Chinese developers act as if "If you build it, they will come." This isn't Hollywood and these aren't baseball fields. Building projects must be based on a reasonable projection of demand. Wishful thinking doesn't get it. Where do those dollars come from? Who will lose?
Builders will be bankrupted.
Investors who buy the bonds from Developers and the Government.
Chinese Middle class. Regular people trying to make their money work for them just like all of us do...buying into developers' schemes...buying stocks and bonds.. and losing when developers can't sell their "new" properties. Many times these are parts of schemes which are designed/sold as very attractive sites with pools and shopping centers , schools, etc. which were never built...and hence were never sold.
and the Chinese Government...who bails out the developers/banks who finance the developers bad ideas.
Foreign investors buying into this grand scheme...keep in mind the high predictions of growth in China...by the Chinese Government.
Without growth we can't attract capital. Without growth they may as well shut down their stock market. So they lie about the growth.
Sooner or later they all recognize that no one is buying their stuff...and they all start suing each other for making false promises to each other...false because they all are derived from assumed demand...which is just not there.
The lesson: Demand is the fuel behind an economy. Government can't create demand for anything. Only people can do that. Socialism is bound to fail because of that. If the Government lies about demand it will have excess capacity/supply with no buyers and the economy will stumble and may fail. There is no way around it.
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