[Finance and Business World]The real estate is about to collapse and the mainland financial crisis is coming? | Mainland Real Estate | Bank Runs | China Foreclosures

[Epoch Times, July 2, 2022]China Evergrande, China’s largest real estate developer, has been liquidated by a Hong Kong company for the first time since the financial crisis was reported more than a year ago. So, how will this event develop? What kind of impact will China’s real estate industry have? In addition, the Henan Village Bank incident, which is still fermenting, is affecting more banks. Moreover, the sales of the property market are sluggish, the supply of houses and foreclosures have surged, and the debt crisis of housing companies is also intensifying. So, does this mean that China’s financial Is the crisis about to detonate? We will focus on these issues today.

China Evergrande filed for liquidation of Country Garden and became a “fallen angel”?

Recently, the Hong Kong company “Top Shine Global” applied to the court to liquidate China Evergrande, involving an amount of 862.5 million Hong Kong dollars. The hearing will be held on August 31. Evergrande strongly opposed this and emphasized that the company expects to announce the preliminary plan for overseas debt restructuring before the end of July.

Although shareholders’ application for liquidation may not necessarily be approved by the court, some economists said that Evergrande’s application for liquidation this time has the role of a beginning and an indicator, and it is a signal of the outbreak of a new wave of Evergrande’s credit crisis. Moreover, the Evergrande crisis is a test of the CCP government’s governance capabilities. If handled improperly, it may trigger a systemic financial crisis in China.

So, who applied for the liquidation of Evergrande? According to “Hong Kong 01”, the beneficial owner of “Jiansheng Global” is Hong Kong’s special election committee, 29-year-old Lian Haomin, who is also the chief president of the “Kowloon Federation of Associations” with a Chinese background.

According to Caixin.com, Lian Haomin has a lot of identities. He is also the vice chairman of the Executive Committee of the Hong Kong Political Consultative Conference Youth Federation, a member of the Jiangsu Youth Federation, a member of the All-China Youth Federation, and the honorary president of the Kowloon Association of Societies. etc. jobs. A person familiar with the matter in Hong Kong revealed that Lian Haomin is the son of Lian Chao, a businessman known as the “king of gambling on the high seas”. However, Caixin reporters could not confirm this. Lian Chao, whose original name was Lian Zhuozhao, was involved in cases such as Huang Guangyu, founder of Gome, Zheng Shaodong, former assistant minister of the Ministry of Public Security, Chen Shaoji, former chairman of the Guangdong Provincial Political Consultative Conference, and even Lai Xiaomin, former chairman of Huarong.

But no matter what, it can be seen that even at a young age, Lian Haomin has quite a background, and his relationship with the CCP officialdom is not ordinary. He made a liquidation application for Evergrande, and whether there are other secrets behind it also makes people very curious. But at least it can be seen that the CCP authorities do not care about Evergrande’s bankruptcy, which has also sounded the alarm for other Chinese private housing companies.

The situation of China’s private housing companies has deteriorated further against the backdrop of tight funding and declining sales.

On June 22, the rating agency Moody’s downgraded Country Garden’s credit rating from investment grade to junk, citing “the decline in Country Garden’s property sales and deteriorating financial indicators” and limited long-term financing channels. The Bloomberg report even described Country Garden as a “fallen angel”, showing disappointment with high-quality housing companies such as Country Garden. There are comments on the Internet that from Sunac China to Country Garden, there are no good students in Chinese private real estate companies.

According to the “Hong Kong Economic Times” report, in the 10 years before December 2020, Moody’s downgraded the rating of mainland real estate companies only 56 times, but in the past nine months, Moody’s downgraded the rating of mainland real estate companies. Up to 91 times.

However, the debt crisis of Chinese real estate companies continues, and many real estate projects are in urgent need of bailouts. Because of this, the China Real Estate Association decided to host the “Real Estate Relief Project and Financial Institutions Matchmaking Conference” in Hangzhou at the end of July.

But the question is, since the explosion of Henan Rural Banks, the risks of Chinese financial institutions have gradually been exposed. Now they are too busy to take care of themselves, can they still be able to help bail out real estate projects?

China’s bank run wave financial crisis is about to detonate?

On April 18, 400,000 depositors of 6 rural banks in Henan and Anhui were unable to withdraw money, involving an amount of 40 billion yuan. After that, the banks involved closed the online transaction system, and even used the “health code to red code” for rights protection depositors. The means of precise strikes made the red code a means of maintaining stability, which was very bad.

However, one of the banks involved, Henan Kaifeng New Oriental Village Bank, secretly opened an online transaction system on the 26th for 15 minutes. After the news spread, it was scolded by the whole Internet, questioning that this was a green light for some “leaders” to let the powerful and powerful run away first.

During the opening of online transactions, some depositors successfully withdrawn funds, but after many depositors withdraw funds, the funds are recovered by the banking system because they do not arrive immediately, and the transaction page displays “transaction reversal”. In response, New Oriental Rural Bank responded that the individual operation authority of mobile banking is abnormal, and all accounts involving withdrawals will still be reviewed, even if the depositor has withdrawn the deposit. This is a bank under the CCP system, and you will be censored when you take your own money. Of course, this rogue-like response immediately aroused public indignation and quickly became a hot search.

However, this incident also shows that the official previous statement does not hold. First, the depositors’ money is still in the account and has not been defrauded by Lu Yi, the actual controller of New Wealth; second, all transactions are still within the banking system, not outside banking supervision.

However, at a press conference on June 23, the person in charge of the China Banking and Insurance Regulatory Commission stated that the public security organs have arrested a group of criminal suspects and seized a number of assets involved in the case, but they still do not mention the issue of deposit repayment.

Poor many savers, nowhere to ask. A 45-year-old entrepreneur from Wenzhou, Zhejiang, under the pseudonym Peter, told US media CNN that he deposited about $6 million of his life savings into online accounts in three small banks in Henan Province, but has been unable to do so since April. withdraw money. He said that he couldn’t sleep, and he was about to have a nervous breakdown.

However, in addition to the deposit of the depositors of the village banks in Henan and Anhui being swallowed, from Shenzhen to Shanghai, from Dandong in Liaoning to Jiujiang in Jiangxi, there have been cases of restrictions on withdrawals and runs on large and small banks everywhere. The Chinese government has also recently indirectly confirmed that there has been a wave of bank runs in China. According to the International Finance News, the Shanghai headquarters of the Central Bank of China said that from June 1 to 15, the total amount of the central bank’s cash supply has reached nearly four times that of the same period last year.

I believe that in the current chaos of the CCP, there will only be more and more such things in the future. The CCP’s bank is more like a money machine, but it is the money of the common people.

At present, China’s four major state-owned banks are restricting deposits, withdrawals, or online transfer transactions, which shows that the demand for cash in China is high, and one of the important reasons is the lack of trust in banks. This shows that China’s financial risks are very serious, especially small and medium-sized banks and rural banks, which are likely to become the trigger for the outbreak of China’s financial crisis.

Some experts believe that according to the current economic situation in China, it is expected that by the end of this year, the vast majority of small and medium-sized banks will have an existential crisis, and the failure of a large number of small and medium-sized banks will inevitably lead to an economic crisis in China.

Bad loans snowball, banks fake to cover up risks

And this statement is not alarmist. According to a report by “China Digital Times” on June 28, some netizens recently asked questions on Zhihu, “Why do you always feel like the end of the world recently? Do you also feel this way?” As a result, a person named “Liu Yan” of netizens replied “yes” and described his personal experience in detail.

The netizen works in a bank in Sichuan and started to approve loans more than a month ago. He found that his main task was to deal with various inspections, write various reports, accept various consultations, and reviewing loans was just a sideline. However, he was particularly nervous about it.

why? Because he has to write various accountability reports for regulatory authorities and answer various questions, such as: How did the joint loan go out? Why are there so many off-site loans? What is the real situation of the affiliated company? Is the Pratt & Whitney indicator true or false? Why has the loan ratio kept falling? How much risk is hidden in the stock loan? Is it really impossible to release new loans? And the bank clerk said that every report was written so that he bit his pen and broke into a cold sweat. If the real situation is written, the executive will be interviewed in minutes.

As for why the loan review has become a sideline, he said that it is because the loans really cannot be released, and very few of them can be recovered. What surprised this netizen even more was that in order to avoid concentrated exposure of risks, the bank also used technological means to directly change the secondary level to normal in the system when the principal and interest have not been paid.

The bank clerk also analyzed that to say the culprit, the only thing that can be said here is real estate, and the vast majority of non-performing loans are related to real estate. He also said that the mountains and the rain are coming, and it is hard to imagine what will happen to the banks and depositors after a large-scale thunderstorm…

Finally, he also shared what he saw with his own eyes about the business downturn. He described it this way: “I went out to investigate the loan a few days ago. The collateral was a shop, located in a commercial complex. When I walked in, there was only a cheap supermarket on the first floor, and aunties lined up in the fresh area to grab specials. In addition, The second, third, and fourth floors of the building have not been settled by a single merchant. There are no traces of decoration on the storefront, some doors are not locked, and the ground is full of dust. Under the bright sunlight at 3 o’clock in the afternoon, it looks like a ghost building…”

Systemic financial risks looming

We know that the real estate industry has always been a huge and important lever for China’s economy. Real estate and its related industries account for about 30% of China’s GDP. If the real estate industry is sluggish, China’s economic growth will inevitably slow down.

To this end, developers everywhere are currently racking their brains to stock up. Following the emergence of wheat and garlic in Henan, Poly Real Estate also launched a marketing campaign in which a 200-pound pig will be given away as long as you buy a house. It is said that the average market price of native pigs ranges from 30 to 60 yuan per catty. If calculated at 30 yuan per catty, the price of a 200 catty native pig is about 6,000 yuan. In addition, a real estate project in Nanjing, Jiangsu, also launched a “watermelon exchange” activity. These ridiculous means of selling houses also show that the real estate developers are really in a situation where they have nowhere to go.

At the same time, civil servants from all over the country also went down to the streets, villages and towns to help sell houses. The Economic Observer reported that a civil servant in Yulin, Guangxi, has added a job of “selling houses in rural areas” since February this year. In addition to publicizing the government’s subsidy policy for house purchases, he also arranged for a bus fleet to organize villagers to visit the city. Although he can’t get a penny of commission, the success of selling the house is related to the assessment of his unit and his personal performance.

In addition, the Xuejiadao Sub-district Office of Qingdao City also issued a notice on June 17 according to the “red head document” issued by the superior, requiring each cooperative to complete no less than 2 online signatures by the end of June. If you have a huge deposit in the bank but do not buy a house, you will be regarded as “not buying a house maliciously” and will be interviewed.

Let’s see, China is now “malicious”, going abroad may be “malicious going abroad”, returning home may be “malicious returning home”, and seeing a doctor during the epidemic is “malicious seeing a doctor”, now, if you have money, you don’t buy a house, and It is “do not buy houses with malicious intent”. In the eyes of the CCP, the Chinese people have become a group that always creates “malicious”. Of course, who is the real “evil”, needless to say.

It can be seen that since the beginning of this year, despite efforts to sell houses in various places, banks have also lowered the down payment ratio and mortgage interest rates, and issued large-scale credit loans to encourage consumers to buy houses, the housing transaction volume is still halved year-on-year.

What’s more serious is that there has been a large increase in the number of houses for sale and foreclosures. Recently, some netizens exclaimed on Twitter that real estate has begun to collapse. They mentioned that, according to the news of the Bank Financial System Risk Control Conference, “there are nearly 40 million houses in the country that have been foreclosed, and more than 10 million foreclosed houses.”

Sina Finance reported that Sun Shuo, a lawyer from Zhengzhou, said that more and more cases were in his hands, all of which were requested by the bank to sue the owners who had “broken their confession”. times.

Analysts have long worried that Evergrande’s collapse could have ripple effects across the real estate industry and spill over into the financial system. And now, that fear is becoming a reality…

Institute of Financial and Commercial Economics
Planning: Yu Wenming
Written by: Li Songyun
Editor: Wei Ran, Yu Wenming
Edit: Song
Producer: Li Songyun
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