Okay, I'll bite. I think the Evergrande crisis is a telling example of the limits and risks of China's subordinate capitalist sector, but because of China's two-tiered, state-led economy, the systemic risks are low and not comparable to capitalist economies. Some thoughts:
First, some background. Michael Roberts did an excellent post on Evergrande and what he thinks will happen, which I largely agree with. See: thenextrecession.wordpress.com/2021/09/19/not…
Remember that what made the housing crisis so severe in the US was the extreme obfuscation caused by the securitization of junk mortgages, inaccurate credit ratings and the subsequent compounding of risk through derivatives. This made the liquidity crisis severe.
China, on the other hand, doesn't share the same risks. First, the vast majority of Chinese are housing *owners* not borrowers - residential mortgages are rare. Second, Evergrande is a relatively known quantity and people have been sounding alarms over it for a long time.
As I understand it, Evergrande's largest creditors are Chinese state-owned banks. This (likely) means that the state has significant insight into Evergrande and also gives them a tremendous amount of leverage (literally) to dictate the outcome of any restructuring.
This also means that the systemic financial risk is likely a much more known quantity compared to what happened in 2008 in the US, where no one knew who owned what and for how much. The lack of information dramatically exaggerated the extent of the crisis.
My point about the lack of residential mortgages in China is to underline that the financial system in China is very, very different from any other country in the West. It is state-controlled and tightly regulated, and the risks of a real liquidity crunch are relatively low IMO.
That being said, I'm guessing there will probably be a limited a crisis in the stock market which will primarily impact foreign investors and other speculators without much spillover.
The interesting aspect of this to me is what this means for the future of real estate in China and the state's relationship to it. Construction and finance are already controlled by the state - I wonder if this would encourage the state to take further control over real estate.
China has been on a spree of new regulations and restrictions lately on the capitalist sector and the timing of this with the new "common prosperity" initiative is interesting. The recent clampdown on Ant Group might foreshadow this, but I don't know.
It also lines up with recent regulator statements about controlling the disorderly expansion of capital. So yeah it's going to be very interesting to see what the outcome of this is, but anyone expecting it to resemble 2008 in the US is being misled.
It's also another reminder to treat Western reporting on China and the Chinese economy with a huge grain of salt. Capitalist media has been screeching about the coming housing collapse (that never materialized) in China for yeeeeears.
My thinking is that the capitalist media *wants* to see a housing collapse in China to A) prove that the Chinese system is "just as bad" as elsewhere or B) provide an opening for political disruption from the social instability created
I also think this is just another example of Western observers looking at China through the lens of *their* home country, not realizing that China is not controlled by an oligarchic FIRE sector like the US.
(by the way, I'm not a financial advisor, I'm an idiot, don't take any of this as financial advise lmao)

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Izak Novák

Izak Novák Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @izak_novak

13 Jun
Lol Amnesty's latest report on Xinjiang notes in its methodology section (the only part that matters) that "nearly all" interviewees are being kept anonymous, making it impossible to independently verify their stories or validate their credibility, possible ulterior motives, etc.
This is the oldest trick in the human rights propaganda playbook, and it is used *extensively* in reports on places like the DPRK.
The report argues this is because of "risks" to people criticizing the government including "journalists." Their source for this claim about "journalists"? Radio Free Asia. Of course, you wouldn't know this "journalist" was from RFA unless you read the footnote (I wonder why?)
Read 7 tweets
4 Apr
You didn't use Western sources? Really? Let's see about that. In this video, Vaush cited the WSJ: (1/9) Image
The Jamestown Foundation, "a Washington, D.C.-based conservative defense policy think tank.[2] Founded in 1984 as a platform to support Soviet defectors" (2/9) Image
Business Insider, "an American financial and business news website founded in 2007. Since 2015, a majority stake in Business Insider's parent company Insider Inc. has been owned by the German publishing house Axel Springer." (3/9) Image
Read 9 tweets
19 Mar
THREAD: Highlights of Chinese remarks at the US-China meeting that happened in Alaska. The quoted speakers are Director of the Office of the Central Commission for Foreign Affairs Yang Jiechi and State Councilor/Foreign Minister Wang Yi. [Minor editing to fit tweets]

YANG: "The wars in this world are launched by some other countries, which have resulted in massive casualties(...) We don't believe in invading through the use of force, or to topple other regimes through various means, or to massacre the people of other countries"
YANG: "So we believe that it is important for the United States to change its own image and to stop advancing its own democracy in the rest of the world. Many people within the United States actually have little confidence in the democracy of the United States"
Read 16 tweets
28 Jul 20
I'm truly terrified by how sophisticated, hegemonic and effective anti-China propaganda has become. The English speaking world has been so relentlessly blanketed in the two "Big Lies" about China (HK/Xinjiang) and many small lies, that they've created an alternate reality.
Trying to have a conversation with someone who only gets their information about China from the NYT or Reddit is borderline impossible. This is how the propaganda works: it becomes self-perpetuating and self-reinforcing.
First, you establish the baseline lie: "China is oppressing Xinjiang" Then, anything that has to do with Xinjiang becomes toxic because "that's where China is oppressing people" so we end up with the mask story: "your masks are made by oppressed people in XJ"
Read 10 tweets
25 May 20
Cheng Enfu, leading Marxist intellectual in China from CASS, wrote an article in 2012 that lays out competing political currents in China and the dominant current in the CPC that he calls "Innovative Marxism":

Key points on his definition of Innovative Marxism:

- Insists on the guiding position of Marxism in China
- Adheres to the leadership of the political party of the working class in China
- Insists on the dominant position of public ownership of the means of production in China
"Innovative Marxism believes that China must adhere to the socialist nature and principle, aiming at emancipating and developing productive forces, while eliminating exploitation and polarization so as to achieve common prosperity, and ultimately realizing communism (...)
Read 13 tweets
25 Apr 20
Is China trying to build hegemony? Is it imperialist? No, and any comparison to US hegemony or imperialism requires an immense amount of mental gymnastics especially when China-Global South relations are so strong and views of China are so positive. Additionally,
When we look at the structure of US imperialism we have to understand its basis in a few things:
-The concentration of private financial capitalism overseeing private monopolies (China has neither)
-Settler colonialism (not China)
-Fascist white supremacy (not China)
The fake left, boosted by the CIA and adjacent media, have worked tirelessly for decades to try to paint China as the mirror image of the US: "It's just capitalism", they're "Han supremacist" or "they're colonizing Africa" etc. All of this is baseless projection.
Read 7 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!