[BrianC]

For decades, buying property was considered a safe investment in China. Now, instead of building a foundation of wealth for the country's middle class, real estate has become a source of discontent and anger. From a report:
In more than 100 cities across China, hundreds of thousands of Chinese homeowners are banding together and refusing to repay loans on unfinished properties, one of the most widespread acts of public defiance in a country where even minor protests are quelled. The boycotts are part of the fallout from a worsening Chinese economy, slowed by Covid lockdowns, travel restrictions and wavering confidence in the government. The country's economy is on a path for its slowest growth in decades. Its factories are selling less to the world, and its consumers are spending less at home. On Monday, the government said youth unemployment had reached a record high.

Compounding these financial setbacks are the troubles of a particularly vulnerable sector: real estate. "Life is extremely difficult, and we can no longer afford the monthly mortgage," homeowners in China's central Hunan Province wrote in a letter to local officials in July. "We have to take risks out of desperation and follow the path of a mortgage strike." The mortgage rebellions have roiled a property market facing the fallout from a decades-long housing bubble. It has also created unwanted complication for President Xi Jinping, who is expected to coast to a third term as party leader later this year on a message of social stability and continued prosperity in China.

So far, the government has scrambled to limit the attention garnered by the boycotts. After an initial flurry of mortgage strike notices went viral on social media, the government's internet censors kicked into action. But the influence of the strikes has already begun to spread. The number of properties where collectives of homeowners have started or threatened to boycott has reached 326 nationwide, according to a crowdsourced list titled "WeNeedHome" on GitHub, an online repository. ANZ Research estimates that the boycotts could affect about $222 billion of home loans sitting on bank balance sheets, or roughly 4 percent of outstanding mortgages.
https://www.nytimes.com/2022/08/17/busi ... risis.html

[Plantagenet]

Interesting post, Brian. THANKS.

It sounds like the Chinese economy is in big trouble with real estate speculation and a real estate bubble.

The builders are going bankrupt and they can't afford to finish all the apartment buildings they promised to build

In some areas there are even "ghost cities"....entire cities of apartments where almost no one lives.....


"Ghost city" in China.........empty buildings full of empty apartments.....

And not all the buyers are potential homeowners......there are many speculators who buy up real estate in hopes of making a big profit by reselling it. Real estate has been going up in China for years but now real estate prices now are in a "bubble."

Do you have any idea how much of this Chinese boycott activity going on is from actual 'homeowners" and how much is from speculators who bought houses/apartments on "spec"....as I understand it many chinese speculators signed up to buy units and they promised to pay for them before they were even built because the speculators expected to be able to "flip" the home/apartment and make a big profit once it was completed.

Cheers!

[Newfie]

Something is screwed up in China big time. They are crying about production being down while they continue to enforce the draconian “zero covid” regime.

They are hiding something or trying to accomplish something they want kept secret.

Several empty cities while at the same time folks are being bilked for buying apartments that the can not complete. WTF?

[Doly]

Several empty cities while at the same time folks are being bilked for buying apartments that the can not complete. WTF?

I've read a bit about this, trying to understand it. I can't say I do, but the gist I got is that in China some financial games are still allowed that were outlawed a long time ago in the West. The final effect is that people are using real state for their Ponzi schemes in ways that wouldn't be possible in the West.

[Newfie]

Doly,
Perhaps that is all it is, that is the simplest explanation.

But there is a lot of weird stuff going on that this does not address. So I keep my eyes open for some more far reaching explanation, knowing one may never emerge.

[JuanP]

Real Estate bubbles, like all bubbles, pop. Life goes on.

[Shaved Monkey]

And a "big" government has the levers to make rapid change and not have to wait for the market to clean up the mess.

[evilgenius]

Or the Communist Party is using policy, supply side housing policy to intervene in the economy. As a result of the way they perceive they have to do it, they are about to undergo a huge deflationary event. That's what happens when people don't pay back what they promise to, the money supply shrinks.

If they can hang on long enough, they can possibly blame the Fed. I don't know if who they can blame, however, will do them any good?

You know, I wonder if a Chinese deflationary crisis would prompt the Fed to either stop raising rates, or lower them? The reason would be entirely political, not economic, I would think. Then again, a weak yuan would be good for China if that's what was going on. It would help counter the strength that the yuan would have gained due to deflation.

You see, the US has China right where they want them. If they go deflationary, and the US packs on the interest rates, the US can utterly route them, by forcing their business into the American stream. It would be, for them, the only economic stream. Nobody else could afford to pay for anything. Putin thinks he can rely upon the Chinese to get him over the hump. He should think twice.