Fundamentally the problem with these acquisitions is the company overpaid. If the acquired asset is worth what the company paid then there really isn't a debt issue.
Chinese banks are legendary in their insanity. One time we went to withdraw money from a bank and we were told to come back in two hours. Apparently the jag-off running it deposits the bank's deposits to other banks to earn interest. So the teller actually ran out of the bank to withdraw the banks money from another bank.
... Once in the morning, I met a teller of a local bank in Bangkok to withdraw an interest. She told me to be back in the afternoon. I asked her why it takes so much time? She replied the interest had to take a ride to get here. .............
@@donbusu nothing? Three banks in the US have collapsed this year and we are not even half way into 2023. The fall of First Republic is the biggest bank failure since 2008
In its original territory, Hainan Airline actually did quite well. Pretty much all Chinese students in Massachusetts have flown from Beijing or Shanghai on HNA.
I actually flew with Hainan, from Guilin to Sanya, in 2000 ... Small plane. Two Chinese pilots, assisted by a very big German guy sitting on a stool just behind them. All visible to the passengers because the cockpit door wasn't closed!
Pre 2001 it wasn't uncommon for Passangers to even be allowed in the cockpit, I as a child was invited multiple times into the cockpit and I know from others that they regularly were allowed as adults inside after asking. For small planes it is still possible today.
I believe the small plane you referred to is Dornier 328 , a germany made airplane now stocked, the German guy there is for a training pilot from manufacturer. Back then b4 911 there’s little cockpit protection , now it’s totally changed.
I just love it when these companies tout their alleged connections to the Chinese government; They are simply appealing to the investors greed by essentially saying, yes this thing is all corrupt and a mess, but don't worry you will benefit from it. Of course it's nonsense, when the bonds come due, the government is not going to pay you
To big to fell, but HNA don't as important as Evergrande can kidnap all indebted property companies and pre order customers. Actually, even Evergrande their somehow government link and knock on effect can't let government bail it out from debts mess, and only give some loans let them maintained floats for a while until property market preparing well.
@@slypear could we interest you in a little war?. Hmmm?. Would you like a little war?. War is our greatest export, couId I interest you in a little?, hmmm?. (Very good for business?)☝🏽
Airline companies all around the world are running on razor thin margins. US airlines like United and SW are mostly in the credit card industry. Many airline's value is not their flights or planes, like how Amazon is actually AWS and the nonprofitable Amazon site. Seems like this integration is just inevitable.
@@PercocetPete theory acc which the rate of profit-the ratio of the profit to the amount of invested capital-decreases over time. Some communist crap. Basically diminishing returns.
This is what I saw when studying overseas, there were non-stop jokes about how 'slow' Westerners are and how much more clever the Chinese are. But what it really came down to was how willingly the Chinese pushed legal boundaries and almost always prefer shortcuts for short-term gains. Eventually things go pear-shaped (e.g. Evergrande), and accountability is nowhere to be seeing. The workers, average joe share holders, contractors are left holding the bag.
We never leave workers, average joe share holders and contractors left holding the bag after a corporate collapse. FTX and Theranos come to mind. 😃😃😃😃😃😃
@@John77DoeFTX isn’t a company, crypto is decentralized, no one nation owns that stupidity, in fact China is the largest crypto player on the planet. Anyone who buys crypto knows full well they go in with their pants down, it isn’t security or currency, it’s speculation, so there’s no obligation or risk protection for that purpose. Theranos got arrested, so there’s Justice in that.
I just want to say that I understood, comprehended, analyzed and cogitated over everything you said. A total and complete understanding was achieved. It was very simple. Or maybe not. Anyways, I don't know what's going on with these people
MAY NOT BUT WHAT I GOT OUT OF THESE IS GREED WAS THEIR UNDOING. MORE BILLIONS THEY GOT THE MORE BILLIONS THEY WANTED TO MAKE DIDNT KNOW HOW TO LEAVE WELL ENOUGH ALONE AND JUST RIDE WITH THAT INTO THE SUNSET THEY WANTED TO BE BIGGED THAN SAMSUNG CAUSE THEY OWN A WHOLE BUNCH OF OTHER COMPANIES BUT IT TOOK THEM HUNDREDS OF YEARS TO BE SUCCESSFUL HNA TRYING TO DO THIS FLY BY NIGHT THOUGH A WHOLE BUNCH OF ACQUISITIONS BY BORROWING OFF THE VALUE OF THE COMPANY THEY WAS TRYING TO ACQUIRE
I remember reading the news about Frankfurt-Hahn Airport being sold but for some reason the investor would not show up and could not be contacted. It was actually treated like a scandal for the regional government since the public opinion was that they fucked up the due dilligence. There were articles about this for weeks in german newspapers. Thanks for giving me the background to this story I already forgot 😂
Our theory was that they didn't pay attention to the 'which Frankfurt?' question - Hahn isn't even in the same country or close to the actual city (germany has quite a few Bundesländer, meaning it consists of several countries). Also: since HNA was the only investor interested in the airport and everyone just wanted to get rid of it the claim that DD was not all that diligent and nobody on the german side cared is true.
@@Katharina-rp7iq Hi just wanted to clarify that the correct translation of German ''Bundesländer'' is counties, not country. ''Länder'' is our word for countries and a direct translation of ''Bundes-Länder'' might be ''union-countries''.
LOL I took it as a humorous dig at the stereotype of democratic countries being infamously partisan, acting as if separate countries -- literally "federated countries" as you point out!
Wow, what an amazingly detailed, yet comprehensible history and discussion of a very complex topic! This sort of deep dive into recent history is extremely valuable in helping the public understand how some of China’s largest companies grew as quickly as they did, and why so many are running into trouble, now that the Chinese government is paying attention the the debt levels of its largest borrowers.
This is why the world needs real, clean data. Transparency is generally seen as diminishing privacy, but advanced cryptographic methods exist to allow both. We need to automate the accounting processes to eliminate systemic risk. Data data data
@@goldnutter412 why would people with capital who benefit from keeping controls in their favour allow it and how easily can they suppress any attempts of open source transparent data world You people are busy in your idiotic petty little squabbles
@@goldnutter412 As a retired aerospace engineer, I was taught that Data is everything and that Everything is data. Thus if we believe that knowledge/information/data is power -- (which it is) -- then know that Power begets Control. Looking forward, we can expect that the continuing acquisition and Processing of knowledge/information/data will be the basis of AI's Growing Power and Control of Events, if truth be told. For our human capacity is limited by our slowness and confusion, compared with Artificial Intelligence's clarity of insight and vision. But you already know that. Or maybe you don't. In any case, time will tell; it always does.
An asianometry video release always makes the day a good one. I appreciate how you just give a factual explanation of the history of the subject matter without any need for flash or flair. It makes things like this very easy to digest, ecen for a layman; I never even heard of HNA before this video.
Have to keep reminding myself to click "like" as soon as I start watching an Asianometry video. I would always get too focused on the content, then eagerly look for another old video I missed previously, and forget the click like. Now I have to come back to click like for this video. There has never been a video here that doesn't deserve a "like" anyway.
Thank you very much for the video. Im a commercial aviation fan so heard hna group's name a lot and noticed Hainan Airlines flew some international routes that seemed pretty marginal.
Yeah that’s how I knew about them as well. Back in 2015-2017, They were offering routes from LAX to HKG for like 20% of Cathay Pacific airfares. I was like no way they were actually making a profit. As it turned out, they weren’t and the flights disappeared as soon as they appeared.
Have you noticed that people don't get such news any more ? Prc has now done the utterly wrong thing of expanding their tech sector to bury two sectors into one. The worst is yet to come..... Even if you are a skilled engineer. You cannot find the company to work for to hold their stability.... This is insane. I thought that it was odd too with these various vertical integration which is common in the UK or Europe. But this is another level altogether. Cos he tries to be like Li Ka Shing. A lot of SE Asian holding companies are like that. You would think that a typical manager has an actual fiscal budget control ? They didn't even have that. It is all about sell and buy. I get these people don't even have the basic understanding of a set of books and account. I mean... Most people know how to run a household budget. What comes in. What goes out. Simple maths. What are they doing ??... And in such a large scale too.
Very interesting topic - thank you for this presentation! I (American citizen) did a lot of business travel to and in China in the early and mid '90s. Then in the 2000s my wife booked a ticket to visit her family in Beijing on a Chinese airline I'd never heard of before: Hainan. It puzzled me at the time that an apparently brand new Chinese airline could appear that wasn't part of the original China family of airlines. Of course as a whole lot of financial constructs are busy unraveling in China, this story of HNA Group birth and collapse now makes a lot of sense.
It really is kind of shocking to me just how much growth out of China wound up being a huge bubble. It was always obvious that a worryingly large portion of it was, but the scope has been _staggering._ It's like Chinese companies looked at the worst excesses of American banks and went all-in on the exact same strategies, dialing them up to eleven.
They are not even backed by the Bank of China, are they? Or even ICBC... Right ? So how come, these individuals go above the national banks.. and the central banks... to borrow this way ? And do a "side way move" like that ? PRC should not have joined the WTO at all... and what is that World Bank individual doing ? They are controlling agriculture.. right ? What has HNA got to do with agriculture ? And wasn't HNA also involved in some kind of weird entertainment sector as well ? Does anybody DO any actual accountancy any more ?!!?! Chi sin !!!
1. Have a lot of connections 2. Get your connections to lend you a lot of money 3. Use the lend money to buy other businesses and stock 4. Put family members and you with insane salaries in top positions 5. Bankrupt the company because of the high leverage.
Hi Jon! Not sure if this is the best way to reach out to you, you have a business email on your channel but this is not business related. I love your videos but I usually listen to them on Google podcasts. I see you upload less frequently on Google podcasts and Spotify and there are quite a few videos that are currently only uploaded on RU-vid. I was just wondering if you aim to upload audio versions of every video or if only a selection of your videos get the podcast treatment? Thank-you
In China, EVERY transaction is an opportunity for kickbacks. From the janitor who will skim dollars, to the managers who will take thousands to the higher ups who will take millions.
Frankly also shown all those "genius" Western investment firms, blindly going along with a business plan they clearly knew nothing about (or if they did know, thought they could outsmart or profit of). I suppose it did work for some, but there's always somebody who is ultimately left with just the debt ...
that's what _finance_ is about. getting out before the fall and leaving the -retards- plebs investors to sink with the ship while still fleecing them... 😑
One detail I noticed was the Ingram Micro 1% profit margin. Electronics distribution is in some ways like selling fruit or vegetables. Speed and inventory control are all-important. Just like an over-ripe banana has no sale value, the previous model of consumer electronic hardware can hardly be sold. Generally Ingram Micro is the middleman selling other company's products to resellers. Transactions are is done in volume and decisions depend on price and availability. If I was a businessman flying from Southern China to Beijing there are few choices and I am not going to quibble about a 20% difference in price. But if was running a chain of electronics stores then a 5% higher wholesale price might be enough to put me out of business.
4:08 I'm pretty sure using that image isn't intentional. The text is wrong with the character 南 missing the component ¥ which looks like the symbol for the RMB currency. I think its suppose to be a jab that Hainan has no money.
Just one question, how did no one thought about shorting the stocks of such a badly run company!?? Why did rating agencies saw nothing wrong when such senseless purchases were being made? Where were the Hindenburg's and the Burrys?
Astounding! I have never heard such a story of business history. I can't think of anything close to this level of complexity and speed. It really looks like China's best attempt at a global supercorporation. Audatious, but at some point you have to actually make profit to make it work.
The plandemic sealed their fate😅😂 who knows they might have pulled off the most daring and outrageous global businesses coup of the decade😅😂😂. Overleveraging is man's over ambitious blind spot apart coupled with the dodgy business sharp practices
A very interesting post thanks Asianometry. It was surprising to hear that Hainan were able to mortgage their planes twice, if they could do that then why not go for a 3rd or even 4th time?
I love your straightforward and concise yet simplistic approach to explaining some really intricate things. Definitely helps me understand things on other channels I wouldn't. Great work 👍
A very impressive and detailed corporate report. You guys should be teaching in MBA in Harvard or work Due Diligence for the big banks. I'm impressed beyond. I'm going to require my students to follow your reports and test them on how much they could understand it. You just won a new tribe.
Just flew hainan airlines round trip between Beijing and haikou a week ago, with no knowledge of HNA’s history, I felt that it was a great experience with good service
Jon, do you sometimes feel like we live in a world populated by houses of cards? In Oklahoma where I live Chesapeake Corp. was notorious for playing shell games with its assets. If only we could cut through all that nonsense and grift and actually focus on slow growth.
It's what the universe wants, actually...no one tells you the truth but surely I can't be the only one who knows: Lying and cheating is what makes people smarter and arter because predators always have to be smarter than the prey...and so am intellectual arms race that over time leads to more intelligent groups overall. I don't like it but this is what the universe wants for some reason and we who complain about it are just losers and idiots, to be honest!
I lived in China from 2011 to 2019 in several Pacific rim cities. I was amazed at the speed of development of China and made many friends there. Overall China is a great country but to discover how China works compared to western cultures would be an understatement. I saw the complexity of Chinese culture as over whelming since historically its cultural development is several thousand years old, meaning their way of doing things is ingrained into their DNA....something that westerners may misinterpret by a wide margin. I often questioned and was often puzzled by the speed of change and development....changes that would take place right before my eyes every single day...changes that would leave me scratching my head as to how they were happening.
I visited China twice from the UK in 2017 and 2019 and I was puzzled and dazed by the dizzy exponential growth of their economy. Now I understand it was just a leverage house of cards waiting to collapse from an epic debt bubble of the century 😅😅😂😂
Too many high level chiefs and no Indians. That describes them the best. And now. They are training backwardly highly skilled individuals for very low pay. What do you suppose will happen ? Social unrest and mortgage defaults are happening. Fake coins to move money around is created. Even at this stage.. they refuse to reform their society... It's too late now.
One thing to mention is that for all its failings, at least the airline has offered excellent service, far exceeding anything from China Eastern or Air China...
How can you even run a company that complex? With so many parts and legal structure would you even have enough hours in the day to draw an org chart from memo?
Around that Era, most commercial pilots were ex fighter pilots with limited English skills. Some planes had third young pilots who can communicate in English with the air traffic controlers.
how the fuck do you morgage your future revenue lol. Maybe its a cash flow loans? - a term loan that doesn't require personal assets as collateral and is base on past and forecasted cash flow?
Quite good! Opacity + complexity + incredible leverage + fraud + Black Swan = party's over... Subcribed. First time viewer... SoCalFreddy (Enlightening... cautious tale when investing in other countries, especially this one)
@0:17 I was surprised to see Hahn on your channel! I was stationed there in the mid-1980s. If you look into the middle distance you can see the 100m microwave tower, where I saw a German pilot do a loop around it in a Tornado (he was too close to the ground, unauthorized of course)
Wow! Great job explaining what unfortunately isn't unique. I had reason to look up the "South Sea Bubble" of 1720 recently. The similarities are striking. But this is on a scale several magnitudes greater. Sad that it can still happen. Thanks!
In relative terms, the South Sea Bubble was way larger in magnitude. It peaked at several times the entire UK economy - that’d be like a $50t Chinese conglomerate collapsing.
Another classic case of an over leveraged conglomerate that flew too close to the sun ☀️. The end result? A cataclysmic implosion of financial losses. I hope SoftBank Group led by Masayoshi Son is learning from this epic business collapse.😅😂
Why does the Chinese government pull the rug out from under these companies? Don't they benefit from Chinese companies buying all these overseas assets using Monopoly money?
I have once visited a small port on the far western side of Hainan island back year 2009 for business trip. Unlike major cities like Haikou and Sanya, as I recalled during the time, the major transporting vehicles on the Island are bicycles, and mini buses only use between remote villages.
lol....i lived there long time before covid and i can assure you its full of motorways that cross the island - all those are full of cars. In cities they do have tons of eBikes/motorbikes but theres plenty of cars. Also the island has a Hi-speed train going along the coast in a big circle connecting the cities on the beach. Very pretty island.
Can someone tell me what's going on with China's semiconductor industry? Have they already lost the chip war, because there are no new developments and the US sanctions are piling up. Has China already lost? Has the US already won?
@@melvinch Yeah, many people say that, but I'm hesitant to just assume that China's done and there's nothing they can do about it. That attitude is usually adopted by people who are just anti-China, but EVERYONE who says that genuinely believes that they are right. After, they usually say "because they are right" 😂😂
These things take time to untangle. Maybe China will get back enough competent scientist and engineers working overseas back to China that they can build a high end chip…or maybe the global and international system that currently leads high end chip keeps outpacing any one nation and keeps its dominance. Most likely the global and international team will win it since chip design and manufacturing are one of the pillar of humanity that requires a God like level of cooperation, competence and intelligence to even eek out any progress.
@@J_X999ah, the viewpoint comes from people who work in the industry and have strong insight into what it takes to make a microchip. These are people with highly realistic expectation on chip progression and can’t afford to be wrong about their assumptions. It takes a global effort to even manufacture a high end semiconductor today, and no nation has a monopoly on the system and process that is required to design the chip. That’s why many believe China, on its own, cannot compete in the high end chip market. If you have any evidence that China can competently design and manufacture a high end microchip that is comparable to the international chips, I’m all ears. If you can explain which Chinese company is designing, and/or producing extreme ultraviolet lithographic machines comparable to ASML, Intel, apple, AMD, NVDA,Google, Japan, and TSMC, I’m all ears.
@@henrytep8884 That's the thing, I'm hesitant to believe that China has already lost, yet I am aware of the huge tech gap between the west and China. China hasn't reacted yet to the US chip sanctions and I'm not surprised. It will take time for the Chinese to plan their response. Recent reports come out that Chinese scientists and the CCP have planned out their long term technology strategy, however like all communist dictatorships, I wouldn't expect the plan to be released in full detail. When Sputnik was first launched, the US public is completely demoralised and it was almost certain that the USSR would have dominance in space. A decade later Neil lands on the moon. Just shows how things can change even if it doesn't seem like it.
Greed is ambivalent of age. A child will climb over other children with no consideration to get the sweets. An adult will climb over other adults with no consideration to get the money. Same story, different characters, forever.
HNA: all your base are belong to us Great presentation👍🏻👍🏻 Hong Kong airlines is infamous in the aviation enthusiast circles for not washing their jets (externally)
