Chinese banks paying people to take out loans for a week to juke stats; property crisis rolls on; AI
Posted: Today 10:28:27 AM EST
[Last Edit: Mal_means_bad][Edited]
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A widespread decline in home prices in China related to the collapse of real estate development giants, declining demographics, and growing unemployment has ruined the market for the absurdly optimistic purchase of homes as speculative retirement investments which at its peak was responsible for 38% of government revenues (the government has difficulty taxing the famously evasive and cash hoarding Chinese directly, but cleverly channeled them into putting their life savings into real estate transactions with the government that are tightly documented by their nature, taxing every transaction 40% - irresistible while market value increased by double digits annually, intolerable with them declining). Former finance minister Lou Jiwei predicts that the property crisis will drag on another five years (total of a decade, a prediction roughly shared by western analysts) generating an indigestible mountain of debt while government revenue is strained, just as the poorer half of the population will attempt to retire on $1 a day. 300 million migrant workers from rural villages live in cities where they don't have residency rights and are therefore denied most social benefits including pensions; by comparison retired urban salaried employees currently receive an average monthly basic pension of $461. Resources for reforming the social safety net as the ratio of elderly to working age radically tilts grow increasingly scarce: SCMP To stimulate a shaky economy in a tough trade war Chinese authorities ordered the banks to loan more money to a population that isn't borrowing. Unable to do so honestly, Chinese banks were paying customers to take out loans and pay them back in a few days to juke the October volume stats, which also fakes the non-performing loans stats: Bloomberg Jerry Hu, who owns an auto-parts firm in eastern China, was approached in October with a strange request. A loan officer from one of the country's biggest banks asked him to borrow 5 million yuan ($700,000), deposit the money and repay it next month. The bank even agreed to cover the interest. "Their managers kept calling me," said Hu, whose firm in Zhejiang province near Shanghai is a valued client because of its steady cash flow and solid profits. "I didn't really need a loan, but I still agreed to help." Known as "quick-lend-and-recover," the practice is spreading as banks come under unprecedented pressure to hit government-set targets that can't be met by real demand, according to interviews with almost two dozen bankers. The loans underscore a major challenge facing policymakers as China's economy slows: They can make funds cheaper and more abundant, but they can't force people to borrow, spend or invest. While targets vary from bank to bank, they have been told to lend at least as much as last year, said the bankers, who asked not to be named discussing private directives. Bankers are worried the number of borrowers could shrink even more over the final few months of the year at a time when record low margins and rising bad loans are already putting lenders under strain. Retail clients are getting similar requests. Jane, who works for a bank in Zhejiang and requested to be identified only by her first name, was asked by several rival banks to take out a consumer loan and hold the funds for only a few days before repaying. Banks in these cases have also offered to cover the interest, with some loan officers even using their own money to pay for clients such as Jane, so that they can tap them again. Despite cheating desperately new loans ended up down 50% YOY, the second lowest month in more than a decade: Reuters New loans by Chinese banks fell sharply in October from the previous month and missed market expectations, as households and businesses remained wary of taking on more debt due to economic uncertainties and trade tensions between Beijing and Washington. With private demand still weak amid the property downturn, policymakers are finding it hard to reflate the economy as Chinese consumers tighten their belts. Incremental policy support has yet to yield significant results. "Bank loan growth continued to weaken in October, with the consumer loan subsidy scheme failing to put a floor under household loan growth," said Leah Fahy, economist at Capital Economics. Banks made 220 billion yuan ($30.89 billion) in new loans last month, plunging from September's 1.29 trillion yuan, according to Reuters calculations based on data from the People's Bank of China (PBOC) on Thursday. Analysts polled by Reuters had expected October loans would reach 500 billion yuan, matching the levels seen a year earlier, as seasonal factors that helped boost September's numbers wore off. Secondhand home sales cratered in October, usually a strong month for home sales. Ominously they fell hardest in the most desirable cities, which were the last to feel market value declines: Caixin The price drops came alongside a retreat in transaction volume. Following a brief uptick in September, existing-home sales in the first-tier cities resumed their decline. In Beijing, transactions fell 23.7% from the previous month to 12,087 units, while Shanghai posted a 9.3% drop to 18,483 units, including commercial properties, according to data from China Real Estate Information. Shenzhen's sales fell 7.7%. Bonus wildcard crisis, in a rare public appearance a senior researcher for China's DeepSeek AI told an audience in China that AI may replace most jobs in the next decade, that "societal structures will also be greatly challenged", and that "tech companies should play the role of guardians of humanity, at the very least, protecting human safety, then helping to reshape societal order" after blowing apart said societal order. Which is what American AI CEO's have been saying, so at least we agree on something: AOL |
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Do you really think they have 5 more years, Mal? That a government official is actually publicly admitting to an end to the musical chairs, is honestly terrifying. Even a former finance minister, and not a current one. We had no such similar news (albeit news outlets were a lot more limited back then) when the Soviet Union imploded. I wouldn't be surprised if it was only 5 more months before the unrest really kicks off. They're not ready to knock over the table yet, they know it, but that ending is preferable to one where the peasantry demonstrates just how much the Emperor has lost the Mandate of Heaven. |
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There's a ton of shit going down. I honestly think predicting details is impossible, but the trends are increasing social instability, probable war, and possible AI economic revolution causing total chaos. Xi purged something like 25% of the senior leadership, including the nuclear rocket force and the commander of the military district opposite of Taiwan, who was 2nd or 3rd most powerful man in China. Could be dictator life insurance 101, could be replacing them with yes men willing to row a boat to Taiwan. American naval construction is fatally hosed but the drone swarm program is advancing rapidly and at least parts of it will be available in 2027. WWII airbases are being refurnished all over the Pacific. Feels like China's window of opportunity is closing pretty fast. The US is performing kinetic housecleaning in Iran, Syria, and Venezuela to prevent another Ukraine-Russia type distraction. 30% of Chinese industrial companies are operating at a loss (official stats ) but the government barely gives a shit. Maybe to maintain employment for social stabilization, or flooding markets to drive foreign manufacturing out of business and establish monopolies that can be leveraged politically, maybe because most of it has military applications. 80% of their electric car manufacturers are predicted to collapse in the next year or so (the biggest will survive, so that's not 80% of production), as well as most solar manufacturers and a lot of battery manufacturers, and a dictator could build a hell of a lot of drones after converting that infrastructure. If they're not producing military drones the unemployed will be rioting. They redefined youth unemployment when it reached 25% then stopped reporting it when it reached 25% again then made economic data a national secret after analysts used proxy data to ferret out the real numbers. One of their own senior economists estimated it was 40% then got disappeared. Most of their provincial and municipal governments are technically bankrupt. They're using stimulus to keep the economic engine running but are running out of borrowing capacity (I'm aware we are also - a long war could ruin us as well, but we'd go down together). The Chinese had to play their rare earth ace before they'd like to in a kinetic war and the level 9 trade war got dialed back to about a 6, but now Washington is rushing to secure their own. Rare earth minerals aren't actually that rare, they were just cheaper from subsidized Chinese mines that don't have EPA oversight, so it's only a matter of time before the US eliminates the leverage on them and applies leverage on others. Germany recently realized with horror that they no longer have a significant competitive advantage versus Chinese exports. Soaring energy costs, thin labor, and falling behind technologically. Europe no longer has agency, they are an economic battleground between America and China with a literal battleground by proxies along one edge sketching a specter of their possible future. With their dependence on the US and fear of market flooding they have little choice but to begin closing their market to the Chinese. Without the EU and US markets exports can't keep China afloat anymore. If Xi remains in control for another couple years he's going to need a war to hang his hat on. Most likely Taiwan; possibly he'll pick an easier fight elsewhere. Chinese labor morale is cracking and they need a new reason to follow the leader. I expect they'll be shooting at somebody in a year or two. AI is a wildcard, everybody is going to be dealing with domestic chaos if unemployment is 50%. Everybody. If the robot revolution takes off sooner rather than later China could catch the leading edge of that and drag themselves out of this hole by manufacturing them by the tens of millions, but that would create an 80% unemployment world and a super chaotic transition, if there's even a good system to transition to. |
