IMF: your housing market is collapsing
China: yeah we know
IMF: so how about you bail out those poor housing investors
China: ...no thanks
IMF: surprised Pikachu
this post was submitted on 03 Aug 2024
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In May, officials unveiled the biggest rescue package yet. It contains a 300 billion-yuan ($42 billion) central bank fund that attempts to help local governments buy finished but unsold homes and turn them into subsidized housing.
Separately, the IMF warned of “significant downside risks” to China’s inflation outlook, saying “a negative domestic demand shock amid high debt levels could trigger a period of sustained deflation.”
Does it tough? Why would aggregate demand collapse because of real estate developers going bankrupt? They make up a small part of the population and hoard more of their wealth. Also, very funny that IMF only cares about private debt buildup when it affects the 
.
Where is the concern for a demand shock when you pressure Kenya and Nigeria into raising sales taxes, which has much greater impact on aggregate demand?
Infrastructure building, including housing, was a major part of the Chinese economy. That part of the economy collapsed, which is causing China to try to transition to other industries to drive economic growth.
It is possible that the IMF is worried about the collapse of a Chinese industry, but it seems like China is trying to focus more on the effects of a collapse on the asset class given that said asset class is the main retirement savings in the country and the main driver of local government spending. China has also taken internal steps try to limit infrastructure spending in the last few years, so they may not be worried about development companies collapsing as long as their collapse doesn't spread to the overall economy.
China rescues people, not investors. 😏
That's quite a fantasy you're telling yourself. A huge portion of China's people's wealth is wrapped up in real estate, and tens of millions of stalled residential units have already been purchased by the Chinese people, and that money is now gone, taken by the developers.
The IMF recommendation here was "to deploy 'one-off' fiscal resources to complete and deliver pre-sold properties or compensate homebuyers." That would literally be rescuing the Chinese people who were burned by developers. Instead, the Chinese government is supporting the tech and manufacturing industries. Don't pretend like China is some paradise where the common people aren't getting fucked
Don’t pretend like China is some paradise where the common people aren’t getting fucked
- Reuters, 2018: China overtakes U.S. for healthy lifespan: WHO data
- United Nations, 2019: Helping 800 Million People Escape Poverty Was Greatest Such Effort in History, Says Secretary-General, on Seventieth Anniversary of China’s Founding
- The Economist, 2021: At 54, China’s average retirement age is too low For most men in China the age is 60, much lower than the average of 64.2 in the OECD, a club mostly of rich countries. For female civil servants the age is 55; for blue-collar women it is 50.
Oh no! The millionaire is now not a billionaire... And the developer was sentenced to life in prison.
Anyway...
How is a family spending their money on an apartment they now won’t receive “a millionaire that is not a billionaire”? Not to mention, China loves billionaires. They have more of them than the US. It’s a fascistic shithole.
Why are you lying? They bailed out buyers. And no it's not. Are you a fed? https://redsails.org/china-has-billionaires/
meanwhile in the real world
Chinese household savings hit another record high in 2024 https://www.wsj.com/livecoverage/stock-market-today-dow-jones-bank-earnings-01-12-2024/card/chinese-household-savings-hit-another-record-high-xqyky00IsIe357rtJb4j
The real (inflation-adjusted) incomes of the poorest half of the Chinese population increased by more than four hundred percent from 1978 to 2015, while real incomes of the poorest half of the US population actually declined during the same time period. https://www.nber.org/system/files/working_papers/w23119/w23119.pdf
From 1978 to 2000, the number of people in China living on under $1/day fell by 300 million, reversing a global trend of rising poverty that had lasted half a century (i.e. if China were excluded, the world’s total poverty population would have risen) https://www.semanticscholar.org/paper/China’s-Economic-Growth-and-Poverty-Reduction-Angang-Linlin/c883fc7496aa1b920b05dc2546b880f54b9c77a4
From 2010 to 2019 (the most recent period for which uninterrupted data is available), the income of the poorest 20% in China increased even as a share of total income. https://data.worldbank.org/indicator/SI.DST.FRST.20?end=2019&locations=CN&start=2008
By the end of 2020, extreme poverty, defined as living on under a threshold of around $2 per day, had been eliminated in China. According to the World Bank, the Chinese government had spent $700 billion on poverty alleviation since 2014. https://www.nytimes.com/2020/12/31/world/asia/china-poverty-xi-jinping.html
I don't know enough about this specific situation. But the history of the IMF and World Bank is such that, if they were to put out a statement saying that the sky is blue, I would immediately go and check if it had somehow changed colour.
China already bailed out the buyers. Don't know where you're getting your info from. THIS perhaps? https://www.appropriations.senate.gov/imo/media/doc/FY21%20BILL%20HIGHLIGHTS_SFOPS_final.pdf
https://www.congress.gov/bill/116th-congress/house-bill/7937/text?format=txt
https://prospect.org/politics/congress-proposes-500-million-for-negative-news-coverage-of-china/
My info is from the article. Your info is from where?
Don't pretend like the average person in China is a fucking real-estate investor. This investment money is from the middle class and up i.e. people who don't need to be rescued. They're going to be fine. Even if their investments all go up in smoke, they won't be homeless. Common people just spend their paychecks and keep a little aside for savings, like everywhere else in the world.
My understanding is many everyday Chinese people bought real estate that wasn't yet built because demand was so high. Supposedly many of them sunk their whole life savings into units that developers had promised to build at some future point. That point seems unlikely to come if those developers go bankrupt, meaning that some decently large number of everyday people are going to lose their life savings.
My understanding is middle class Chinese people bought real estate because they wanted passive income from investing in real-estate. China shouldn't have allowed them to do that but the solution isn't to bail out these developers. The actual solution is to make sure these people do not end up destitute because they wasted their money on gambling.
it was basically the only kind of investment allowed in china.
That's call investnent risk that investors bears why should their losses be subsidized via loans on entire taxpayers?
Ironic how China is more less interventionist than US now where we bail out the owner class every single time
Sorry, so the people who saved up to buy a home that couldn't be built until later due to demand are now investors?
I don't think they owned any stock in a company.
They had contracts for homes, right?
Real estate is an asset class just like any other asset that is traded.
With respect to them giving money unfront for building, they got scammed. It is a criminal matter. But why should other people socialize their bad choices.
Bail out mechinsm done in the west is the most retarded way to deal with these issues and it creates incentives for owner class to scam taxpayers.
So you are saying anyone who has a mortgage is the "investor class."
Got it. Think we are done here.
IMF: Imperialist Monetary Fund
Impossible Mission Force
Why subject your self and enslave yourself to the IMF?
If it was my country's government, they would have accepted it without a second thought and the people have no say about it.
Isn't the rate of homeownership like 95%? Seems like a tough market.
Why did it crash like this though? Its really hard to find truthful information about this housing thing.
The quick answer is because the housing market was used for speculation and was causing real estate prices and rents to rise. China introduced "three red lines" policy to mitigate this and let the housing market crash and let the billionaire CEO Hui Ka Yan (and mostly foreign Investors) hold the bag
There were other positive feedback items happening as well, including local governments relying on development as the major tax base.
China is also likely to see a drop in infrastructure investment in the next generation, so having some of these companies collapse isn't seen as a major issue in China.
Because housing is for living in, not for speculation or asset price inflation*.
- Oct. 2017: China's Xi says to maintain principle property is not for speculation China will maintain the principle that houses are for people to live in, not for speculation […]
- Mar. 2024: China’s housing minister says real estate developers must go bankrupt if necessary
.
*Radhika Desai and Michael Hudson Discuss the Causes and Politicization of Inflation
What has really been inflated, since 2008, has not been consumer prices, but asset prices — [that is,] real estate prices, stocks and bond prices, things that the 1% hold. Wealth has been inflated much more than goods and services. [This is especially true] for real estate.
This debt has been inflated not by government debt, not by government deficits, but by the Federal Reserve creating a $9 trillion subsidy to the banks to support real estate prices, and hence the value of bank-held mortgages and stock and bond prices.
This is not discussed, or even recognized, in the mainstream economic models. Instead, we have a kind of mythology by right-wing anti-labor financial lobbyists.
This mythology is about what I think most of the listeners are expecting us to discuss: the inflation of rising consumer prices. That’s the only kind of inflation that the Federal Reserve talks about. This is all blamed on increasing the money supply, as if somehow money is creating the inflation.
They are not talking about inflation as the result of monopoly pricing. They are not talking about inflation as a result of NATO’s sanctions against Russia. They are just talking about money [as if] somehow, if we [could] just stop money supply, if we could stop the government spending so much money on Social Security and Medicare, and other social spending (not military spending) then everything would be over.
We’re actually going to be talking about the relationship between, [on the one hand,] the inflation of housing and asset prices [and,] on the other hand, how this actually affects the inflation of consumer prices, and how debt and inflation all go together.
On a more practical and immediate level, it crashed because of COVID. Chinese real estate companies were using new money to finish old projects, and when supply shocks and work stoppages interrupted the system, it fucked the whole thing. The government has been reacting to that crash ever since.