https://edition.cnn.com/2024/07/03/business/china-bond-market-bank-crisis-svb-intl-hnk/index.html

This has clearly already happened

which criteria has happened?

This is such a tough market to manage. Overall it extremely close to resolution on several resolution criteria, but not quite there yet.

1) some news sources write about a "slump" or a "crisis" or a "crunch", but not quite about a "bubble popping" or a "crash".

2) Evergrande is has been ordered to liquidate. Country Garden is in deep trouble, but not bankrupt yet

3) Some vehicles associated with municipal governments have defaulted.

4) as @Ciuccio pointed out below, the real estate indices are in deep decline for years now - but no sudden drop

5) The residential properties market seems to be in deep trouble, but that doesn't stop new units being built (completed)

Additionally, there have been a bunch of measures to prop up the sector, with lukewarm results.

I feel like any further bad news, or even lack of good news, would be enough to resolve this market as "yes".

I wrote a whole blog post on this market. Might want to read it. ;) @PeterBuyukliev

@marktwse Hey, I was inactive and somehow missed your comment.

Very good research! I'll definitely lean on that, come resolution time.

And yes, definitely for this market navigating the resolution criteria is just as difficult as forecasting itself. I thought about different options, but there is no good way to define housing crisis/bubble popping - clear cut and objective. Or at least I couldn't figure it out. I should have addressed developments that were already happening, though.

Nonetheless, it is an important question to try to forecast, even if it's hard to be objective. Literally billions of dollars are on the line.

I hoped for more activity here, even arbitrage with different real-money options.

@marktwse also, regarding what is a sufficient stock index drop, I addressed this in a comment below:

50% drop in new units being built in a given quarter, year over year comparison

30% drop in real estate indices (sustained for more than a few days)

The S&P China real estate indices (https://www.spglobal.com/spdji/en/indices/equity/sp-china-a-1800-real-estate-sector-index/#overview and https://www.spglobal.com/spdji/en/indices/equity/sp-china-a-300-real-estate-sector-index/#overview) are showing 30% declines YoY, and even bigger declines (~50%) from their peaks. How many more days do they need to stay here to qualify as sustained to get a YES? Or do we also need to see the QoQ declines in new units?

Hi @Ciuccio

I'm sorry, but I don't think this qualifies. From the market description above:

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

So gradual decline over years does not work. Otherwise I'd have to close the market on the day I opened it.

I think it's fair to consider "sudden drop" as a 30% drop within a 3 month period.

I realize this may be disappointing to hear, but please keep in mind that I hold no stock in this market, and it's very tricky to define objective criteria.

China Evergrande ordered to liquidate in landmark moment for crisis-hit sector

There is already a large drop in new units being built.

@JimAusman any specific source/statistics?

It is quite likely to see these two things happen:

• large drop in new units being built

• large drop in real estate value

Can you define large?

i think what will very likely happen is the real estate becomes cold in china, but the general economy remain unaffected.

@HanchiSun

I didn't give precise definitions intentionally, this is really vague and I wanted to leave myself sufficient flexibility. Note that I don't hold any stock in this market.

However, I feel the following numbers are fair:

• 50% drop in new units being built in a given quarter, year over year comparison

• 30% drop in real estate indices (sustained for more than a few days)

Precursor:

Also: https://www.nytimes.com/2023/08/28/business/china-property-country-garden-evergrande.html

Yes: https://www.nytimes.com/2023/08/28/business/china-property-country-garden-evergrande.html