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Financial Crisis
government bailouts
When the United States has a crisis, the government bails out the corporations
When China has a crisis, the government bails out the people
Thread 🧵
When China has a crisis, the government bails out the people
Thread 🧵
When the Evergrande Group defaulted in 2021, western media expected it to get a multi-billion-dollar bailout like the US govt gave AIG in 2008.
Evergrande’s billionaire chairman Xu Jiayin was in the Party, and the Party’s corrupt, right? So of course there’d be a bailout.
Wrong
Evergrande’s billionaire chairman Xu Jiayin was in the Party, and the Party’s corrupt, right? So of course there’d be a bailout.
Wrong
Xu found that his membership card didn’t help him one iota. The government started dismantling the real estate giant instead. The Wall Street Journal called it a “controlled implosion”—Evergrande was compelled to sell off assets to other companies.
wsj.com
wsj.com
In fact, Xu was “encouraged” to cover the debts with his own personal fortune.
By the end of the year he had lost three-quarters of his net worth, or about $17 billion.
bloomberg.com
By the end of the year he had lost three-quarters of his net worth, or about $17 billion.
bloomberg.com
What about all the homebuyers?
When Evergrande went bust, their new homes weren’t finished. This understandably made a lot of people angry. Why should they pay for a home that wasn’t getting built?
So they went on a mortgage strike.
When Evergrande went bust, their new homes weren’t finished. This understandably made a lot of people angry. Why should they pay for a home that wasn’t getting built?
So they went on a mortgage strike.
Tens of thousands of homebuyers across dozens of cities in China collectively stopped paying their debt in the summer of 2022, demanding that their homes be completed first.
theguardian.com
theguardian.com
Think carefully on the phrase “mortgage strike”—where have we heard that before?
That’s right, NOWHERE. Imagine what would happen if such a thing happened in the US. How do you think the government would react when the banks started complaining about missed payments?
That’s right, NOWHERE. Imagine what would happen if such a thing happened in the US. How do you think the government would react when the banks started complaining about missed payments?
Of course, in “authoritarian” China, we can always expect a swift “crackdown” on its rebellious population, right?
Also wrong. A few months later, the strike hadn’t been crushed or curtailed.
It expanded instead.
reuters.com
Also wrong. A few months later, the strike hadn’t been crushed or curtailed.
It expanded instead.
reuters.com
Rather than foreclose upon homeowners, Chinese banks and the government tried to placate the protestors.
Regulators vowed to meet the strikers’ demands, and the govt instituted forbearance—i.e., missed payments wouldn’t negatively impact credit scores.
bloomberg.com
Regulators vowed to meet the strikers’ demands, and the govt instituted forbearance—i.e., missed payments wouldn’t negatively impact credit scores.
bloomberg.com
The western press would like you to believe that the PRC’s new regulations on business and economic intervention by the government are driven by the arbitrary whims of Xi or the Party bureaucracy.
But that’s clearly not the case. Change is being demanded from the bottom up.
But that’s clearly not the case. Change is being demanded from the bottom up.
At the end of 2021, Reuters reported that the government’s response to the crisis was to gradually nationalize the property market. Banks were allowed to extend credit to state-owned developers, but instructed to “steer clear of private real estate firms.”
reuters.com
reuters.com
This echoes the Chinese government’s domestic handling of the 2008 crisis as well. Instead of implementing austerity measures like most of Europe, the PRC responded by increasing public spending. China’s massive high-speed rail network was almost entirely built after this shift.
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