Evergrande of Red China \u2013 is predicted by us to formally default this month \u2013 in its interest repayments on its corporate bonds \u2013 that will evidence the driving force behind the companies collapse \u2013 the Chinese Communist Party.<\/p>\n
A company that was founded in 1996 (entering the Hong Kong stock exchange in 2009) \u2013 and whose growth was based on massive expansion financed by Chinese banks and global bond market \u2013 (and who has presently $20 billion of dollar denominated bonds outstanding) supported by its political connections in Beijing.<\/p>\n
In fact, according to the Xinhua News Agency \u2013 in 2018 it became the most valuable real estate company worldwide.<\/p>\n
And yet \u2013 3-years later \u2013 it is on the verge of complete collapse\u2026why?<\/p>\n
Has the Chinese property market shrunken? No<\/p>\n
Has the economics behind the company\u2019s business model failed? No<\/p>\n
The reason we believe is the \u201cchanging\u201d face of the Chinese Communist Party <\/strong><\/p>\n This is a party dictatorship that seized power in 1949 with its sole central theme of \u201cclass struggle\u201d on its road to socialism – and who has led its people through the following decades \u2013 with millions of its citizens dying of hunger due to the complete mismanagement of the economy as it followed Mao\u2019s \u201c(much better named) great leap backwards\u201d and who entered the 1990\u2019s as economically bankrupt.<\/p>\n At this point in 1991-2 the Reds had simply two choices \u2013 to allow political freedoms for its people \u2013 and sign its own death warrant (as had faced the Russian communists in Moscow) or to \u201cshow a humble face\u201d to the world politically and allow new economic conditions to prevail that would encourage private ownership and entrepreneurship.<\/p>\n The Reds chose the latter \u2013 and with the aid of their constant bed-fellows \u2013 the Globalists (who saw both an \u201cuntapped\u201d Chinese consumer market and new ways to increase their own profits by transferring work and employment opportunities from their own countries to Red China) we have witnessed millions of jobs move from the West to China, billions of dollars in trade deficits and priceless amounts of technology transfers \u2013 to our political enemies.<\/p>\n As Desmond Shum author of the book \u201cRed Roulette\u201d whose ex-wife was one of the local entrepreneurs with political connections whose businesses flourished \u2013 until she was arrested in 2017 and has since \u201cdisappeared\u201d \u2013 \u201cThe party (Chinese Communist) had to let private ownership and entrepreneurship flourish in order to save the country. But by 2005 the party could afford to revert to [state dominance]. They never changed; it was expediency.\u201d<\/p>\n <\/p>\n And so, we return to the story of Evergrande \u2013 and our own hypothesis<\/p>\n As China grew economically \u2013 and with the replacement of the Red\u2019s collective leadership by Xi Jinping \u2013 managed to create a personal dictatorship by removing the term limits that were put in place to stop exactly this eventuality.<\/p>\n With the political base safe \u2013 personal economic greed came to the forefront \u2013 and as in previous times \u2013 the Russian \u201cplaybook\u201d was again borrowed.<\/p>\n <\/p>\n Firstly, the political environment needed to be created \u2013 and the Red campaign \u201cagainst corruption\u201d \u2026or what should be more accurately coined as a campaign against non-Communist corruption\u201d<\/p>\n Within this pretext the Reds unveiled \u201c3 red lines\u201d to stop the \u201cindependent\u201d growth of property developers namely, the ratio of liabilities to assets; net debt to equity; and cash to short-term borrowings.\u00a0 Based on data from Beike Research, part of Chinese property group KE Holdings, immediately 14 of the 30 largest property companies were put \u201cunder notice\u201d<\/p>\n And from this point \u2013 the future of Evergrande as an independent company became impossible.<\/p>\n Because it is our belief \u2013 that what we are witnessing is not the free market collapse of a company \u2013 but a Red inspired \u201cYukos 2.0\u201d<\/strong><\/p>\n For those who remember, Yukos was the one of the largest oil companies in the world \u2013 until it was claimed by Russian tax authorities to owe $27 billion dollars in back taxes \u2013 a number far larger than even its multiple years turnover.\u00a0 Subsequently its assets were frozen \u2013 then taken by the state \u2013 and sold in a closed room auction for a fraction of its value to a \u201cshell company\u201d that had only just been created \u2013 whilst Yukos\u2019s ownership was placed in jail for alleged corruption.<\/p>\n And as the higher echelons of the Russian political elite financially benefited from the \u201cforced takeover\u201d of Yuko in 2004-5 \u2013 we watch eagerly to see if our hypothesis is correct and will the positive assets of Evergrande itself \u2013 be taken over by \u201cfriends of the leader\u201d Xi Jinping \u2013 solely to enrich themselves \u2013 whilst the billions of dollars of liabilities will be \u201cpushed\u201d onto a \u201cfailing\u201d bank<\/p>\n As Desmond Shum wisely says \u201c\u201cThe red aristocracy will always have privileges – they go to different schools starting at kindergarten, they live in different compounds.\u2009.\u2009.\u2009That\u2019s the way the system has always worked, that\u2019s the way the system is structured. If you\u2019re not connected to political power in China, you will never do anything of significance.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" Evergrande of Red China \u2013 is predicted by us to formally default this month \u2013 in its interest repayments on […]<\/p>\n","protected":false},"author":1,"featured_media":2613,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[13,15,11,10],"tags":[],"_links":{"self":[{"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/2612"}],"collection":[{"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2612"}],"version-history":[{"count":1,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/2612\/revisions"}],"predecessor-version":[{"id":2614,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/posts\/2612\/revisions\/2614"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=\/wp\/v2\/media\/2613"}],"wp:attachment":[{"href":"https:\/\/far-right.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2612"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2612"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/far-right.co.uk\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2612"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}