China drags the break of the world.

in Deep Dives2 years ago

China drags the break of the world.



Souce


To understand what is happening in China and the world, we must begin by understanding that, unlike the West, where the relativization of private property is promoted, "you will have nothing and you will be happy"; in china real estate has a cultural and social importance:


Real estate represents a greater patrimony, which will help to arrange a better marriage, give greater social status, which as a consequence will have better job prospects and standard of living; while in the West savings are usually used to purchase assets such as shares, bonds or hard currencies; In China, the picture is completely different, with up to 70% of savings being used to purchase one or more homes.


This very high demand for properties, together with the rapid urbanization of the country, consolidated the development of the real estate sector, but also attracted national and international investors, generating a boom in the financial sector. All of this constitutes a key piece for the expansion model of the PCH.



Souce


As you know, the process of creating bank money is not through deposits as is often believed, but through loans, especially real estate loans; as Chinese policies have been an absolute failure that only served to increase corruption to make some officials millionaires who looked the other way at the books and mainly for the flourishing of an entire financial structure in the shadows, the so-called shadow banking.


The PCH's house of cards began to collapse with the fall of the giant Evergrande in December 2021, leaving a debt of 300,000 million dollars, despite the initial declarations and guarantees of the government that seeing the debt problem in an isolated case. In no way was it limited to this corporation, but rather it is a systemic problem throughout the real estate sector and that is why since the end of 2021 more and more companies are failing to fulfill their commitments, the issue is that these breaches also drag the financial sector and uncertainty are beginning to have global consequences.


Fears about a recession and hidden debts, debts that are not officially on the books, have caused the bonds of some of these real estate companies to start plummeting even those that were previously considered safe investments by rating agencies. risk.



Souce


The Chinese policy on real estate companies is to sell from the bottom, that is, they are properties that have not yet been built, before this construction boom these companies took loans, but not to conclude them but rather loans to ensure the "Real Right of ownership” of the land, for future developments, since this is something very important that is rarely mentioned, the laws of the People's Republic of China establish that the land belongs to the “people”.


So, how do you get the permits for the properties of a home, through the “real property right” system, the use of the land is transferred in exchange for money for a series of years and in the case of homes intended for residential use, this use is for a period of 70 years, that is to say that every 70 years the permits must be renewed to continue maintaining ownership of the real estate.


So we see absolute delusions like buildings that never get to be released being demolished because these deadlines expire, these "real property rights" by not being able to renew the occupation permits have to demolish them directly, those are the consequences of a planned economy, of course all under the watchful eye of the PCH, who is the one who precisely grants these construction permits, although later, in the face of public opinion, they sell a narrative of burning them, which are the companies, the excesses of the banks, etc., pretending to be completely distracted as if They have nothing to do with it.


It is estimated that 60 percent of all bank loans are guaranteed by nothing, in fact they are guaranteed by the belief that the government is going to rescue any type of collapse, any type of problem, as they said in the famous movie the wolf of wall street "everything is fleeting".



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