Vocabulary

 

 
 
 
 
 
 
 
 
 

Video

 

 
 
 
 

Transcript

In 1989 the CCP did something that shocked the entire world: China’s democracy protests were threatening the CCP’s rule; it made them scared.

So scared that the CCP decided to launch an attack against its own citizens to silence the protests — in the process thousands of innocent Chinese students were killed and thousands more were wounded.

.     .     .     .     .     .     .     .

In the last few weeks something similar has been happening in China that is scaring the CCP: Chinese citizens across the country took to social media to do something that has never been done before — thousands of would-be homeowners pushed for a movement to STOP paying mortgages on their homes in an attempt to put pressure on the CCP and banks to treat them fairly.

Protests broke out in multiple cities and the crusade seems to be gaining more and more momentum each day. The CCP is so worried that it has already sent out tanks to maintain stability.

For the first time in more than 30 years, the CCP is fearing for its existence. And it all has to do with China’s real estate bubble.

According to one expert the CCP sees this situation as a political protest not a banking crisis. Government officials are extremely fearful about how this might turn out.

WION Reporter: “But one country could already be facing a recession, and that is China.”

CNN Reporter: “A massive protest over frozen bank deposits.”

DW Reporter: “Hundreds gathered in Zhengzhou; tens of thousands of them have begun withholding payments demanding compensation.

Before long thousands of security personnel appeared accusing the local police of using violence against them. They’d rush over by the hundreds grab somebody and beat them and kick them regardless of whether it was men women the elderly or children even people with disabilities.”

.     .     .     .     .     .     .     .

Big Chinese banks are at risk: over nine trillion dollars in loans are a danger of defaults.

And if the situation gets any worse this could foretell the collapse of China.

And the CCP this mortgage crisis isn’t the only crisis the CCP is dealing; with as covered in my previous videos zero-covid policies and bank deposit scams in Hanan pose a big risk to China’s fragile economy too.

But this mortgage situation is by far the biggest threat, as it affects trillions of dollars involves some of the most important industries like banking and real estate and influences millions of households in the country.

According to a well-respected expert this mortgage crisis could be a hundred times worse than the 2008 financial crisis.

So to keep the news under wraps the CCP sensors are working overtime to censor any articles and videos that spread the truth.

{Now i have my suspicions that the CCP’s bots have always been disliking my China videos in order to suppress it in the algorithm, so if you guys can just take a quick second of your time and tap that like button below it helps me out a lot with the YouTube algorithm especially when covering topics that are critical of the CCP}.

.     .     .     .     .     .     .     .

Even though the protest started in July, the problems have been brewing for China’s real estate market for decades. So before jumping into how these protests are threatening the CCP’s rule, let’s first go over how the Chinese economy got to where it is now.

Here in uncle Sam’s America, it’s considered to be an important part of the American dream to own a home.

But slowly it’s getting less popular among newer generations to do so, because well it’s not very affordable.

China, on the other hand, is different. The importance of owning a house has only gone up in the past couple of decades. Real estate is one of the asset classes that the public trusts more than anything and real estate ownership has been a very important cultural significance to the Chinese people.

Families use real estate as a way to plan for their retirement guys with real estate are considered attractive choices for marriage and the amount of real estate you own is directly related to your social status in society.

Considering all this, you can see why real estate prices have continued rising over time. If you want to learn more about the cultural and economic significance of real estate in China, Polymatter has a great video on this which I will link below.

There’s a high demand for real estate because of all these factors, and coupled with incredible price rises in the past, you can see why everyone and their mother wants to buy a home.

(kind of reminds me of the 2008 US housing market, where everyone wants to buy real estate because real estate prices are only going up).

.     .     .     .     .     .     .     .

The rush to buy houses was so huge that the developers were selling out complexes before even breaking ground for construction.

However even after construction finished apartments just sat there empty because they had owners but no inhabitants.

Demand was high because everyone wants to buy their second or third home to get rich on the real estate boom.

So supply increased drastically to match the demand but a lot of these homes were just sitting empty as owners were only buying these homes in hopes of price appreciation, because other asset sectors weren’t as accessible and developed real estate was the only thing people invested in.

Based on one data set Chinese families had around 70% of their wealth in real estate. Yes you heard that right 70 percent; they’re not much for diversification oh just imagine if something happened to the real estate market.

All right I think I’m laying on the foreshadowing a little too thick.

DW Report: “The collapse of Chinese property giant Evergrande unfolds — shares in the highly indebted company have fallen 80 percent this year and . . . “

Ten News Report: “Fifteen towers unfinished for seven years; the developer bankrupt. These towers were recently brought down in Shanghai after 20 years of stalled construction.”

.     .     .     .     .     .     .     .

Evergrande took full advantage of this boom in China’s real estate market and became one of the largest developers in the country. At one point in 2018 they were actually the biggest real estate company in Asia.

When people look at something that big . . . well they kind of just assume it’s all legitimate. Oftentimes though that’s not really the case. I hope you guys learned that lesson after the 2008 crisis.

If anyone had looked under the hood they would have realized that some of the practices happening at Evergrande were far from appropriate. Now due to the sheer scale of the company a lot of practices were quite complicated, but here’s my attempt at trying to simplify this.

Remember earlier how I mentioned that FOMO into real estate was so bad the people were buying houses before construction even began.

Usually a company like Evergrande would lease a piece of land from the local government, then they would turn around and sell the houses that are supposed to be built there, and receive full payment for the houses before even breaking ground.

Companies would never have any issue selling out as the demand for real estate was so high.

People were more than happy to take out mortgages and buy houses just in hopes of owning real estate someday in the future.

.     .     .     .     .     .     .     .

Now the big problem that starts here is that companies like Evergrande wouldn’t usually use the money from the sale to start construction.

No, instead they would use the money as down payment to buy even more land so they can sell even more apartments for the future.

Now this is already a huge problem this should not have been allowed in the first place. Any unbiased person can look at the system and figure out that this isn’t gonna last.

This is exactly the job of the CCP. But they passed on this responsibility to the local governments and this is where another problem lies.

Local governments were directly benefiting from these real estate pyramid schemes that companies like Evergrande had going on. You see in China, one of the big ways local governments make money is by leasing land to developers, like Evergrande.

This meant that the more risk these property developers took on, the higher the bids on this land that the government was leasing out. Around fifty percent of local government’s revenue was coming from leasing out land.

The same government that should be protecting its citizens from these risky practices is benefiting heavily from these so-called risky practices. This is a prime example of perverse incentives — we don’t even need to get into the corruption that goes on around these land leases.

This was one of the main reasons why China’s real estate bubble has gotten so big. Regulators were always slow to step in because it was directly benefiting them.

The CCP saw where things were heading and tried to get things under control by implementing the three red line policies for property developers . . . but it was a little too late.

Report, Spotlight on China: “The debt burden continues to weigh on China’s Evergrande group as its angry suppliers are protesting the developer’s unpaid bills while its bondholders patience has dissipated.”

The shady practices don’t just stop there either Evergrande would list these houses as assets under their balance sheet to get more loans from the banks so they can finish construction.

These houses were already sold to other people so no matter what accounting magic you use these can’t be considered assets of Evergrande.

The worst part is that Evergrande wasn’t the only one pulling these shady tricks almost every real estate company in China was operating this way. The whole sector was over leveraged to the teeth just like a ponzi scheme.

.     .     .     .     .     .     .     .

The only way to continue forever is if you continue growing forever. But you can’t keep growing if people lose trust in Evergrande’s ability to stay solvent and I’m sure you guessed it by now that’s exactly what happened.

Once the company misses one payment chaos ensues.

Early last year one of Evergrande’s subsidiary companies failed to make a payment on its loans and people started looking deeper into its financials.

This is when the house of cards started crumbling and the news about contagions spread across the world.

Reuters: “The debt burden continues to weigh on China’s Evergrande group.” WION: China’s top real estate developer Evergrande is reeling under a financial crunch.
Gravitas: “Meanwhile in China, the debt crisis at Evergrande is only snowballing.” CNN: “There’s so many questions surrounding Evergrande.”
Spotlight on China: “In a notice circulating on social media, the suppliers have demanded payment from Evergrande.”

Evergrande Evergrande Evergrande Evergrande

DW: “As Evergrande’s debt crisis deepens, small business owners and people waiting for homes to be completed are starting to despair.”
WION: These investors were lured with various promises.”
DW: “To demand a developer to give them their money back the protest made authorities nervous.”

When the news got out that evergrand could default on 300 billion dollars worth of loans panic spread throughout the economy. People also realize that this problem isn’t limited to Evergrande.

The whole real estate sector is over leveraged and it’s starting to crumble. Chinese developers owed around 5.3 trillion dollars in debt.

*     *     *     *     *     *     *

Questions

Real Estate, Property. Is China a democratic country, or has it been totalitarian, authoritarian, despotic, tyrannical?

Loan, Mortgage. In 2022, where all Chinese people happy and satisfied with their lives? Did they only complain on social media?

House, Home. Why were people protesting? What are ordinary people doing as a result?

Interest, Debt. The CCP (Chinese government, Chinese Communist Party) is very calm. They didn’t do anything. True or false?

Construction. Does this affect only a few hundred people in China? Does it involve a few hundred thousand dollars?

Materials, Supplies. Is this a problem for the government or only for the people? Are the Chinese media and reporters openly talking about the situation?

Construction Worker, Builder. Chinese bots love this video report. Is this right or wrong?

Architect, Engineer. Do Chinese consider houses to be very important? Why do they consider homes to be very important? Is this unique to China and the Chinese?

Bank, Lender. Has the price and value of real estate in China been increasing, decreasing or remaining the same?

Borrower, Home Owner. What happened? What was the problem? Did local governments monitor and regulate the situation?
 
 
 
Regulations. Are houses cheap, medium-priced, expensive or very expensive in your city, region and country, or does it depend?

Inflation. Everyone wants to buy and own their own home. Yes or no? Is real estate a major industry?

Appreciation, Depreciation. Is property, housing and real estate a good investment? Do many people buy houses and property?

Housing Bubble, Overpriced. What might happen in the future?

Collapse, Bubble Burst. Is there a housing problem? What is the solution?