Oct

11

Wang Jingbo: “The world revolves around money, and it makes its own rules.”, quoted in  Patrick Chovanec's article on Chinese Trusts

Richard Bubb is shocked:

After reading the article linked, I think I smell a bubble regarding this seemingly unregulated financial house of cards. From the article:"The big concern the chain-reaction that could unfold if those developers run out of ready financing and go bust: There are signs the real estate market is already cooling . . . Hungry for cash, some developers are borrowing at 12 percent to 25 percent . . .""  “Medium-sized property developers appear to have borrowed heavily for short-term and bridge loans,” said Il Houng Lee, the IMF’s senior representative in China. “Property developers’ strains could hit trusts.” and,"Any sign of weakness in China’s real estate market could have a chilling effect on trusts and their investors, said Jason Bedford, a manager at KPMG LLP in Beijing. “Imagine that you have a real estate product and suddenly the real estate markets start to plummet,” Bedford said. “What was a liquid product suddenly becomes very illiquid as investors pull out and can’t be replaced." and,“It will cause a significant amount of wealth destruction,” [Michael Werner at Sanford C. Bernstein & Co. in Hong Kong] said. “The party goes on until someone turns on the lights and you can’t roll over these assets. There will be wealth destruction. The question is how much.” Just my 2 cents.


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