Chinese Entrepreneurs Are Leaving China

[Jacob]

The article is talking about people with net worth in the millions of US dollars equivalent.  Sticking it in a box doesn't seem a viable option.  Anyone with the pull to be able to do this probably has access to enough inside info to have better options.

Agreed.

I'm sure people stick some cash in boxes (or equivalent) as part of spreading their risk, but there're better ways to place your money in China (and ways to get the money out of China too).

I thought you meant that it was unfeasible to withdraw large amounts of cash from the Chinese banks, as in you wouldn't be allowed somehow, but I don't think that's true at all. In transfering fairly significant amounts of cash to Canada, for example, you're more likely to run into problems from the Canadian or US (because many Canadian banks use US based clearing houses) due to money laundering controls than from the Chinese side. Of course, you could just transfer the money to an account in the Bank of China, which has branches here, and withdraw them and not have any problems.

Seems to me that if you're in China you still have a bunch of options for placing your money, but that you have to rely much more on personal trust and interpersonal relationships than systemic protections.

[alfred russel]

I tend to think that china is the future, etc. But if I had all my assets there, I would be worried that all my wealth is in a totalitarian (nominally) communist country.

[Malthus]

I just wish those folks would stop buying investment condos here in Toronto - they are inflating what I fear is a massive property bubble here. 

[The Minsky Moment]

I thought you meant that it was unfeasible to withdraw large amounts of cash from the Chinese banks, as in you wouldn't be allowed somehow, but I don't think that's true at all. In transfering fairly significant amounts of cash to Canada, for example, you're more likely to run into problems from the Canadian or US (because many Canadian banks use US based clearing houses) due to money laundering controls than from the Chinese side. Of course, you could just transfer the money to an account in the Bank of China, which has branches here, and withdraw them and not have any problems.

Seems like you are talking about wire transfers here, not bank notes?

[Jacob]

Seems like you are talking about wire transfers here, not bank notes?

Yes, but the wire transfers can be turned into bank notes in short order. Of course, that was in $CDN not RMB, so I guess that doesn't show that you can withdraw RMB 5 million (or whatever) from your bank account without too much trouble, should you want to.

I'll ask and get back to you on that

[Josquius]

I just wish those folks would stop buying investment condos here in Toronto - they are inflating what I fear is a massive property bubble here. 

Do they leave them empty like in China?

[Jacob]

I just wish those folks would stop buying investment condos here in Toronto - they are inflating what I fear is a massive property bubble here. 

Jesus fuck, it's bad in Vancouver too. There are "house collectors" who buy five, six, seven houses sight unseen in the most expensive neighbourhoods. Amongst some of them it's even allegedly a status symbol collector type thing. "Oh, I just bought my seventh house. It's in West Vancouver with a nice pool" they'll say over mah jong, and then the other guy's got to go out and buy houses so he can say "well, my eighth house is probably my favourite," next time they play.

If/ when the Chinese bubble bursts it'll be interesting times in the Canadian property market (not to mention the world economy, of course). At least they're mostly paying cash, so that might make a difference when the time comes.

Actually, that's a question I wouldn't mind to put to the more economic minded languishites: does the fact that most of the properties in the Chinese driven property bubble are paid for in full (rather than with mortagages) alter the likely ramifications of the bubble bursting?

[DGuller]

Actually, that's a question I wouldn't mind to put to the more economic minded languishites: does the fact that most of the properties in the Chinese driven property bubble are paid for in full (rather than with mortagages) alter the likely ramifications of the bubble bursting?

Most certainly, I would think.  The most devastating effect of bubbles bursting by far is that it forces everyone to deleverage at once, and do desperate things to get some liquidity.  When you don't owe anyone money, you're much less concerned with what is happening to other people.

[Admiral Yi]

What DGuller said.  We don't particularly care if some house collector's net worth suddenly drops by 80%.  We care about what happens to the guy he owes money to.

[Barrister]

What DGuller said.  We don't particularly care if some house collector's net worth suddenly drops by 80%.  We care about what happens to the guy he owes money to.

True, however...

These are pure speculative / luxury plays.  If the Chinese economy goes south, they'll look to sell at any price.  They guy in debt to his eyeballs is at least using the place as a primary residence, so will try and stay in the residence.

[Admiral Yi]

That sounds like a good thing from the perspective of a Jewish lawyer kvetching about housing prices.

[DGuller]

What DGuller said.  We don't particularly care if some house collector's net worth suddenly drops by 80%.  We care about what happens to the guy he owes money to.

True, however...

These are pure speculative / luxury plays.  If the Chinese economy goes south, they'll look to sell at any price.  They guy in debt to his eyeballs is at least using the place as a primary residence, so will try and stay in the residence.

Why would they sell at any price?  The biggest reason for firesales is that there is a debt that you need to somehow repay.  If you don't have debt, you can lay low, unless you have some other constant stream of unavoidable expenses.

[Barrister]

What DGuller said.  We don't particularly care if some house collector's net worth suddenly drops by 80%.  We care about what happens to the guy he owes money to.

True, however...

These are pure speculative / luxury plays.  If the Chinese economy goes south, they'll look to sell at any price.  They guy in debt to his eyeballs is at least using the place as a primary residence, so will try and stay in the residence.

Why would they sell at any price?  The biggest reason for firesales is that there is a debt that you need to somehow repay.  If you don't have debt, you can lay low, unless you have some other constant stream of unavoidable expenses.

Because they need liquidity because of the Chinese economy tanking.  Or at least I am anticipating.

[DGuller]

Because they need liquidity because of the Chinese economy tanking.  Or at least I am anticipating.

That's pretty much the same thing I just described.  You need liquidity if you owe someone money.  If you don't owe anyone money, then you need just enough liquidity to cover your expenses. 

[Malthus]

That sounds like a good thing from the perspective of a Jewish lawyer kvetching about housing prices.

Not really - I own my house and I'm not looking to buy. The value of my house will tank with all the rest (though as I'm not looking to sell either, it won't matter one way or another to me I guess).

My worry is what it will do the the economy around me, if anything. I'm presuming it won't be good.