The Old System Is Being Overturned
A report from Want China Times. “Several development projects in Shanghai, Hangzhou, and Suzhou, have come to a halt, due to a disruption in funding for developers. Construction works for the Yuehe International Square project in the Cao’an business circle of Shanghai’s Jiading district, for example, have stopped over debt disputes, as the developer has used up funds, and a local court has seized the property. Similar cases have occurred in other municipalities. The disruption to developments has affected a number of property trust funds, as subscribers had difficulty redeeming their beneficiary certificates following their maturity.”
“A series of lawsuits between trust firms and property firms have broken out, as developers continue to have difficulty selling or leasing their properties amid the sluggish market and cannot secure fresh funds from banks, the capital market, or from overseas markets. In the first quarter, the average debt/assets ratio of the 23 realty firms listed on the A-share market hit 77%, a record high, according to Centaline Group. Yang Hongxu, VP of E-House China’s Research and Development Institute, said that the situation will be exacerbated in the third quarter, when large amounts of credit loans and property trust funds will mature.”
South China Morning Post. “Mainland loan guarantors have found themselves ensnared in the woes of the underground banking sector following a fresh wave of bankruptcies around the country. Creaking under the weight of bad debts, hundreds of guarantee groups would be unable to bear even more, although their services are critical for the economic system and the millions of small firms that provide the majority of the mainland’s jobs.’
“Rampant loan-shark schemes in Wenzhou resulted in the collapse of the city’s economy, with dozens of underground banking operators and investors either committing suicide or fleeing the country. ‘It is by all means a risky business,’ said Wang Xiao, a Zhejiang entrepreneur who invests in a loan guarantee business. ‘An increasing number of loan defaults will soon force us to close down the business.’”
From Bloomberg. “Chinese developers, hit by tighter liquidity and a widespread anti-graft campaign, are delaying paying fees to realtors who help them sell new projects, according to the nation’s biggest real estate brokerage. Project launches are also being delayed as developers can no longer ‘offer advantages’ to officials in order to speed up pre-sale approvals amid a fledging crackdown on corruption, said Centaline Group founder Shih Wing Ching. The old system of doing business is being overturned, he said.”
“‘Aside from disruption to the developers’ liquidity, our customer base is also affected by the anti-corruption drive,’ he said. ‘In the past, officials and their relatives made up between one-fourth and one-third of buyers.’”
“Excessive profits can be earned through land speculation that are even higher than those stemming from housing speculation and many local government officials are overfeeding the itch. Some local governments have been able to generate profits of as much as 20x in some cases, according to the Beijing-based China Times.”
“Developer Gou Jian said he had participated in the construction of an industrial park in Foshan. An investment firm with a government background had acquired thousands of acres of land from farmers at a price of 30 yuan (US$4.87) per acre. The city government later acquired the land from the investment firm for the construction of an industrial park. In 2000, land prices in the area surged to 2,000 yuan (US$322) per acre.”
“‘Speculating in land sales is a highly profitable business, but government officials cannot openly intervene in the deals so some local officials hide their identities for such business,’ a small-scale housing developer from Guangzhou stated on the condition of anonymity.”
From NTD TV. “As the richest Chinese business tycoon for 16 consecutive years, Li Ka-shing has sold his shopping plaza in the Guangzhou Metropolitan Plaza, the Credit Agricole in Shanghai and the International Financial Center in Nanjing. They were priced 35 percent lower than last August’s market price. His son Richard Li also sold his Beijing shopping mall. It seems that the Li family has no longer owns large-scale real estate projects in China.”
“Former Associate Professor of Beijing Capital Normal University Li Yuanhua: ‘He noticed the many impoverished people in Chinese society, and he sees them in a lot of pain…Because he has dealt with Chinese government officials at various levels in Chinese society, he knows that Chinese society is currently very corrupt. He has also noticed that China’s economy is on the brink of collapse. In particular, he has foreseen the risks in real estate and other various businesses he invested in.’”
From Trading Floor. “The corruption crackdown on China’s state-owned enterprises is officially billed as part of a drive to end waste and inefficiency in the public sector. But what the party really wants delivered is positive PR to turn round the public perception of a sector seen as too big to fail and too corrupt to save. The anti-corruption campaign has spawned a new campaign as Beijing renews efforts to eliminate so-called ‘naked officials.’ These are government officials and state company executives whose families live abroad or have foreign citizenship. Beijing frowns on such behaviour – the reasoning is that only those with something to hide would send their families abroad.”
“The southern province of Guangdong has recently uncovered 866 ‘naked officials.’ These officials have variously been demoted or told to retire or resigned. Another 200 plus officials moved their families back from overseas. And this is data for just one province.”
“Will the campaign succeed in reducing the number of ‘naked officials’ nationwide? The number of EB-5 visas issued by the United States under its investment programme provides a proxy measure that is publicly accessible. Applications from China so far this year are up 50 percent. It would be interesting to see how the numbers stack up by October at the end of the programme’s quota year.”
Hey, Albuquerque Dan, are you out there? If so then you should pay particular attention to what’s being said in the NTD TV article.
Here, in case you need a bit of help, I’ll boil it down to the essence for you:
“As the richest Chinese business tycoon for 16 consecutive years …
(this guy is rich and he’s 85 years ago so he’s been around the block a few times)
… he knows that Chinese society is currently very corrupt. He has also noticed that China’s economy is on the brink of collapse.”
That last sentence, the one that says “He has also noticed that China’s economy is on the brink of collapse” (which is almost said in passing, as in “By the way …) should give you pause.
But, then again, maybe it won’t.
“85 years ago” = “85 years old”
http://www.chinaeconomicreview.com/growth-stabilized-q2-li
It would mean more if it was from the person himself instead of a college professor’s take. I have heard his son speak and he did not describe China as being on the verge of collapse only that real estate was a better value outside of China so the company was investing outside of China.
(this guy is rich and he’s 85 years ago so he’s been around the block a few times)
And as my post said with the link he is not the one that made the comment that the economy was about to collapse. It is a college professor that is attributing that view to him. I saw his son on Bloomberg or CNBC a few months ago and he stated that in the short term his company preferred real estate outside of China now but in the five to ten year term it preferred to buy real estate in China. He is expecting, correctly, a correction not a collapse.
They all expect a correction…..right up until it collapses, sometimes for even for a while afterward!
Sounds like you in California.
I forecasted a collapse in 2006 & 2007….and that is what happened.
Actually, it was not I, it was a compilation of multiple sources, including this blog and other data sources which lead me in that direction. That is why I continue to support this blog. I enjoy it here.
You forecasted it eh J._Fraud? LOLZ
By golly I got you pegged correctly. You couldn’t tell the truth unless someone tells it for you.
Check it out HA. You were not even around back then. It was a much nicer place to hang out.
Comment by Inspired
2007-05-09 22:11:42
Good luck Jingle.
Signs of bottom. Check
I knew things were headed into the crapper back in 2007 when the average HBB post became much more pessimistic than Professor Bear’s own predictions.
Nobody around to call you out on your pattern of misrepresentations John_Fraud.
“Li Ka-shing is worried about the continued disparity of global wealth, especially in China.”
“He is worried about China’s lack of arable land and safe drinking water.”
“he is also worried… people do not tell the truth to each other.”
Smart guy. Where in CA do you think he is planning to GTFO to?
“He has also noticed that China’s economy is on the brink of collapse.”
It is cruel for you to harsh on ABDan’s mellow that way.
From the link thatis about to post Tuesday, July 8:
Chinese Premier Li Keqiang said on Monday that economic growth had increased in the second quarter of the year, but that further support measures will still be necessary to steady the economy, Reuters reported. His remarks may boost market confidence ahead of China’s second-quarter economic report due July 16. Analysts polled by Reuters expect China’s growth for the April-June period to have steadied at 7.4%. To lift China’s flagging economic growth, which hit an 18-month low of 7.4% in the first quarter of 2014, authorities have cut taxes, ordered regional governments to increase spending and reduced reserve requirements for banks.
Chanos and Whitney were both right-just ahead of their time
BTW your county is spending the “gains” from housing appreciation mucho fast
Someone actually believes the economic statistics that Chinese officials pull out of their butts?
Sorry but it does not appear that China manipulates its numbers much more than the US does:
http://www.businessinsider.com/world-bank-sorry-chinese-statistics-are-not-manipulated-2010-3
Someone actually believes a Chinese official who used to work at the world bank?
The Chinese numbers deviate less from private estimates than the U.S. numbers do. Thus, I find them at least as reliable.
ABQDan — just how much skin do you have in play over in China to compel you to consistently take the optimistic side of every discussion regarding their future outlook?
That’s like saying democrats aren’t much worse than republicans.
Perhaps but what I see is the banksters and their press trying to shift the focus from the collapsing U.S. economy to China. They see everyday the Yuan displacing the dollar as a reserve currency and want to slow down the process as much as possible and claiming that China is about to collapse due to a housing bubble bursting helps that agenda. However, it ignores that the Chinese government is actually trying to deflate the bubble since it does not need housing bubbles to grow the GDP unlike the U.S. where that is about all we have.
In some ways I really believe this board argues against itself. I think that this board believes that housing bubbles are bad and the economy would be on much stronger footing absent a housing bubble. Moreover, it believes that many would benefit from cheaper prices. The Chinese government appears to think the same way and is actively trying to deflate the bubble but this board seems to argue that the deflating will doom China. The board with the belief seems to support the banksters’ belief that the government cannot allow housing prices to fall since this is bad for the economy. I think that is BS, and I think that the deflating of the Chinese housing bubble will actually help the Chinese economy and their press has people like me.
From a May China Economic Review Article:
If prices were to continue to drop, if bigger developers went under and China’s property sector collapsed, this isn’t necessarily the doomsday scenario many have feared, according to the independent analyst Andy Xie.
Economists worry that a stall in property investment in China would ripple through the economy and leave millions unemployed as companies that cater to the industry feel the impact. Households would also curb their expenditures. Yet, the meteoric rise in prices during the last decade didn’t encourage Chinese homeowners to open up their wallets. Xie says. Why then, he asks, would a collapse cause a great contraction in consumer spending?
“China’s middle class is just coming out. College grads with five years experience and a relatively high salary still can’t afford property,” Xie said. Outrageously high prices have put normal Chinese under great pressure and have actually hurt consumption; rock-bottom prices caused by a housing collapse would stimulate buying by freeing up more of people’s incomes.
An implosion isn’t the preferable form of correction in the Chinese housing market. But one way or another, prices must come down.
‘The Chinese government appears to think the same way’
Except that they didn’t. I had a post in spring 2005, something along the lines of ‘China pops bubble commie style’. Boy they were going to tough! Yet when it really started going down, they printed up close to $20 trillion and went wild.
Nowhere is the real estate bubble more intertwined with over-all finances than China. Nowhere is there more corruption in the government related to real estate. The one Q&A I posted mentioned the “real danger”. As usual, they have it wrong. The real danger was letting prices go nuts in the first place. What we have now is the problem baked in the cake. It’s just a matter of how it plays out.
Maybe they have learned since 2005. I agree that after 2008 they did prop up housing to maintain ten per cent growth. However, they seem to be willing to accept slightly above 7% growth to deflate the bubble. But we will see if they maintain their resolve.
“However, they seem to be willing to accept slightly above 7% growth to deflate the bubble.”
You persistently miss the problem of massive overbuilding of their housing stock, coupled with an economy that is dependent on continued addition of empty cities to their overbuilt real estate inventory.
This will end badly, and only a blind man could miss it.
http://www.zerohedge.com/news/2014-07-08/china-prepares-boost-economy-also-revising-its-gdp-definition
Excerpt from your link, so they are going to use are accounting method and that makes them more likely than the U.S. to collapse”
China’s proposed revision to GDP accounting approach mainly reflects the updated international guidelines for national economic account in the 2008 UN System of National Accounts (SNA). A number of countries such as the US, Australia, Canada and Korea have already implemented the changes. In particular, the NBS is planning to make the following changes:
our accounting
“To lift China’s flagging economic growth, which hit an 18-month low of 7.4% in the first quarter of 2014, authorities have cut taxes, ordered regional governments to increase spending and reduced reserve requirements for banks.”
Which means they intend to borrow and spend their way into prosperity.
With a national debt of 15% of GDP compared to about 100% for the U.S., they have some room to borrow. However, their deficit this year as a percentage of their GDP is less than our deficit.
Yes, and keep using more and more of that money to invest in real estate. More concrete, more steel, more ghost cities, more economic growth! What can possibly go wrong?
That is not what the government is doing. They are actively trying to reduce housing speculation which is quite different from the U.S.
Chinese corporate profits are down since worker’s wages are going up 10% per year. Al Jazeera this weekend has a series calls China Rising and I believe some of the episodes will be replayed this week. It was fair and balanced and did discuss issues such as pollution. But just looking at the roads, businesses and houses, you see prosperity and if anything you question whether the official numbers actually underestimate the wealth that has been produced. The young people are bright and driven to succeed, it is a country with a future and will succeed even more if the government gets further out of the way.
‘The housing market has been bleak across China. The overseas edition of party mouthpiece People’s Daily published an article on July 2, saying that the bleak housing market has very limited impact on China’s economy. It says home prices have gotten into the phase of adjustment, which is a rational regression after 10 years of high growth, and the changes in the housing market will help transform China’s economic structure to one of high-quality growth.’
‘Mr. Deng, Chinese economist: “The party is making an empty show of strength and trying to confuse the public. Now we clearly see that if China’s economy falls apart, the hardest hit victims won’t be developers or ordinary people. If China’s economy collapses, it will bring about social chaos, which the party is unwilling to see.”
If China’s economy collapses, it will bring about social chaos, which the party is unwilling to see.”
I agree that social chaos will break out in China if the economy collapses. I do not agree that the “party” is unwilling to “see”, i.e., consider this possibility. The “party” has proven itself more than willing to kill or neutralize hundreds of thousands of Chinese to maintain order and to stay in power. That country has been around the block quite a few times in the last several millennia, and chaos has happened there more than once.
Many countries seem to be in a race to see who hits bottom first.
‘Malaysia’s steady pace of economic growth may unravel if China, the world’s second-biggest economy, slows faster than expected , a report in the Financial Times warned. Citing Moody’s Investor Service, the paper said the entire Southeast Asian region, including Malaysia, was vulnerable to a sharp economic slowdown in China.’
‘The situation looks even starker if Malaysia is singled out. Data from the Statistics Department shows that China is Malaysia’s biggest trading partner. Total trade between the countries reached just over RM200 billion in 2013, a 12.5 per cent increase from the previous year.’
‘China’s breakneck economic growth is already slowing. In the first quarter of 2014, growth was the slowest in 18 months. At 85 per cent of the entire economy in 2013, Malaysia’s household debt burden is among the largest in Asia. This large burden could be a telling factor if the economy slows and interest rates rise, putting an end to the days of free spending.’
‘Some may start to default on loan repayments but many more will have to start watching their spending habits — a factor that will weigh on domestic demand.’
‘A slowdown in China’s housing market has forced a Taranaki logging contractor to slash his crew’s working hours. Graeme Sole, of New Plymouth logging business G J Sole, yesterday told about 60 employees their working week would be cut down to four days.’
“We aren’t laying anyone off. We are just going to cut them back a little bit. There has definitely been a slowdown in demand for logs. We are only doing half of what we were doing before.”
‘The drop in demand was the result of a slowdown in China’s housing market which had reportedly made banks less willing to lend money for development or buying houses, and that meant there had been a dip in usage of the logs.’
‘Log inventories at Chinese ports had doubled in the past six months and it was believed there was as much as two-and-a-half months supply just waiting to be used. This oversupply had seen export log prices drop by a third in the past three months.’
I just added a log and created a realtor at the same time. Oversharing?
China has almost as many fortune 500 companies as the U.S. and will soon pass the U.S. if the trend continues:
Shanghai Daily)
Updated: 2014-07-08 09:41
Counter:
Sinopec Group is the first Chinese company to enter the top three of Fortune Global 500 list which also hosts a record 100 Chinese companies.
They include 91 companies based on China’s mainland, five in Taiwan, and four in Hong Kong.
China cemented its place as the world’s second largest home for powerhouse companies as the number of Chinese entities rose by five from last year. The number of US companies fell to 128 from 132, the magazine said yesterday.
Companies are ranked by total revenues in their respective fiscal years ended on or before March 31, 2014.
Beijing-based Sinopec Group, with 2013 revenue at US$457.2 billion, moved up a rank to replace Exxon Mobil as the world’s third largest company. Sinopec was followed by Beijing-based China National Petroleum that also beat Exxon Mobil with a US$432 billion revenue last year.
Wal-Mart toppled Royal Dutch Shell to grab the top spot as its sales approached half-a-trillion dollars. Royal Dutch Shell fell out of the top spot, where it reigned for two years, after its sales dropped 4.6 percent.
Better economic conditions last year have lifted companies’ overall performance, though Chinese firms were weaker in profitability.
The combined sales of all 500 largest companies reached US$31 trillion last year, up 2.5 percent from 2012, while their combined profit surged 27 percent to US$1.96 trillion, the magazine said.
But companies on China’s mainland and Hong Kong underperformed in terms of profitability as the average profit for the 95 firms was US$3.22 billion, US$700 million short of the world’s average and slightly more than half of the US average.
The 128 US firms on the list generated 40 percent of the total profit in 2013.
“The number of Chinese companies in Global 500 list has steadily climbed, and the companies’ average income and assets are edging closer with the 500,” Fortune China said on its website. “But their corporate profit and profit per capita - key indicators of competitiveness - still lagged behind.”
Eight Shanghai-based companies entered the list. SAIC Motor rose 18 places to No. 85, and China United Network Communications climbed to 210 from 258.
State-owned China Development Bank, at No. 122, is the highest among seven Chinese companies debuting on the Global 500 list this year.
I wouldn’t be too concerned about this
China’s Population Poised to Crash in Perfect Demographic Storm
Read more at http://globaleconomicanalysis.blogspot.com/2012/05/chinas-population-poised-to-crash-in.html#jiGr6FsMmJhSOVtU.99
“China‘s total working age population is set to fall between 2010 and 2030. (By Census Bureau projections, China‘s working age manpower will be peaking in 2016—just 5 years from now; by 2030, it stands to be shrinking by almost 1% a year).
Furthermore, as noted above, China‘s manpower pool will be graying over these years; in fact, by 2030, there would be more than four older (50-64 years) prospective workers for every three younger counterparts (15-29 years)—a complete inversion of the current ratio.19 With a smaller and much greyer Chinese workforce on the horizon, sustaining the growth rates of the recent past would be a truly counterintuitive proposition.
Read more at “
So now having a population under control is a bad thing? I do not believe this either, this also is a bill of goods we have been sold so we keep our borders open. The Chinese are enjoying a rising standard of living due to controlling its population including not allowing too much immigration. I wish we had its problem rather the problem of assimilating MS-13 gang members.
PS no one is saying they will maintain their present rapid growth rate, however with a declining population you do not need as high of growth rate to increase your standard of living.
Wrong: when your worker participation vs retirement rates invert, you end up with a declining standard of living.
The US is also heading toward this along with the rest of the industrialized world, but the US is just trending more slowly, so it stands to maintain its dominance on the geoeconomic/geopolitical stage by default.
It appears the US will remain “the place to be” for the next couple generations.
No you are wrong, if you have 2% growth in population and 2% growth in GDP, you have 0% growth in per capita gdp. Now, have 1% growth in population, you will have 1% growth in per capita income. If population growth was the answer Africa would be rich. We are not the place to be with a declining IQ due to the immigrants we are letting in. China is the place to be even with its declining workforce due to high productivity gains.
BTW, if you don’t create Ponzi schemes such as Social Security you do not need to import people. If the system fully funded every retiree we would not need more contributors than retirees. Of course, that would mean either we reduce benefits or we increase taxes, Obama has ignored his own commission and refuses to do either. Instead the globalists want to import more people which only makes the Ponzi scheme bigger.
How do people earning cash under the table make the Ponzi scheme bigger?
You think that all the illegals are earning cash under the table? Our government even has a program so illegals using false social security numbers can still claim benefits.
The way it works is once they get legal status and a social security number they can claim past credit for their contributions to their fake social security number they used at their job, thus they are being rewarded for an action that should get them placed in jail:
http://www.fairus.org/issue/amnesty-breaking-the-social-security-bank?A=SearchResult&SearchID=7326187&ObjectID=6034441&ObjectType=35
China only recently lifted its decades-long rule of no more than one child per couple. They see the demographic crisis coming up and are trying to push it out further.
And it appears the comment section is “stalled” again.. joy.
It seems to choke on BS posts.
Wordpress has a new algorithm that has a bull$hit detector built in.
Is that why we have not heard from Liberace or Lola?
One can only speculate. I imagine the dynamic duo is back conferring at headquarters on how to take out the hbb without exerting too much effort or getting caught doing it.
‘The exuberance in the property sector is dissipating. Some 18 months ago, even scrap metal dealers, who make a killing from the volatility in their piranha-infested world, were talking about building high-end residential dwellings that they felt brought them higher returns. Now, however, there is less talk on property development, not to mention the reduced number of new launches.’
‘The global stock markets are all at their peaks, including Malaysia, but talk to any remisier in town and they are not elated.’
‘Let’s be frank. Anyone who was expecting house prices in general to keep on rising must be living in a fantasy world. And anyone who had expected the broader stock market to keep on rising must be out of whack.’
‘Also, anyone who had expected Bank Negara and the Finance Ministry not to do anything to address the excessive risk-taking that some investors were getting used to, such as speculating in the property market, must have short memories.’
‘Now, the killer blow to the property market seems to be the hikes in the real property gains tax since 2010. The stricter lending guidelines on mortgage loans and over-building, particularly in Johor, have contributed to the falling demand.’
‘At least two research houses have downgraded the sector, particularly pointing out to the massive developments undertaken by the developers from China in Johor Baru that is causing a huge oversupply situation.’
‘Bank Negara may raise interest rates by some 25 basis points when the Monetary Policy Committee meets next week. Households with one mortgage should be able to absorb the hike, but those with two or more properties are in for some adjustments in their spending levels.’
‘A more important outcome from this painful episode would be to lower the cost of doing business in Malaysia. The private sector, especially the businessmen, are tired of the escalating cost because of corruption and rent-seekers.’
‘There must be political will to see that every ringgit saved from the tightening measures does not become an effort in vain. Only then will there be a “buying in” of the pain that the people are likely to go through.’
left out property taxes zooming
zoom zoom- gov worker pensions- free sht army etc
‘Chinese buying was up nearly 80% to $22 billion — nearly 1 in 4 dollars of all foreign purchases, according to the National Association of Realtors. Canadians are actually No. 1 in terms of total homes bought, but the Chinese buy much more expensive homes: An average price of $591,000.’
‘The Chinese also bring a lot of cash to the table: More than three-quarters of their purchases were all-cash buys. California is the biggest market for the Chinese, accounting for a third of their purchases.’
‘Why are they buying? Only 39% of Chinese buyers said they intended to use their purchases as their main home.’
‘Chinese investors are major players in the international real estate markets. The country’s outbound property investment totaled $2.1 billion in Q1 2014, according to Jones Lang LaSalle. And now there are concerns about the quality of the loans that have fed into international property markets.’
“Will China’s capital flight fuel property bubbles overseas or cause a collapse when China’s liquidity dries up?” wrote Andrew Collier, managing director, Orient Capital Research.’
‘In an email titled “Will China’s Shadow Banking Kill the International Property Market?” Collier writes that the $2.1 billion figure most likely understates true outbound Chinese property investment because it is hard to track shadow lending. “Shadow lending is about 40% of total loans so the figure for property investment could easily be double $2.1 billion — or more,” writes Collier. “More important, the funds are targeted in just a few places; just three cities, Chicago (who knew?), London and Sydney account for 50% of investment. No doubt, Los Angeles and New York will catch up soon.”
‘China saw $464 million in outbound real estate investment Q1 in 2014 into Chicago. $38 million into London, $242 million into Sydney, $150 million in Melbourne and $144 million into Los Angeles. From Collier: “Let’s say overseas property investment reaches $10 billion in a year or so due to capital flight. How much of that will be backed by bad loans? What will the default rate be? This is an important question of you are a hedge fund buying up hundreds of properties in key areas. If the wind is sucked out of the market by defaulting Chinese buyers, it will impact property values significantly.”
‘A majority of North American mortgage bankers fear another real estate bubble is forming, according to a recent survey conducted for FICO, a predictive analytics software company.’
‘The survey found that 56 percent of a pool of American and Canadian respondents directly involved in mortgage lending expressed concern that “an unsustainable real estate bubble is inflating.”
‘Andrew Jennings, chief analytics officer at FICO, said the housing market is “bifurcated” with strong price growth pushing total homeowner equity in the U.S. to its highest level since late 2007, even as 6 million people struggle with underwater loans that exceed the values of their homes by an average of 33 percent.’
“That doesn’t feel like a healthy, sustainable growth situation,” he said. “No wonder many lenders in both Canada and the U.S. are concerned about the risk in residential mortgages.”
‘Q. Do you think developers will drop prices of new homes voluntarily?’
‘A. They would like to. A lot of developers are thinking of dropping prices if they could. But the problem of being a property developer in China is that they often face a lot of resistance from existing homeowners. People who already purchased their houses don’t want to see prices drop. They ‘hijacked’ the developers and said, “You are not supposed to drop prices.” In the last four to five years, developers became too optimistic. Many of them borrowed heavily and invested heavily. They bought very large pieces of land at prices that are inflated. They are under stress and they have to sell their inventory in order to recover the money. But they can’t. Some of them are hoping that the market will recover so they can recoup.’
‘Q. It’s interesting that you mentioned this. There was a news story that said that some homeowners blocked the entrance to their gated residential area to prevent potential buyers from going in because the developer lowered prices. Do home owners have that much influence on developers?’
‘A. Yes, they do. I talked to several developers and they all face this problem. They can’t lower prices because of the pressure from homeowners. They are worried that the existing owners will cause a lot of trouble…in the form of demonstrations. Then the local government will come to the developers and say, “Don’t drop prices.” They are really faced with a lot of pressure not to deviate from the general norm. So the developers are trying to come up with a scheme like “shadow discounting”. For example, they can give away free stuff, like free interior decorations or return money to the buyers some years down the line. From their point of view, it’s in their best interest to cut prices.’
‘Q. How big is the impact of real estate on the Chinese economy?’
‘A. It is very large. It depends on how you measure it. Some people say it is some 16% to 17% of the GDP. There is another effect, which is not directly related to real estate—the wealth effect. If you count the number of houses and then multiply that by the market prices, Chinese housing market is very large. I did a simple calculation and it is like three to four times of China’s GDP. If the prices drop by 10%, that’s a huge wealth reduction. As a result, a lot of people might reduce their consumption. That’s the real danger.’
‘Q. So what’s your view on the sector for the longer term?’
‘A. For real estate companies, the next four to five years will be very tough. My personal view is that the situation of high returns on real estate investment is gone. The housing growth during 2000 to 2010 was abnormal—we ate our future lunch.’
HA- ellen pockets 15 mill on re sale
how gay is that?
She seems to have this real estate speculation game licked.
Year Over Year Housing Demand Plunging In 55 Of 58 Counties In California
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D4%26r%3D9%26el%3D0
As a realtor recently said, “why buy when you can rent for half the monthly cost?
http://www.realtytrac.com/content/news-and-opinion/best-and-worst-markets-for-rental-returns-heat-map-8023
“…what I see is the banksters and their press trying to shift the focus from the collapsing U.S. economy to China.”
Hey Van Winkle, I guess you slept through the real bankster lie, that China would save our infinite growth on a finite planet to support ever growing debt system.
It kicked the can real good though, made some real sweet bubbles while it lasted. The End.
Yes I wish we were suffering like the Chinese worker. China is kicking America’s butt with its version of Reaganomics, it is like Germany against Brazil”
http://www.china-briefing.com/news/2014/06/23/ten-provinces-release-guidelines-wage-increases-2014.html
A number of years ago, I called for lower growth for China due to it hitting a resource wall. I saw too much of its production being low value added goods consuming vast amounts of water and energy. This lower growth has occurred but now I see China producing much higher value goods and less resource intensive products and I see them maintaining relatively rapid growth. When the facts change, my opinion changes.
http://marketrealist.com/2014/04/chinas-manufacturing-wages-rise-7000-per-year-baidu-benefits/
Add to this the average manufacturing worker in China will probably see around a $1000 raise this year, many American lucky ducky’s will not see that much. So which country is about to collapse?
Those wage increases are a response to rising prices.
Or was it the rising wages resulted in increase demand that drove prices higher?
Unrest growing in magical economic miracle unicorn country:
“Strikes and worker protests gain momentum in China as economy stutters”
“The number of wage arrears cases in particular increased noticeably during the quarter, reaching 46 in June alone, as the lack of liquidity in the Chinese economy started to impact on manufacturing and construction.”
“By far the biggest and most publicised strike was the massive two-week protest at the Yue Yuen shoe factory complex in Dongguan during April. The strike was noticeable both for its sheer size – around 40,000 workers took part”
http://www.clb.org.hk/en/content/strikes-and-worker-protests-gain-momentum-china-economy-stutters
“Rampant loan-shark schemes in Wenzhou resulted in the collapse of the city’s economy, with dozens of underground banking operators and investors either committing suicide or fleeing the country. ‘It is by all means a risky business,’ said Wang Xiao, a Zhejiang entrepreneur who invests in a loan guarantee business. ‘An increasing number of loan defaults will soon force us to close down the business.’”
Huh…