Related to the news around Evergrande: https://www.reuters.com/markets/asia/evergrande-shares-set-open-down-38-amid-uncertainty-over-debt-revamp-plan-2023-09-27

Many, many analysts have predicted the impending doom of China wrt to building ghost cities, unsustainable infrastructure spending, municipal governments taking on huge loans, and an inevitable bubble.

There are plenty of articles arguing so:

• NYT: China Is on Edge as Fallout From Its Real Estate Crisis Spreads

• Industry report: Why China’s housing policies have failed

• Reuters: China’s next debt crisis will be municipal

• Bloomberg: China’s Debt-Fueled Housing Market Is Having a Meltdown, Again

If and when this will happen is a very important question, with widespread consequences and plenty of opportunity to cash in on accurate forecasting.

The question is: will there be a crisis in China in the real estate/housing/construction sector in the next year?

• By 27th September 2024

• If the crisis is very transient, similar to Covid in US, and everything is back to business as usual by the deadline, it's still counts as "YES"

• If the Chinese governemnt takes on insanely huge loans, but prevents the crisis, that does not count as "YES"

I am intentionally vague with my definition of crisis, but here are some things that would cause me to resolve this as YES:

• multiple reputable publications (e.g. Reuters, Bloomberg, Al Jazeera) writing about a construction crash, housing bubble popping, etc. Not about impending danger, but about currently ongoing stuff.

• multiple large companies like Evergrande declaring bankruptcy

• municipal governments defaulting on bonds

• sudden drop in stock value in the sector, of at least 30% sustained over a week or more

• large drop in real estate value

• large drop in new units being built

Breakingviews - China’s next debt crisis will be municipal

On the southern bank of the Amur river that runs along the Russian border is one of the most affordable property markets in China. Where the average two-bedroom flat in Beijing can cost $1 million, investors can snap one up in the city of Hegang for $10,000. Dependent almost entirely on coal mining, Hegang’s economy has been on the ropes for years. The pandemic appeared to push it over the edge. On December 23, local officials announced the city has frozen hiring and begun fiscal restructuring. That may be a first for China, but it’s unlikely the last.