As China Evergrande Group edges closer to a massive restructuring, Beijing has stepped up efforts to limit the fallout, signaling it’s willing to prop up healthy developers, homeowners and the real estate market at the expense of global bondholders.
Central bank liquidity is so abundant, there is NO way Lehman would have failed today. Free markets no more. Adam Smith has one (invisible) hand tied behind his back. We have unintended consequences as far as the eye can see with Uncle Sam’s fingerprints on every street corner.
https://www.zerohedge.com/markets/former-lehman-trader-chinas-lehman-moment
Fast forward to today when after weeks of tentatively creeping higher, China’s junk bond yields not just surged higher overnight, but have just surpassed the 2020 highs, printing 14.34% overnight, and the highest level since the great repo rate crisis of 2011.
https://www.zerohedge.com/markets/harbin-we-have-problem-chinese-junk-bond-yields-hit-11-year-high
Evergrande’s 8.75% note due 2025 fell 1.5 cents on the dollar to 33.7 cents, according to Bloomberg-compiled data. Its shares earlier closed 0.7% lower in Hong Kong trading, taking this year’s decline to 71%.
Still, the company needs to sell even more assets to plug its financial hole. Evergrande had around $104 billion of interest-bearing debt as of March, but that isn’t even the most urgent problem. It doesn’t have any bonds due until March next year. The bigger worry comes from its unpaid suppliers and contractors—many have sued to get their money back and some have managed to get some of Evergrande’s assets frozen.
Like before, it starts with and in China. That country’s National Bureau of Statistics (NBS) reported last night its Big Three estimates for the month of April 2021: Industrial Production; Retail Sales; and, Fixed Asset Investment (FAI). It was difficult to plausibly disguise the thorough disappointment.
Somehow, the opinion-makers in the media, the bloated military brass with all their ribbons and stars and with little to do but worry about how to keep their massively overbuilt operation afloat with ever more taxpayer money, and the members of Congress who like to gin up fears among the voters so they’ll keep voting for them have gotten everyone thinking that Russia is still hell bent on world communist takeover and that China it trying to replace the US as global hegemon.
Nothing could be farther from the truth.
China Aggregate Financing expanded an unprecedented $4.535 TN ($504bn monthly). This was 45% higher than comparable 2019 growth, and 67% ahead of 2018. Meanwhile, the Fed’s Z.1 data inform us that U.S. Non-Financial Debt (NFD) surged $5.740 TN during the first three quarters of the year, an increase of 188% from comparable 2019 and 163% from comparable 2018. Combining growth in Aggregate Financing with NFD, China/U.S. Credit expanded an astounding $10.275 TN During 2020’s First Nine Months, double comparable 2019 and 110% greater than comparable 2018 – in one of history’s spectacular Credit inflations.
http://creditbubblebulletin.blogspot.com/2020/12/weekly-commentary-10275-tn-in-nine.html
Quick. Somebody tell Mike Pompeo. The secretary of state is not supposed to play the role of court jester — the laughing stock to the world. There was no sign that any of those listening to his “major China policy statement” last Thursday at the Nixon Library turned to their neighbor and said, “He’s kidding, right?
https://consortiumnews.com/2020/07/28/presumptuous-pompeo-pushes-preposterous-peking-policy/
Fast forward a little over three years, when China’s housing bubble is bigger than ever, and now the WSJ has picked up on what we said three years ago, namely that China’s epic housing market is perhaps the world’s most defining bubble, and more importantly, not even the covid pandemic did anything to threaten the sanctity of this bubble.
Some more statistics: “the total value of Chinese homes and developers’ inventory hit $52 trillion in 2019, according to Goldman Sachs, twice the size of the U.S. residential market and outstripping even the entire U.S. bond market.” China’s housing market is certainly bigger than the US stock market, and at its current growth rate will surpass the total value of all global stocks (which is currently about $85 trillion) in just a few years.
https://www.zerohedge.com/markets/look-inside-52-trillion-bubble-has-hijacked-chinas-economy
