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China’s banking sector is in free fall, according to market veteran Kyle Bass.
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Hayman Capital’s chief information officer estimated that at least $4 trillion in real estate losses could occur in China.
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Experts say China’s real estate development boom is unstoppable and is causing a serious crisis.
China’s banking system is collapsing and the country’s real estate crisis could wipe $4 trillion from the financial system, according to veteran investor Kyle Bass.
In an interview with Andrew Ross Sorkin on CNBC on Monday, the Heyman Capital Management CIO said China’s financial crisis has worsened in recent years as debt from major real estate owners deteriorated and some companies defaulted on their bonds. He pointed out that the real estate sector is in turmoil. A former senior Chinese official said the real estate crisis has left China with enough vacant homes to house 3 billion people, and a flood of unused supply would cause huge economic losses to the real estate sector.
Such losses are bound to have a major impact on China’s highly leveraged banking system, Basu said. Meanwhile, China’s local real estate market is primarily financed through local government financing vehicles, a market worth about $13 trillion, but many of those debt loans are currently in default, Basu said. Stated.
This suggests that Chinese bank losses could dwarf those seen during the Great Financial Crisis, when U.S. banks lost about $700 billion.
“This is what we think [China’s] Real estate losses amount to at least $4 trillion. And the municipal lending vehicle market, we don’t even know where the bottom of that market is,” Basu said. “For the capital markets to function properly, we need to understand the banking system, and the “The system is in freefall.” right now. “
Experts have warned that China’s real estate sector could be in trouble for a long time. The country’s developers have embarked on a massive building boom over the past decade, much of it financed with debt, but supply now far exceeds housing demand. One economist estimates that it could take up to a decade to resolve the real estate problem, as China faces a variety of economic headwinds that are hampering growth.
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