Politics 'China's financial system could collapse': What the Reserve Bank's Evergrande bombshell means for Australia

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Admiral Byng

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This is a real problem, and it has been brewing for a long time. China does not have a "properly" developed financial and regulatory system like we see in most other developed nations. It is a bit of a mess and mired in corruption and politics. The root causes are firstly that regional and city governments are reliant upon revenues from the lease of land to property developers, and secondly the lack of a well regulated and functional financial system means that real estate speculation is the only investment option open to ordinary people. They have had a good run for about the last 30 years where property speculation has actually delivered big returns.

There is a real danger of it all going tits up now, if the CCP do the wrong thing. People have been predicting the China real estate crash for about the last decade, but the can has been kicked down the road.

If there is a crash in China it will end up in a severe recession, a depression even, in that country. Demand for Australian iron ore will collapse if the construction sector collapses. So it will be a bad thing for us too if/when it happens.
 

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This is a real problem, and it has been brewing for a long time. China does not have a "properly" developed financial and regulatory system like we see in most other developed nations. It is a bit of a mess and mired in corruption and politics. The root causes are firstly that regional and city governments are reliant upon revenues from the lease of land to property developers, and secondly the lack of a well regulated and functional financial system means that real estate speculation is the only investment option open to ordinary people. They have had a good run for about the last 30 years where property speculation has actually delivered big returns.

There is a real danger of it all going tits up now, if the CCP do the wrong thing. People have been predicting the China real estate crash for about the last decade, but the can has been kicked down the road.

If there is a crash in China it will end up in a severe recession, a depression even, in that country. Demand for Australian iron ore will collapse if the construction sector collapses. So it will be a bad thing for us too if/when it happens.
There are at least 3 developers that have crossed one or more of the "three red lines", and 3-4 developers currently delinquent on their bonds. I think the first default comes on the 18th ( 30 days after entering delinquency )

Without access to banks ( as denied by the three red lines), the ponzi scheme can't continue. This is going to get a lot worse - for China, and Australia.
 

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