Duan Yongping once said in "Investment Q&A" (the gist is):

Those who can learn from the experiences and lessons of others are talents.

Regardless of whether we are talents or not, it is very important to learn from others and history.

In an earlier article, I shared and recommended a classic movie, "The Big Short," which I believe is an excellent portrayal of the unprecedented financial crisis in 2008.

However, many of our readers may not have experienced that crisis at all, so they do not have a personal sense of it; even if they watch it, it is merely scratching the surface.

But the real estate crisis and property collapse in China are events that each of our readers has personally experienced and is currently experiencing. The lessons learned from this are worth serious study and research for every reader (including myself).

Before reading "Classic Cases of Value Investment: China Evergrande" (hereinafter referred to as "Value Investment Evergrande"), I confidently thought I had a good understanding of this property collapse, but during the reading process, I found that many details shocked me far more than my previous understanding.

Today, I would like to share some details from the original book (note: the book was published in 2019):

The following excerpts of questions and answers reflect the author's thoughts and understanding of the real estate development at that time.

"Are Chinese housing prices already ridiculously high?"

"Existence is reasonable. If housing prices were unreasonably high, how could so many people afford to buy? How could there be such a large transaction volume?"

"Will the Chinese government actively burst the housing price bubble?"

"The Chinese government cannot actively burst the housing price bubble; that would be economic suicide because the consequence of a sharp drop in housing prices is the collapse of the Chinese economy."

"Therefore, from the government's perspective, overly aggressive housing price control policies cannot possibly be implemented in the short term."

"Under what conditions will housing prices collapse?"

"It can be said that the author is optimistic about real estate stocks, betting on the national fortune, betting that the Chinese economy can still develop healthily for another ten to twenty years without a hard landing in the short term."

"Will there be a large-scale bankruptcy and flight of real estate developers?"

"Real estate is a very good industry. One major advantage is that it has low asset intensity, with very low barriers to entry and exit."

"The developers who go bankrupt and flee are just a minority; most have transformed wisely after making money."

The following segment is a speech by Tao Dong, Managing Director and Chief Economist for Asia at Credit Suisse, at a public meeting in 2017:

"If you try to analyze China's real estate with economics, whether you start from supply and demand, inventory, population structure, or affordability, the conclusion can only be one: bubble. But if you analyze it with these things, you are wrong."

"In 1990, at the peak of Japan's real estate market, the value of all houses was equivalent to 200% of Japan's GDP; in 2006, at the peak of the U.S. real estate bubble, the value of all houses in the U.S. was equivalent to 170% of that year's GDP; we in China have reached 250% of our GDP, which is an unprecedented figure in the history of modern capitalism."

Regarding the author's thoughts on the real estate industry, due to the sensitivity of some topics, I will only mention one point: the author believes that real estate developers cannot go bankrupt and flee on a large scale. But we have all seen the current situation: private real estate giants, including Vanke, have completely collapsed.

Interestingly, regarding Tao Dong's remarks, as the Chief Economist for Asia, he has already identified the housing price bubble from common economic knowledge, but he also wavered in his stance when faced with the market's madness.

All these situations are exactly the same as the madness reflected in "The Big Short," with the only difference being the time, place, and characters.

History truly always rhymes.

However, the facts repeatedly prove that no matter how mad the bubble is, no matter how special the national conditions are, common sense and laws cannot be violated.

Is the real estate industry the only one with similar problems?

If common sense and laws will ultimately take effect, what will we see in our future? What will we experience?

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