Cash crunch at LeEco ‘far more severe'

[voyager]

Less than a year ago, Chinese tech giant LeEco landed in Silicon Valley with dreams of crushing both Apple and Tesla at their own game. Now, the Beijing-based tech empire is strapped with a severe cash crunch as it tries to salvage its electric car and smartphone ambitions. Last year, the company had said it planned to hire 12,000 workers in Silicon Valley.

Cash crunch at LeEco 'far more severe than expected,' says founder

 

[eye.surgeon]

A microcosm of China in general. It's more difficult to play financial shell games in a market that requires disclosure.

 

[sandpiper]

A microcosm of China in general. It's more difficult to play financial shell games in a market that requires disclosure.

Uh huh. Economically, that's what scares me, more than Trump, Brexit, or anything else. Eventually the shells will all be lifted and people will realize that there's nothing under any of them.

 

[BluestarE3]

Pretty soon, he may have to do a "John DeLorean" to raise funds.

 

[Cosmacelf]

Uh huh. Economically, that's what scares me, more than Trump, Brexit, or anything else. Eventually the shells will all be lifted and people will realize that there's nothing under any of them.

That has been the financial market fear for many years now. China will eventually hit the wall, sparking a worldwide recession. I suspect it won't happen in China until inflation gets bad enough for people to demand action. I would think that would be double digit inflation. We aren't anywhere near that yet.

 

[trayloader]

I don´believe a single word which leaves this guys mouth. The whining is only to soothen the US attorneys.
His grand scheme was to syphon the IP from exceptional US talents as smart as he could to China.
He effectively created a shortcut. It´s all about the "leSee" car with Faraday being the storefront.
They will build their huge factory, and this car will be a contenter. Earlier and cooler than Lucid.

 

[sandpiper]

I'm more concerned about the massive real estate overhang. Walk down any major street in an Chinese city and you will see a bizarre number of completely empty office and apartment buildings. I've been told by locals that all of these buildings were built by politically well connected individuals using borrowed government money, and they don't lose their shirts because the investment value of the buildings and apartments keep appreciating. Repayment terms are fluid, based on how well the owner compensates the local party authorities. I freely admit that I don't know any of this first hand. It's just what I've been told by some well positioned locals who should know.

If this is all the case, you have the ingredients for a major Chinese real-estate bust when the Chinese cash surplus dries up or if they ever get corruption under control.

 

[Cosmacelf]

I'm more concerned about the massive real estate overhang. Walk down any major street in an Chinese city and you will see a bizarre number of completely empty office and apartment buildings. I've been told by locals that all of these buildings were built by politically well connected individuals using borrowed government money, and they don't lose their shirts because the investment value of the buildings and apartments keep appreciating. Repayment terms are fluid, based on how well the owner compensates the local party authorities. I freely admit that I don't know any of this first hand. It's just what I've been told by some well positioned locals who should know.

If this is all the case, you have the ingredients for a major Chinese real-estate bust when the Chinese cash surplus dries up or if they ever get corruption under control.

If what you say is true, wouldn't the party officials just print more money to alleviate whatever financial distress is occurring? In which case you would see signs of financial distress in the inflation rate, which has remained tame.

 

[sandpiper]

If what you say is true, wouldn't the party officials just print more money to alleviate whatever financial distress is occurring? In which case you would see signs of financial distress in the inflation rate, which has remained tame.

Why would they print money? They've still got a lot of foreign reserves to loan out, and so I'm pretty sure you've got good money covering the bad. And as long as the book value of the real estate continues to climb, the party can continue.

Climbing real estate prices... empty buildings... easy credit... heavy corruption... poor regulation and oversight.... hmmm.....