Western media has been quick to highlight China’s burgeoning real estate troubles.
However, the role of U.S. investment firms in inflating China’s property bubble has been notably absent from many reports.
Thomas W. Pauken II, a seasoned specialist in Asia-Pacific affairs, revealed to sources, “The problem is that China’s property developers, many of them closely connected to Western investors, were pushed by these investors to act in a very aggressive manner.”
He emphasized the strategy of rapidly funneling money from prospective homeowners into new ventures, a method that was destined to inflate a volatile bubble.
Specifically, Pauken pointed to the real estate giant, Evergrande.
“Evergrande had a lot of investments from Western investors, and they were pushing them to keep buying and get really aggressive in how they park all these properties and develop the properties,” he elaborated. “And so inevitably there was going to be a boom and bust cycle.”
Pauken underscored the widespread consequences of this approach: “It’s not just the homeowners that get hit. It’s not just the Chinese banks that get hit, but there’s a lot of Western investors who are part of that.”
U.S. investment behemoth BlackRock has been identified as a significant Western player in China’s real estate sector.
Pauken mentioned, “BlackRock is actually struggling big time in their real estate investments and they’re not even paying back their investors anymore because they’re losing so much money on these property and real estate development projects.”
He drew a parallel to the past, stating that the current situation bears “a lot of similarities because of real estate” to the 2008 financial crisis.
Goldman Sachs, another prominent Western firm, has continued its bullish stance on China’s real estate, making significant investments even after the shockwave from Evergrande’s 2021 fall.
The trend of Western investment remains strong in 2023, extending beyond housing to encompass foreclosed commercial spaces, especially as the Chinese government mounts its offensive against speculators.
Predicting this downturn, Pauken earlier anticipated a steep drop in property values.
“I had predicted that there was going to be a major downturn in China’s real estate market a few years ago, I’ve predicted to many people to prepare for a 30-40 percent decline in property values,” he said.
He further warned of a potential global repercussion, explaining, “We should be ready for a major real estate property downturn, not just in China, but across the world.”
In the wake of the Evergrande fallout, the Chinese government has been proactive, revealing an exhaustive 16-point initiative aimed at ensuring the real estate sector’s “stable and healthy development.”
The plan, backed by President Xi Jinping, pushes back against speculative tendencies, reinforced by his 2017 declaration, “Houses are for living, not for speculation.”
Given the tumultuous state of leading real estate enterprises like Evergrande and Country Garden Holdings, combined with the substantial Western interference, the Chinese leadership might have compelling reasons to double down on their commitment to stabilize the housing market.
The New York Times reported Friday that major Chinese real estate developer Country Garden missed payments on its bonds and estimated it lost up to $7.6 billion in the first half of the year.
The Times piece says that China’s “engine is sputtering, posing alarming risks for Chinese households and economies around the planet. Long the centerpiece of a profit-enhancing version of globalization, China has devolved into the ultimate wild card in a moment of extraordinary uncertainty for the world’s economy.”
China’s exports have also dramatically declined.
