A weekend topic starting with Bloomberg. “Disgruntled China Evergrande Group customers staged a protest in Guangzhou demanding that the cash-strapped developer restart stalled construction work and urging the local government to intervene. More than 100 home buyers in white T-shirts emblazoned with the phrase ‘Resume construction, Evergrande’ lined up before the housing bureau of the city’s Nansha district on Thursday, according to people who attended the protest and asked not to be named because of fear of retribution. They said the building of units they purchased in Evergrande Peninsula, a project of almost 5,000 apartments, has been halted since May.”
“Evergrande owed a record 951.1 billion yuan (S$198 billion) in trade and other payables to suppliers as at June, an earnings report showed last month. It had received down payments on yet-to-be-completed properties from more than 1.5 million home buyers as at December.”
The World Socialist Web Site. “The Chinese bond market and its financial system more broadly is coming under increasing pressure because of the crisis at Evergrande, one of the country’s largest property developers, with potential flow-on effects for international markets. The situation has gone from bad to worse. The company is engaged in a desperate scramble to sell off assets and raise cash while warning it faces the risk of default on bonds that are about to fall due.”
“In its report on the crisis the Financial Times warned that a default, exposing the perilous state of China’s property market, would be a ‘debacle that could cascade across global markets.’ Evergrande is not the only property developer experiencing major problems. This week the bonds of Guangzhou fell by more than 20 percent in a single day and are now trading at 60 percent of their face value. The plunge came after Moody’s downgraded its credit rating and warned about the company’s ability to refinance itself. Fantasia, another property developer, is also in financial difficulty and told the Hong Kong stock exchange earlier this week it had made purchases of $6 million of its own bonds.”
“The tightening of restrictions by the Xi Jinping regime is being conducted under the banner ‘housing is for living, not for speculation.’ But having promoted the very speculation that it is now seeking to curb the government is caught in a trap of its own making. Its efforts to reduce speculation threaten to stifle one of key engines of Chinese economic growth over the past period. Developers are reported to have sold 21 percent fewer homes in August compared to a year before. The extent of the housing boom is reflected in the rise of household borrowing which is now 62 percent of gross domestic product compared to 44 percent just five years ago.”
“A comment by Australian Financial Review columnist Karen Maley drew attention to the international ramifications of the Evergrande crisis. Foreign investors were becoming ‘fretful’ that Beijing was preparing to separate out Evergrande’s real estate arm from any rescue operation, leaving the holding company, in which they are heavily invested, with the debt. This would mean they would incur substantial losses.”
“Consequently, they are ‘stampeding towards the exits’ and seeking to sell off their bonds. As she noted, the problem for Beijing is that ‘while it may be able to limit the damage that an Evergrande default inflicts on the local economy, it is powerless to limit the impact of the country’s $12 billion bond market.’”
The Epoch Times. “Beijing’s crackdown on celebrities in the entertainment industry has resulted in Chinese social media such as Weibo, as well as major film and television websites, removing relevant content of the purged artists. Chinese film producer Shi Yuge (a former democracy protester now living in the United States under political asylum) told The Epoch Times about the chaotic political factions behind the purging of the entertainment industry.”
“Shi explained that it started when former CCP (Chinese Communist Party) leader Jiang Zemin encouraged Chinese princelings (children of CCP founding cadres and veterans of the Red Army) to engage in entertainment industries, despite it being criticized for ‘bringing down morality and involving pornography’ at the time. Jiang believed that it was beneficial in order for the CCP to control the industry.”
“‘When I was in Beijing [2013–2015], my friends chatted about the number of studios established by students in the Beijing entertainment circle for those two years. There were about 700 or 800 studios, and half of them were owned by the princelings,’ Shi said. Shi also disclosed that studios like these are often involved in money laundering for the princelings, who receive various benefits that must be whitewashed through various channels at the end of the day. It is ‘a consensus in the circle,’ Shi added.”
“Shi said, ‘The CCP is really short on cash … so it calls for common prosperity, which is in fact the same policy of ‘dividing the land with local tyrants’ that was implemented in the Mao era.’ ‘Targeting those who are very wealthy and influential is a characteristic of dictatorships,’ Shi added. ‘In many cases, when the regime cannot solve a certain problem from the root, it goes after the people who supposedly raised the problem. Once the people disappear, it is believed the problem will also disappear. This is the habitual practice of the CCP and the current situation in China.’”
The Globe and Mail. “China’s government on Wednesday summoned gaming firms including Tencent Holdings Ltd. and NetEase Inc. to ensure they implement new rules for the sector. It also said it would crack down on illegal behaviour in the ride-hailing industry. Gaming firms were told by the government on Wednesday to implement measures such as curbing minors’ hours of access to their video games to protect their physical and mental health, the official Xinhua news agency reported.”
“Those that are found to have ‘inadequately’ implemented the regulations will be severely punished, it said, adding that the firms present were also asked to resist engaging in improper competition and should instead focus on driving innovation.”
“Meanwhile, the Cyberspace Administration of China said it has shut down and banned 1,793 so-called self-media accounts on online platforms since Aug. 27, when it announced a probe into the illegal release of financial information and badmouthing of financial markets. The term ‘self-media’ is mostly used describe independently operated accounts that produce original content but are not officially registered with the authorities.”
“The accounts closed include three with more than a million followers, while more than 47,000 pieces of ‘harmful information’ have been cleaned up, the administration added.”
From Asia News. “From the outside they look like a dozen square buildings, residential complexes for Cambodian or foreign workers. In reality, the China Project hosts 8,000 to 10,000 slaves, people recruited by deception, held prisoner and forced to commit Internet fraud. ‘Every Chinese person who spends more than a couple of months in Sihanoukville knows about it. They call it China City,’ an anonymous source told the Khmer Times.”
“A group of entrepreneurs who bought the entire area after Cambodian Prime Minister Hun Sen banned gambling in 2019 is behind the crime syndicate. After Chinese President Xi Jinping launched his mega infrastructure project, the Belt and Road Initiative (BRI), Western tourists were thrown out to make room for the Chinese. Signs in Khmer and English have disappeared, replaced by signs in Mandarin. Hotels, restaurants and casinos now form many small Chinatowns.”
“China also provided aid to modernise Cambodia’s military. Perhaps this is why China Project bosses can act undisturbed. ‘China City is the worst of the worst,’ the source told the Khmer Times. ‘They are protected by the police. The only reason the cops will go in there is a strong tip-off about drugs. It’s a very clear line in the sand,’ he added.”
“According to the Cambodian newspaper, most slaves are Chinese, but many come from Southeast Asia. Scammed with fake job offers, their passport seized, taught how to create realistic social profiles to trick people into investing in fake cryptocurrencies, they are groomed to engage in criminal behaviour. Whoever gets to turn social media interactions into WhatsApp or WeChat contacts gets a reward, such as having sex with East European women, who are also held prisoner.”
The Khmer Times. “Multiple sources reached out to this newspaper to report instances of abuse at the hands of enforcers at the location believed to be housing at least 8,000 people – most of whom are Chinese nationals. Each had varying experiences working for companies located at the 10-building complex. They claimed to have been taken hostage, beaten, starved, isolated, extorted, sexually abused, trafficked and stripped of their basic human dignity.”
“The spouse of one victim described an incident when a busload of people illegally crossed the border from Vietnam and now they are in captivity. If true, this suggests the organisations are complicit in trans-national human trafficking. Some people have been freed since reports of the crimes surfaced last month. An unknown number of individuals, believed mostly to be Bangladeshi nationals, have been sold to other companies in the complex or relocated to other buildings.”
“An officer whose name has been withheld thanked Khmer Times for its coverage of the crimes and offered additional information. Deaths occurs almost every other week at The China Project. Officials have difficulty differentiating murders from suicides. Some corpses have messages written on their arms informing individuals that their death was not a suicide. Others have scratches on their bodies indicating they were made in self-defence.”
“The China-Cambodia Law Enforcement Cooperation Office officials told Khmer Times that similar activities are also rampant in several neighbouring countries such as Myanmar, Philippines and Indonesia and each have a task force working hard to crackdown and put an end to this blood money business.”
From Radio Free Asia. “China is facing a population crisis of increasing urgency, with 149 cities shown in recent census figures to have 14 percent of their residents over the age of 65. A recent analysis by the state-run China Business News (CBN) found that 149 cities in China have now entered ‘deep aging,’ the middle state on a spectrum that runs from aging, where more than seven percent are over 65, to super-aging, when more than 20 percent is over that age.”
“The fastest-aging cities are mostly clustered around the Yangtze River, the southwestern cities of Chongqing and Chengdu, and the urban industrial northeast, the report said. Seven provinces have 10 or more deep-aging cities, CBN said, with Sichuan at the top of the table, closely followed by Shandong. Similar situations were found to exist in Hunan, Anhui, and Hubei in the middle reaches of the Yangtze River, with 12 cities in Hunan and Anhui experiencing deep aging, and nine in Hubei.”
“Yi Fuxian, a senior researcher at the University of Wisconsin-Madison and an expert on Chinese population issues, has been tracking population changes in China for some time, and regards official statistics as highly dubious. ‘The real rate of aging in China is much more serious than current announcements suggest,’ Yi told RFA. ‘But even the current published figures are very serious,’ he said. ‘The first thing is it is causing a slowdown in economic growth.’”
“Yi said he predicted the slowdown in economic growth in China from 2012. ‘Economic growth averaged 10 percent prior to 2011, and by 2019, it was only six percent,’ Yi said. ‘China’s demographic structure is about where Japan’s was in 1992. By 2035, it will be roughly where’s Japan’s population structure was in 2018.’”
“He said that people’s consumption patterns become more conservative with age, and the lack of access to universal pensions, debt crises among local governments and a likely burst real estate bubble would make life much tougher. According to Yi, the current situation in northeastern China will gradually become apparent across the whole of China.”
“Wen Guanzhong, professor emeritus of the Department of Economics at Trinity College in the United States, agreed. ‘Relying on cheap labor, producing labor-intensive products, and exporting a large number of products will no longer be possible,’ Wen told RFA. ‘An upgrade [of industrial activity] will be needed, but it needs to be a technological upgrade,’ he said. ‘Now that China has broken off ties with some developed countries, it will find it harder to source technology and innovate independently.’”
The Last Futurist. “China’s debt crisis is most likely to begin if and when Evergrande defaults and collapses, which has historically been less likely to occur due to it being a State-backed private company. However with Chinese regulation in real estate, it’s more likely to occur in the coming months. In the summer of 2021, financial regulators in Beijing told China Evergrande Group to resolve its debt problems and refrain from spreading ‘untrue’ information, issuing a rare public rebuke of the developer as it struggles to stave off a liquidity crisis.”
“The problem is Evergrande is one of the key companies in China’s only way for the working class to invest properly that is in real estate. But with a vacancy rate that’s too high, less people migrating to the cities, and those who are now often too old to make it there, the China real estate bubble shows signs of popping.”
“While China has managed to regulate its housing market to avoid a crash of the bubble, nothing goes up forever. China’s pressure to show unending growth or ‘common prosperity’ for the only mechanism that its consumer spending trusts — i.e. the only investment that works in China — will eventually cause the housing bubble to crash and it will be spectacular for the Global GDP, due to the Chinese consumer having so much weight.”
“The default of Evergrande is inevitable but it could even lead to many banks failing that are dependent on mortgages. And in a worse case scenario it could lead to a housing debt crisis the likes of which China hasn’t seen. Then millions of Chinese ‘investors’ in a 2nd or 3rd house they will never live in or even rent (because who rents in China?), will be stuck holding the bag. This may be the one of the greatest systemic risks to the macro global economy for late 2021 and 2022.”
“Remember, the Chinese can be very frugal just to own more homes. Homes that will never be lived in with imaginary migrants that are no longer coming to some of those ghost towns or expensive tier 1 cities very few can even afford to live in. The situation isn’t just not sustainable, it’s become a path to the potential collapse of China’s economic system.”
“If China has no religion, the financial heist is its faith, and China’s obsession with owning multiple homes (to the exclusion of other consumer goods) has a grave social cost for the next generations. It’s a disease that is economically unsustainable and essentially a religion of greed. When you understand the real estate motivations of the common people seeking ‘common prosperity’ you understand why young people are ‘laying flat’. It’s such a scam of a lifetime of labor it’s unbelievable and shocking in its level of corruption. This is a system flawed with problematic incentives of how capital is spent (and wasted) due to the illusion of never-ending growth (basically a lie the State tells its people).”
“China’s population will be dramatically lower in the future and it will be full of ghost cities of empty castles in the sky. Oh, the faithful to the cult of real-estate scam. You can extinguish religions and cults, but what if the Chinese State is just another kind of belief system? Ever grand, until it’s not. These are dangerous times for China’s economy and demographic implosion impacting its consumer spend that appears inevitable in the years and decades ahead.”