China doesn't allow bubbles. In August 2020, Beijing introduced the "three red lines" for developers: ❗️ liabilities max. 70% of assets (excluding customer deposits from pre-sales) ❗️net debt max. 100% of equity ❗️cash at least equal to short-term debt The more lines a firm crosses, the less it can borrow. Annual growth of interest-bearing liabilities (loans and bonds): 🟢 no lines crossed: max. +15% 🟡 one: max. +10% 🟠 two: max. +5% 🔴 three: 0%, no new debt The result? Evergrande in default, Country Garden in trouble, prices falling since the 2020/21 peak. Not a chaotic crash, but a managed deleveraging of a sector that held a huge share of GDP and household wealth. It hurt developers and speculators who believed prices would rise forever. It also hurt buyers who paid deposits for pre-sold apartments and are still waiting for completion. Those who are just looking for a home, though, see prices no longer running away from wages. Meanwhile, capital is moving out of concrete and into other sectors. And the West? It lets the bubble inflate first, then bails out the "too big to fail," and once the elites are safe, lets it burst. China deflates bubbles preemptively and drop by drop. Is socialist #China really that diabolical?
