one. Country Garden, another property behemoth, is flirting with a bond default.

For once I agree with something the seriously flawed, fiat money economist John Maynard Keynes once quipped, “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” Couldn’t have put it better myself.

Lehman Moment: It’s Not Just a Possibility, It’s a Promise

“Lehman moment” – a domino effect of financial catastrophes triggered when one company’s mess becomes everyone’s nightmare. While some may think that a full-blown Lehman moment is unlikely in China, the property sector’s mounting troubles are about to give Beijing a reality check.

Possible Short Term Band-Aids to Survive the Impending Meltdown

Policy Intervention: Beijing might pull some tricks to steady the property market and dodge a crash.
Debt Restructuring: Companies could beg their creditors to avoid default and rejig their debts.
Bondholder Bailouts: The government could play the hero and bail out bondholders to avoid mass hysteria.

Asian Crisis Contagion Management – Been There, Done That

2008 Financial Crisis: Central banks worldwide went all guns blazing with monetary policy measures to fight the crisis. This will only increase inflation rates to epic proportions.
1997 Asian Financial Crisis: Governments did some soul searching, enacted reforms and groveled to the IMF to restore stability. Hopefully, they won’t end up at the IMF’s doorstep.

Contributing article: https://www.scmp.com/economy/china-economy/article/3231900/chinas-property-crisis-plagues-its-economy-and-financial-system-lehman-moment-looming

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