2013 China problems (My feelings living in China from 2011-2013)

[walle]

My opinion today Chinese house market as similar as past United State house market before 2008, too many Chinese family owe banks' loans.

"BOOM" will lead to social issues, even not econmy problems; if not keep blowing the bubble, normal Chinese ppl also no money could afford 20,000/centiare.

US had the problem with loans granted to people who were unable to pay in the first place, then repackaged and sold as CDOs.

I don't think Chinese state banks would give out loans so easily, given the higher leverage requirement.

 

[xuxu1457]

Many people/entity keeps flipping properties in China? What is the deficit/debt/saving level? How high is the leverage?

In 2012 China's GDP 52trillion Yuan(8.3trillion $)
Government revenue in 2012 11.7trillion Yuan(1.88trillion $)
Government spending in 2012 12.57 trillion Yuan(2 trillion$)
The budget deficit 0.8trillion Yuan in 2012(12.8million $, 1.5% of GDP)
Central government debt, total: 9.12trillion Yuan(1.46trillion $)
Total local government debt: 21trillion Yuan(3.37trillion $)
Savings rate: 52%
Total bank deposits: 130trillion Yuan(21trillion $)

 

[kawaraj]

My opinion today Chinese house market as similar as past United State house market before 2008, too many Chinese family owe banks' loans.
"BOOM" will lead to social issues, even not econmy problems; if not keep blowing the bubble, normal Chinese ppl also no money could afford 20,000/centiare.
Top confidential, i also wanna the answer SIR.

I am sorry you are terribly wrong. Let me tell you something, there's nothing call Chinese bubble if you have a little understanding of the Japanese property market and the US property market.

The Japanese property market was having a bubble in early 1990s, my impression is housing prices in big cities like Beijing and Shanghai is still far from that in Tokyo in those heydays. I would say even less half of Tokyo's level. That bubble in Japan was immenent in its combination with stock market, Nikkei was more than 30000 point in 1991. And please note the Japanese banking sector was not in crash even after the bubble burst. If you have to name specific, I would say this property bubble issue is like early 1980s Japanese situation, the bubble only happens if China continue to enlarge the issue for another decades.

In the pre-2008 days, the main problem facing the US property market is the mortgage issue. People cannot afford their mortgage, and they refinance and so on, the financial market is feeding this re-mortgage and pack bad loans and layer it through offshore ventures in Caymen and Virgin Islands, etc, and sell to the next willing buyer. It's more like a pure financial issue.

If my information is not wrong, the majority part of Chinese mortgages owned by banks are OF VALUE. In other words, those house buyer's buying price was much lower than current price. If those house buyers had bought their property at 1000$ per sqm., and today the price is 3000$ per sqm, do you still insist that they cannot afford their mortgages and the bank debt is in dire strait? heavenly no.

The other reason is China is a huge country, the house price in a few megacities won't matter that much as Banks can even out those risks by absorbing mortgages in small towns.

 

[Audio]

Not totally agreeing with you.

Once again, people are fail to see how QE work.

First of all, QE is a gamble. Alright, this is one major gamble but if we do not do QE, we may as well have our economy broken.

People only see the printing money side of the QE, but they fail to see with those money being printed, they are to follow a vigorous investing portfolio with both inland and overseas investment.

The truth behind QE was when we Print the new money, we use them directly to purchase non-tangible asset (such as bond) with security. Most likely Mortgage Based bonding. What it was is to relieve the housing market and the loan status by issuing a low interest rate quantitative measure to so-called "bail out" the mortgage woe. Using the money or credit that relieved by this act to flood the local and international market with purchase, thus restarting the economy.

Think of it like a giant credit card. With low interest rate. and US is using said Credit card to pay and bail out some bad debt that are due, as long as we can recover the card debt before the bank chase us down we are still good.

Of course there is risk involve, but what else did US got to lose? And since 2010, US Economic have turned and shown some economic activities increase in the latter half of 2010. Japan has also been using the same way and they have successfully bought the deflation back from -2.0% to + 0.1%. And infact they are planning a next round of QE which is bigger and with twice the money as before

Printing money is a solution, if you know how to use them.

QE is not being used as a card to pay out some bad debt.
It's now being used not as a stop-gap measure (ie know when to use them) but as a tool to finance the bloated government apparatus and the obligations that come with Medicare, social welfare etc.... Whatever amount they miss when the Fed goes to sell bonds, they print to make up the shortfall.



Let me spell the problem out for you in a quickie.....
QE was supposed to jumpstart the stagnant economy. What is happening however is that the banks are holding onto the billions pumped into their system and not lending to SME's (small and medium enterprises) and consumers, which are the backbone of every economy.
What was supposed to happen is consumers going on shopping sprees, yet everyone is saving up seeing as how their biggest possesions (their homes) are loosing on value because of the devaluation due to printing.

The only thing that would really jumpstart the economy like QE intended would be the government sending cheques to consumers , for a few thousand, with a certain expiry date so people would not be inclined to save them. That would be printing put to good use, not filling up the bankers' coffers.

 

[cnleio]

If my information is not wrong, the majority part of Chinese mortgages owned by banks are OF VALUE. In other words, those house buyer's buying price was much lower than current price. If those house buyers had bought their property at 1000$ per sqm., and today the price is 3000$ per sqm, do you still insist that they cannot afford their mortgages and the bank debt is in dire strait? heavenly no.

The other reason is China is a huge country, the house price in a few megacities won't matter that much as Banks can even out those risks by absorbing mortgages in small towns.

Yep, u take the point~!
In China few years ago, some buyers bought the house with much lower price. But before sell it there'r no any real value, i mean it's just the price will be floating anytime not the cash, and they(many house owners including me) need other ppl to take the high house price. But the problem in China is, Is other rich ppl and young ppl stop to buy new house with high price?

No i think they will continue buy house, if they didn't have enough money they can borrow thousands of money from CCP banks and continue boot China house price much higher, at the same time other goods & food price also growing here leads to domestic purchasing power is falling and RMB money is losing its value.

Due to recent years rising prices, 90% normal Chinese ppl believe the house/apartment is the only effective way to save their money, as far as possible to borrow money and throw it into China house market, it also boot the China house price rise up like the ROCKET GO OFF.


I have been there before 2008 China stock market crash. Through 2007-2008 most Chinese normal ppl believe can easily earning money from China stock market, many of them invest money into the stock market when SSE Composite Index reach 6000 point, then "BOOM" it drop to 2000 today still around 2300 point. And China government do nothing for these poor investors let them crying, China government just try hundreds of ways to block the hot money flowed out from China, then Wen and his teams found a good way: M2 and boot China house price up.

Well major China GDP came from housing exchange with high house price, China government need to hold 8% GDP growth (coz to improve 1.3billion Chinese ppl's living conditons need it) , now 2013 1st quarter China GDP growth 7.7%.

 

[tranquilium]

M2 print money and the hot money into the market by banks' house loans, coz the government boot local house price growing and ppl need to borrow more and more money from the banks.

Did you actually read where did the stimulus go into? The stimulus went into public infrastructure, as in, schools, hospitals, high speed railways, dam and other infrastructure related projects. Why would they use it for housing loans? That creates no job and does not improve economy.

I have been there before 2008 China stock market crash. Through 2007-2008 most Chinese normal ppl believe can easily earning money from China stock market, many of them invest money into the stock market when SSE Composite Index reach 6000 point, then "BOOM" it drop to 2000 today still around 2300 point. And China government do nothing for these poor investors let them crying, China government just try hundreds of ways to block the hot money flowed out from China, then Wen and his teams found a good way: M2 and boot China house price up.

Did you actually live in China and have been to Chinese stock market? Chinese stock overheated occurred in 2006, where many wall street investor went into the market and jacked up the price. The Chinese government forcefully lowered the stock market price in 2007 to trap the hot money there. Also, this has only occurred for markets outside the A-shares, since A-share represent the core of Chinese economy and foreign traders are not allowed to enter.
Also, Chinese financial minister warned everyone prior to policy curb on stock price that you enter stocking market is risky and normal people should not do it. Basically, it is part of China-US financial war and it is not the fault of Chinese government if you can't take a hint and get caught in the cross fire.

Well major China GDP came from housing exchange with high house price, China government need to hold 8% GDP growth (coz to improve 1.3billion Chinese ppl's living conditons need it) , now 2013 1st quarter China GDP growth 7.7%.

You are kidding right? The entire Chinese third sector, which include all service industry as well as real estate only accounts for 44% of Chinese GDP. The real estate itself is also only a small percentage of the third sector. Where did "major" part come from?
You do know that the Chinese government's projected GDP growth for 2013 is 7.5% right?

 

[kawaraj]

L

Yep, u take the point~!
In China few years ago, some buyers bought the house with much lower price. But before sell it there'r no any real value, i mean it's just the price will be floating anytime not the cash, and they(many house owners including me) need other ppl to take the high house price. But the problem in China is, Is other rich ppl and young ppl stop to buy new house with high price?

No i think they will continue buy house, if they didn't have enough money they can borrow thousands of money from CCP banks and continue boot China house price much higher, at the same time other goods & food price also growing here leads to domestic purchasing power is falling and RMB money is losing its value.

Due to recent years rising prices, 90% normal Chinese ppl believe the house/apartment is the only effective way to save their money, as far as possible to borrow money and throw it into China house market, it also boot the China house price rise up like the ROCKET GO OFF.


I have been there before 2008 China stock market crash. Through 2007-2008 most Chinese normal ppl believe can easily earning money from China stock market, many of them invest money into the stock market when SSE Composite Index reach 6000 point, then "BOOM" it drop to 2000 today still around 2300 point. And China government do nothing for these poor investors let them crying, China government just try hundreds of ways to block the hot money flowed out from China, then Wen and his teams found a good way: M2 and boot China house price up.

Well major China GDP came from housing exchange with high house price, China government need to hold 8% GDP growth (coz to improve 1.3billion Chinese ppl's living conditons need it) , now 2013 1st quarter China GDP growth 7.7%.

What?? I don't understand what your are talking about, you even confused me.

Please know argument is reasoning argument on serious theories and data, not wishful writing.

 

[cnleio]

L
What?? I don't understand what your are talking about, you even confused me.
Please know argument is reasoning argument on serious theories and data, not wishful writing.

The Chinese government were blowing a big housing bubble, few years ago only few family bought house with low price and most of them usually bought many houses in their hands (usually >3 houses or more than 10 houses), then today more and more normal family and poor ppl has to borrow more money from the banks.

What i mean the China house market now become a big bubbly CASINO, few family own many houses in low price and more normal Chinese family and poor ppl just enjoy high price, more risk for China banks' house loans. The rich get more rich, the poor get more poor, at the same time China house price seems won't stop. We and our CCP government were building a big and beautiful HOUSE BOMB for our generations and our future of good life.


I had the experience and i clearly knew what the worse situation of China house bubble, i bought house there and sold house and re-bought house in China. Thanks for rapid development of China house price, my personal wealth from 2009 hundred thousand RMB grow up 2012 over one million RMB. 2013 the situation not change it's still rising. And My parents also own more than 2x houses, the most houses owning around my ppl who i knew more than ten, ususally their family own >3x houses. But i tell the truth not many Chinese normal family as similar as their rich and power.

See it's too simple, few Chinese family seized more low price house in China, other normal Chinese family just enjoy high price here. But u didn't see the Bubble coz u didn't understand most of House owners in China, indeed i believe there'r big Bubble here (few family owning more house, and many poor family can't afford the high price.)

The rich get more rich and the poor get more poor, the CCP banks increase house loans on ur back. 2013 China house market get more SICK ~!

 

[gpit]

There are several reasons for allegedly high house price in China.

In fact, high prices more exist in developed cities (Beijing, Shanghai, Shenzhen, etc), as China is developed so unevenly. Some Chinese reasonably say that China is composed of 4 worlds.

Second, corrupted officials definitely contribute to the high rise price as they hoard units of houses for later profit taking.

Thirdly, in a free market, demand/supply determines the price:

China Home Ownership Reaches 90% - Economic Observer Online - In-depth and Independent

90% is many percentages high than US house ownership.

I'm not sure how accurate the estimation is, but definitely most farmers (almost 100%) have their house (may not be in decent shape in the western China), and all people I met in China (a few hundred) have their own home. I saw for instance in Western poor area fo China, some families dig a hole on hill and use some material to serve as a door. Does that considered as a house?

Many foreign companies also long China real estate market. They purchased a lot of spaces.

Finally, when people talk about China house price, they mostly focus on largest 60-70 cities, whereas China has almost 200 cities with more than 1 million residents. Don’t forget China has about 1000 cities in total.

Every country has its own problem. Not a surprise.

 

[dreamer53320]

The Chinese government were blowing a big housing bubble, few years ago only few family bought house with low price and most of them usually bought many houses in their hands (usually >3 houses or more than 10 houses), then today more and more normal family and poor ppl has to borrow more money from the banks.

What i mean the China house market now become a big bubbly CASINO, few family own many houses in low price and more normal Chinese family and poor ppl just enjoy high price, more risk for China banks' house loans. The rich get more rich, the poor get more poor, at the same time China house price seems won't stop. We and our CCP government were building a big and beautiful HOUSE BOMB for our generations and our future of good life.


I had the experience and i clearly knew what the worse situation of China house bubble, i bought house there and sold house and re-bought house in China. Thanks for rapid development of China house price, my personal wealth from 2009 hundred thousand RMB grow up 2012 over one million RMB. 2013 the situation not change it's still rising. And My parents also own more than 2x houses, the most houses owning around my ppl who i knew more than ten, ususally their family own >3x houses. But i tell the truth not many Chinese normal family as similar as their rich and power.

See it's too simple, few Chinese family seized more low price house in China, other normal Chinese family just enjoy high price here. But u didn't see the Bubble coz u didn't understand most of House owners in China, indeed i believe there'r big Bubble here (few family owning more house, and many poor family can't afford the high price.)

The rich get more rich and the poor get more poor, the CCP banks increase house loans on ur back. 2013 China house market get more SICK ~!

wow, you are a bit disgusting in a sense that you admitted yourself that you were also one of the people that participating in this housing bubble, squeezing out profit as you said. And on the other hand you are criticizing the government of not doing enough to tame the bubble? I wonder what will happen if the government hit hard at the housing market, I　will bet you'll be crying about the government's intervention then???

And as many analysis already mentioned, the leverage in China's housing market is extremely low compared to say the US, down payment is very high compared to the US. If there's no leverage, there's no bubble.

High price doesn't necessarily indicate bubble, it can means there's just not enough supply to meet the demand. Even if it's like you said every person around you have like 3 houses, if those houses are not bought with borrowed money, then there won't be a domino effect when the price deflates.

 

[Audio]

@dreamer53320 @gpit

issue here isn't percentage of apartments owned, but overcapacity in new units built. Built on generous loans (read stimulus, read printing) from the government. According to speculation, 64 million apartments.

How many flats in China are sitting empty? The media recently floated a story – denied by power companies – that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period.

Fear Empty Flats in China's Property Bubble - Caixin Online

 

[shuttler]

@dreamer53320 @gpit

issue here isn't percentage of apartments owned, but overcapacity in new units built. Built on generous loans (read stimulus, read printing) from the government. According to speculation, 64 million apartments.

Fear Empty Flats in China's Property Bubble - Caixin Online

64 million empty flats @ a generous provision of FMV average of ￥3 million each = ￥192 trillion
after 50% ~60% down say 50% leaving a loan exposure of ￥96 trillion

How to finance that balance?

An average income of Chinese household with 2 above （+16%）average bread earners is about￥100K （per capita - imf = ￥85,000 pa for 2 people）

Can they afford to buy a ￥1.5 million flat？

It depends on the downpayment and monthly instalments

Assuming the down payments are paid, For a 7% pa mortage interest I think they can arrange a housing loan with monthy fixed P+I payment for 20 years @ monthly household outlay of about
￥5~6K per month or ￥60K~72K pa They will have a disposable income of about 30~40% per month.

64 million flats for a family of 5 = 320 million folks

we have this target:

China’s middle class to reach 48% in 10 years

Is that "bubble" a big worry? I dont think so!

 

[jhungary]

QE is not being used as a card to pay out some bad debt.
It's now being used not as a stop-gap measure (ie know when to use them) but as a tool to finance the bloated government apparatus and the obligations that come with Medicare, social welfare etc.... Whatever amount they miss when the Fed goes to sell bonds, they print to make up the shortfall.

Let me spell the problem out for you in a quickie.....
QE was supposed to jumpstart the stagnant economy. What is happening however is that the banks are holding onto the billions pumped into their system and not lending to SME's (small and medium enterprises) and consumers, which are the backbone of every economy.
What was supposed to happen is consumers going on shopping sprees, yet everyone is saving up seeing as how their biggest possesions (their homes) are loosing on value because of the devaluation due to printing.

The only thing that would really jumpstart the economy like QE intended would be the government sending cheques to consumers , for a few thousand, with a certain expiry date so people would not be inclined to save them. That would be printing put to good use, not filling up the bankers' coffers.

well, I think we are just looking at things differently.

Have some faith with the US, even the Japanese did it, it would be easy for us.

 

[kawaraj]

The Chinese government were blowing a big housing bubble, few years ago only few family bought house with low price and most of them usually bought many houses in their hands (usually >3 houses or more than 10 houses), then today more and more normal family and poor ppl has to borrow more money from the banks.

What i mean the China house market now become a big bubbly CASINO, few family own many houses in low price and more normal Chinese family and poor ppl just enjoy high price, more risk for China banks' house loans. The rich get more rich, the poor get more poor, at the same time China house price seems won't stop. We and our CCP government were building a big and beautiful HOUSE BOMB for our generations and our future of good life.


I had the experience and i clearly knew what the worse situation of China house bubble, i bought house there and sold house and re-bought house in China. Thanks for rapid development of China house price, my personal wealth from 2009 hundred thousand RMB grow up 2012 over one million RMB. 2013 the situation not change it's still rising. And My parents also own more than 2x houses, the most houses owning around my ppl who i knew more than ten, ususally their family own >3x houses. But i tell the truth not many Chinese normal family as similar as their rich and power.

See it's too simple, few Chinese family seized more low price house in China, other normal Chinese family just enjoy high price here. But u didn't see the Bubble coz u didn't understand most of House owners in China, indeed i believe there'r big Bubble here (few family owning more house, and many poor family can't afford the high price.)

The rich get more rich and the poor get more poor, the CCP banks increase house loans on ur back. 2013 China house market get more SICK ~!

I see your point.

This is not called Bubble as it appears in all of the emerging world, Russia, India, Brazil, Mexico, and etc. Even in Japan majority of the people are out of reach of Tokyo and Osaka's high pitched property prices.

This is why we have so many socialists today, there's this uneven world we have.

 

[cnleio]

wow, you are a bit disgusting in a sense that you admitted yourself that you were also one of the people that participating in this housing bubble, squeezing out profit as you said. And on the other hand you are criticizing the government of not doing enough to tame the bubble? I wonder what will happen if the government hit hard at the housing market, I　will bet you'll be crying about the government's intervention then???

1st my family didn't owe bank loans, 2nd i still have some cash in my hands.
Whatever future house price will keep growing or drop down, it won't hit me. Seriously i also hope the government could hit it hard coz im working for my 2nd house (my 1st house was the reward by bought-sold-rebought during 2009-2012 but the crazy days and rapid growth never came back. I didn't pay for it 80% from original price differences.)

The only way can hit Chinese owners who have >3 houses is the housing property tax, but trust me u never know how many powerful Chinese family own several whole buildings or more than 10 houses. The housing property tax NO WAY in China.