So, sports fans, China's big real estate empire ruler has cracked. It failed to make a bond payment on October 1st. Hmmmmm? What is Beijing and Xi JP going to do now? Well, the first thing they do is: divert attention from financial chaos by sending jet bombers into the Taiwan Straits. Over the weekend last, Chinese military aircraft made provocative intrusions into Taiwanese airspace. This was followed by a warning to the United States to not return the favor as this is nothing more than Chinese aircraft patrolling "Chinese" airspace. Same old, same old.
Real estate in China has been driving a large sector of the Chinese economy for years. Large companies have dominated with the approval of Beijing. However, now some of the business practices are coming home to roost. Namely, under performing loans, devalued properties, reduced demand, and a general slowdown in the global economy as the COVID pandemic continues to roil world markets and world business in general. Couple this with the problem of Hong Kong and the Beijing crackdown on dissidents there, investors are taking a more cautious approach to all things Chinese. Beijing also faces even more scrutiny over its treatment of Muslim minorities in the far west where a crackdown is ongoing over the Uighur minority that has faced years of mistreatment by Chinese government/military forces.
The Mayor visited China just 2 years ago. He traveled extensively from Beijing to Tibet and on to Hong Kong before all the troubles began there. Included among the many stops were stops at Wuhan, site of the COVID outbreak; stops at the Ceramic Warrior Excavation site, a cruise on the Yangtze River to Chongqing, and a few others. Observing the landscape revealed vast real estate properties built shoulder to shoulder, covering miles of the urban fringes. Most of these structures, if not all, were concrete, multistory, condominium apartment building. And, as we found out later, were not much more than unfinished shells, waiting for buyers and occupants. We had the experience of talking to a family that had moved into one of the apartments. We were informed that upon purchase, it was up to the new owner to finish the details. What details, one might ask? Answer: all interior finishes, to include windows(exterior), all plumbing, heating, and AC systems; all flooring; all fixtures, all doors, all trims; and all furnishings required for living comfortably. This family said it took 5 years of saving and spending to finish the apartment. This is not a normal real estate market but one sold by Beijing as the best case for the Chinese people to climb the economic ladder out of agrarian poverty. Many have succeded, but many more are in the wings waiting for the opportunity.
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