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Why China needs to fill its empty homes (www.economist.com)

submitted 9 months ago by tuxbot@infosec.pub to c/economy@lemmy.world

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[–] TheDemonBuer@lemmy.world 3 points 9 months ago* (last edited 9 months ago) (2 children)

They were funded by private Chinese individuals as a way of investing....Since these are funded by private citizens, they are the ones that will lose their investment if the units aren't filled.

I see. Well, I still wonder how much of an impact that will have on the broader Chinese economy.

If the investors are unable to sell these units, they will have an essentially worthless asset on their balance sheet, and the money they invested will have basically been flushed down the toilet, but, while that sucks for them, I don't think that will necessarily have systemic impacts. Unless, of course, these assets have associated bank liabilities, but, again, the banking system is all run by the state. If these investors default on any loans they have against these assets, the assets will be seized by a state bank and the loans will be charged off by a state bank.

[–] dontgooglefinderscult 1 points 9 months ago

You're pretty much correct, except the investors will also likely be criminally charged if they did secure loans for these buildings, or if their losses with empty houses affect the ones they did sell; i.e. if the property management company for occupied building A has to shut down due to liability from unoccupied building b.

In China you don't really get to harm the public economically and get away with it or get rewarded for it, unlike the US where you have to harm rich people to get any consequences.

[–] hasnt_seen_goonies@lemmy.world 1 points 9 months ago (1 children)

You make a good point. Since this was the most popular way of building wealth, the middle class was dependent on this. Since one of the strengths of any economy is buying power, and if a large number of consumers cut back because of a loss on their investments, that would hurt the economy.

I think I agree with your main point that it won't hurt the Chinese economy by a large degree because of how it is structured.

[–] TheDemonBuer@lemmy.world 2 points 9 months ago

Since one of the strengths of any economy is buying power, and if a large number of consumers cut back because of a loss on their investments, that would hurt the economy.

That's a good point, but if there is a significant reduction in consumer demand as a result of these residential losses, the Chinese government can pump some free or cheap cash into the economy to pick up consumer spending, and they shouldn't have to worry too much about inflation because they would actually be counteracting some deflationary pressures.