Srinivasan: China's Three Red Lines policy intentionally engineered Evergrande's controlled demolition
Balaji Srinivasan · Balaji Srinivasan: The Network State · Apr 5, 2022 · at 1:59:29
Balaji Srinivasan explains how China's macroeconomic and housing policies differ from Western central bank interventions regarding real estate speculation.
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“In China, actually, Xi Jinping has talked about how he did not want houses to be used for investment. And actually that's part of their policy there is to try to intentionally pop the bubble rather than having a bear or Lehman type thing. Evergrande was like a controlled demolition where we'll see if it's successful. But they set up these so-called three red lines years ago on like, you know, I think it's like debt to debt to revenue ratio. So some ratios like this, where companies that were above that, they wanted to kind of put the regulatory brakes. They're trying to deflate that bubble to bring the prices down because they don't believe houses should be an investment. They should, they want them to be utility.”
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