Originally published August 18, 2023 7:50 am PDT
Two years after its debt default, China’s mammoth property firm, China Evergrande, has declared bankruptcy protection.
The developer’s collapse in 2021 ignited a domino effect, leading to defaults by other smaller developers in China, according to a New York Times report.
This signaled the beginning of a prolonged downturn in China’s real estate market, which could potentially jeopardize the broader economy of the nation.
The U.S. bankruptcy petition was lodged in the Southern District of New York, highlighting Evergrande’s continuous efforts to reconcile its overwhelming debt.
As of the conclusion of the prior year, the firm, with its linked enterprises holding assets in the U.S., declared outstanding liabilities amounting to $335 billion.
Highlighting the magnitude of the problem, analysts at Nomura observed, “China’s property sector has experienced an unprecedented correction.”
Furthermore, the company’s distress hasn’t been isolated, according to The Times.
Another key player in the sector, Country Garden, is on the brink of its own default.
After reneging on its commitments to creditors and amassing unpaid bills to the tune of $200 billion, Country Garden faces challenging times ahead.
A significant indication of the sector’s dire state is that, based on an estimate, Country Garden is yet to finish constructing almost a million apartments across a multitude of Chinese cities.
China’s longstanding housing market, which had previously flourished in tandem with its ascending economic prowess on the global stage, underwent a stark shift in recent years.
The government, in its endeavor to temper the real estate market, implemented a policy that homes were to be lived in and not speculated upon.
In 2020, a subsequent move to curb uncontrolled borrowing restricted property developers’ fund-raising capabilities, leading to multiple defaults.
This transformation was a pronounced deviation for the housing sector, which was accustomed to prospective homeowners securing mortgages to buy apartments even before their construction concluded.
This method ensured a consistent revenue inflow for developers.
But with the market’s deceleration, numerous consumers found themselves burdened with loans but without homes.
Gavekal Dragonomics, a reputed research entity, unveiled that Evergrande had pre-sold 720,000 apartments by last year’s end that remained incomplete, the Times notes.
Experts are blaming U.S. investors like BlackRock for “blowing up” China’s real estate bubble.
American Faith reported Thomas W. Pauken II, a seasoned specialist in Asia-Pacific affairs, had 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 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 manipulating China’s real estate sector.
“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,” Pauken said.
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.
BlackRock has been manipulating U.S. markets as well.
An April 2021 report from The Wall Street Journal (WSJ) explained that private equity firms like BlackRock have been “snapping up single-family houses to rent out or flip.”
Ordinary Americans are catching most of the fallout.
BlackRock and its peers “are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices,” WSJ reported at the time.
BlackRock is an official partner of the World Economic Forum (WEF). The WEF’s partners “are the driving force behind the Forum’s programmes,” such as the “Great Reset,” according to the group’s website. BlackRock CEO Larry Fink is a WEF board member. The WEF predicts that by 2030 you will “own nothing. And you’ll be happy.” BlackRock owns controlling shares in virtually every major international corporation.
