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this post was submitted on 19 Mar 2024
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Presumably they won’t recover, because the Chinese state isn’t coming to their rescue: China’s housing minister says real estate developers must go bankrupt if necessary
I just hope the collapses won't pull others with them and the whole construction sector. I think the fear of that and the effects rippling to other sectors and to trust in the economy is why bailing out is sometimes done.
yes, it's a good reminder that capitalism doesn't actually work and needs to be propped up with bailouts to ensure it doesn't collapse and gets replaced.
Well China is trying to not bail them out, at least for now. And some others have done it before too. It's just people fear the risk of doing that, hoping that by bailing them out things won't be as bad.
Except that the Chinese national government is trying to reign in the domestic construction market and export as much as it can.
It was the right strategy to keep building for a generation, but it isn't right strategy any more.
I've read that they're trying to lessen the share of the GDP but an uncontrolled crash would still be horrible. Hopefully whatever they do that is avoided.
It is more than that. China significantly invested in infrastructure for a generation, which was generally good. However, China has hit a point where infrastructure investment won't produce the returns it used to or any at all. China also needs to figure out a way to find municipal governments, which it hasn't before. China also has to deal with a significant drop in economic growth, something it hasn't dealt with for a generation.
These are novel problems for the Chinese government.