>

I wish we had this.
Not hard to understand.
Better pop the bubble when it's still managable. Without the three red lines, over time you get into a situation like sitting on a million megatons of TNT drowned on petrol while smoking a cigar. >

Mmm, I'm not questioning whether it's wise to deflate the bubble, but it seems strange to deflate it by immediately bankrupting one of your largest real estate firms (lowering supply). A sudden collapse is typically way more painful than a slow one after all, especially right after zero-covid lockdowns.
Why not, for example, set a higher debt ratio limit, then have pre-set points where the limit lowers? Or open investment into foreign equity to let some air out of real estate? Or any number of slower ways?
Basically, why Three Red Lines specifically. I would have thought the CCP was aware, or capable of being aware of the debt levels that Evergrande (and other real estate firms) were running at. >


Mmm, I'm not questioning whether it's wise to deflate the bubble, but it seems strange to deflate it by immediately bankrupting one of your largest real estate firms (lowering supply).

How does it lower supply? The CCP can just take that land and redistribute it. >

The supply of apartments is increased by firms that build apartments. In China you don't actually own the land the building is on anyway. >

Is that not the case for the west as well? Isn't it normal to have separate entity for the land and building? 
Say the landowner can lease the land for Company A to set up a hotel and pay a monthly rent to the landowner. This creates a cheaper upstart cost of instead having to pay millions to build something on a piece of land.
Or is this a cultural shock? >

In general, in the US and UK (And I think in other EU nations? Not 100% on that), you own the land under your house. In some cases, you even own the geological rights etc. for any underground resources as well.
For apartments, of course, typically you do not own the land under the apartment unless you own the entire building. Landowners may lease land to construction companies as you describe as well, depending on what's most advantageous at the time (hotels often DO own the land they sit on).
In China, of course, you not only don't own the land, you don't even really "own" the house / apartment. You actually have a 99 year lease on the building. >

Saw a more recent youtube video on the unfinished apt problem there and more recently they were only giving 50 year leases.  Buyers were not happy but continued buying. >

Talking about China in the west is hard because there are huge cultural differences and people in the west, especially the US, tend to project their experiences and worldview onto the situation.
Wealth, fortune, etc. Are hugely important in Chinese culture. Ronnie Chieng does a bit about it and he's not wrong. The personal savings rate and national savings rates are much higher than in the US. Owning properties is also seen as very important culturally as well. It's hard to explain if you're not familiar. But it's different than the US. It's not just an investment.
The system also doesn't work the same here. In China, when you buy a new construction you pay the mortgage while it is being built. These people aren't protesting it being overpriced they're protesting paying for years for something they couldn't even move into. I think that's fairly reasonable. I also think the government response to aid them by letting the developers fail is reasonable too given the situation. 
Also, there's a lot of misunderstanding in the west of how the CCP operates. Must people operate on the assumption the CCP doesn't react to what the people want because they just kill people who complain. This is simply false. As the recent COVID protests illustrate. The CCP is very concerned with public sentiment and keeps a close watch on the public mood. They're actually quite responsive.
I've been around reddit long enough to know you can never talk about China in a nuanced, reasonable way without dealing with people accusing you of being a wumao or CCP troll etc. So I always turn comment notifications off. But, I would just say, if you are really interested in what China is actually like on the ground, the economist started a podcast devoted to it called the drum tower. It features journalists in China and Taiwan. Interviews with Chinese people, etc. I find it very fair. And while I don't think they've discussed the real estate much since it started you can still learn a lot about how things actually operate there that can help you better assess what is going on in general. >

This is very interesting >

Damn I do not know the answers to your question even remotely, but I learned a lot reading your excellent post!  Thank you. >

The real estate crisis in China has been going on longer than a year. They've been reporting on China's ghost cities for almost a decade, but it's only recently that they've been unable to continue to float these white elephants and reality is starting to take hold. >

A lot of what the CCP does is about pure messaging. Allowing one firm to collapse would be a strong message, especially since those firms probably also have assets and liabilities in the ghost economy. “None of you are too big to fail” seems like a clear and effective message, without actually stating this out loud.