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China Between Rock And Hard [Place/Case] After Public Anger Mounts Over House Unaffordability, Real Estate Bubble
Even as China proves to the world it has perfected Greenspan's repertoire for blowing asset bubbles in any and every asset class, the fact that China is still a communist country and thus has to carefully respond to public pressure (ironically, more carefully than "capitalist" America) could put a damper in its plans to overtake the US in flooding the market with masses of excess liquidity. The reason: increasing social anger at the affordability of houses. Because unlike the US, where Mozillo's hellspawn and other subprime henchmen were all too willing to subsidize every deadbeat with a 150% LTV on a FICO of 101, China's credit mechanism is not that "advanced" meaning billions of people have become cut off from the home market for the simple reason of lack of affordability (yes, the concepts of equity and savings are still appreciated in certain non-US dominated parts of the world).
This has spooked China's minister of Housing and Urban-Rural Development enough to say on Wednesday that it plans to tighten credit policy in a move designed to curb speculation in the real estate market. Whether this is just posturing is unknown, although while manipulating GDP is one thing, and presenting a completely baseless number to an idiot world which is willing to accept at full faith any "fact" out of the Beijing propaganda central, when the marginal buyers have made home sale offers too high to cross prevailing bids, then you have a real problem.
Further reinforcing the point that China actually means business are remarks by housing minister Jiang Weixin stating that Beijing will remove incentives introduced by local governments to support housing markets. The consensus is that this is a clear indication that the central government will continue to introduce curbs and real estate market restrictions in the attempt to prevent an out of control house price bubble. In particular, China is targeting purchasers of "investment" properties. "The government will adopt tighter credit policies for the purchase of second homes to curb speculative investments."
Earlier, Premier Jiabao had said that the government plans to tackle surging property prices, highlighting tax, interest rates and land policies as the tools for tackling price increases. The premier said "housing prices in certain areas and cities have risen too fast and that has attracted the central government's attention."
Could it be that China will succeed in curbing the very greed that destroyed America? If so, Karl Marx will truly be vindicated. Yet China has to hurry if it hopes to avoid the US fate, and importing Bernanke to wreak the same havoc over in China that his second term in the US is sure to bring the country: Chinese real estate prices increased 5.7% in November according to the National Development and Reform Commission. One recalls comparable increase in California real estate in mid-2006 and early 2007, months before the subprime bubble popped, and marking the beginning of the end of the greatest (and most flawed) Keynesian experiment in human history.
h/t Market News
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Greed truly trumps all ideologies and leads to ruin.. How does one say Bon apetito in Mandarin ?.
Mistaking greed for envy is far worse.
asians were always too good at math for their own good
If this were said of anglos it would be 'racist' . Show me where billions of Asians know math? Most are peasants.
Just a joke I think.
One is either a Drawn Together fan...or one isn't. :-)
of course a joke... the 'own good' should of gave it away
Well I thought it was funny...
But then, I *am* a Drawn Together fan (hiss boo) and have been accused of having a 'dry' sense of humour. :-)
The internet is always a tough crowd!
Americans won't get that riled up until it becomes obvious that they have nothing left to lose.
Credit users in general don't get riled up because they're too dependent on the "extra income" credit deceives them with ("I've got a $25k credit line. I can afford it"). Eventually, credit will flow again so the sheeple just wait. True savers know that as asset prices rise faster than earnings, they get upset because they know their ability to purchase is being destroyed. Credit users don't care since they can borrow the difference today and worry about repayment tomorrow.
considering how many Chinese students you can meet in US universities, starting learning their language wouldn't be a bad idea.
in 10-15 years when Chinese create the most powerful war machine in the world, payback will be a bitch for the US for all those wars and debt holes.
Your comment shows a complete ignorance of Chinese history. When has the Middle Kingdom ever pursued an expansionary military policy? Historically, they are much more interested in securing their own borders. Assuming they do create the "most powerful war machine in the world", what would they do with with it? Invade the U.S. and have 6000 mile supply lines? Not very likely. I suppose they could invade the wasteland that is eastern Russia, but what would be the point?
Last night, I asked a friend from Beijing (who is a very successful business owner) whether he thought there was a property bubble in China. He has several investment properties in Beijing. He assured me that there was no bubble as prices in Beijing were certain to go up another 2 or 3 times within the next 5 years due to the high speed rail system being constructed linking Beijing with all the other major cities in China. Says that rich guys in the other cities will all want properties in Beijing. Took me until today to think about his comments and realize that they were a classic form of a "bubble speak." I will keep forwarding articles from Zerohedge and elsewhere as the bubble evolves to get his reaction and perhaps (unlikely) encourage him to take some of his winnings off the table before heartbreak arrives.
You are going to teach him ("a very successful business owner")? How much is he paying you?
You may want to listen to your friend without being so skeptical. The bubble has surfaced in Shanghai and the national government does not want the whole country to bubble up like Shanghai has.
"China's minister of Housing and Urban-Rural Development".
The details Tyler hasn't provided in this article; Regional governments are the enforcement arm for National policy coming out of Beijing. It's not like the US at all where the Federal level has the big power.
The regional governments are invested in the supply/demand equation as financiers, speculators and developers. Not always directly but family members are involved or big developers give the government kickbacks to green-light leases on land. And some big developers in China are relatives of ruling Communist party members so go figure. All land in China is owned by the Communist Party, the regional gov collects the lease payments on the land and sends a part of it back to Beijing.
As a buyer of a house or apartment you are also purchasing a 70 year lease on the land it was built on. Most purchases of houses or apartments in China are paid for with 50% - 100% cash by the buyer. Credit/Financing is not an honorable thing in China. Cash is King because everyone knows who owns the Bank of China and they do not trust. There are no national ID's or Social Security numbers in China and people like to keep their cash working invested in assets not visible to the government. Stuff the mattress or buy an investment apartment.
So the struggle begins. The National policy makers are going to try to rein in the regional governments corruption and speculation.
I would not expect to see a bubble pop, rather a slower rate of upward appreciation. It will take a while to cool down the fever.
Look, the price/income multiples in China are grossly unsustainable.
There aren't enough cash buyers out there to afford these properties.
Yes, people ARE buying on credit. China has entire cities sitting empty; their solution to the demand crunch was to build more no matter what and to force the State-owned banks to make loans that will go bad if not for massive inflation.
"There aren't enough cash buyers out there to afford these properties."
It's called being a strong handed buyer. In the US most people are weak handed causing them to use excessive amounts of credit. In China you cannot declare bankruptcy. You cannot get a cram-down. No easy ways out. And buyers know this very well.
Once bought these assets will be passed along through generations.
*Recently China changed their policy on the 1 child birth policy. Previously you could violate that policy by paying a birth tax on 2 or more children. Now the ban has been lifted.
I'm expecting there will be some pent up demand in the birth rate. LoL! 1.325B can become ~2.5B in short order, do the math.
You already know I'm not short this market.
1)Most people put money in bank in China Too many thieves)
2)Everyone in China over 18 has ID, ask Chinese
3)Nobody is watching how much money you have in the bank like America
4)No property tax, only pay 7-8% when sell, not like here so called freeland with only one owner-Gman. You can transfer you property to your children without any ridiculous tax
5)So called 70 yr ownership actually last maybe another zero behind 70.
6) I am from China I know what is going on there.
"2)Everyone in China over 18 has ID, ask Chinese"
Ah, no they don't. Maybe you want to take a bicycle ride out to the country and ask any farmer kid if you can see his ID. LoL, good luck Mr China guy.
Too many flaws in 1 - 6 to argue. R U Chumbawambat?
Between this and Iceland giving the IMF the finger, things are already looking brighter for at least *some* countries' citizens in 2010.
2009: the year nothing happened.
Stocks went up. A few more people lost jobs. H1N1 was a prank? Printing, printing, printing...no wars, political implosions, major intrigue. Same old 'in and out' for the Sandbox Warz - too bad for the weddings.
Underwear bomber was a dud. Israel had us captivated in January using white phosphorus on civilians up until the day before O took office - and then it was all O, Pelosi, and Lady Gaga running around. Even the G## meetings were mediocre.
2008 had Greek riots! Mumbai attack! Invasion of Georgia! Where's the beef now?
---
2010, we're rooting for ya!
Mexico - show us the money!
Pakistan - sting India again!
Israel/Iran - you guys are both sissies; get a room.
Venezuela - Chavez is a sissy, too.
What exactly are the Dragon and the Bear up to, anyway?
.
I've seen a number of comments at other times with just a dot. What does that stand for?
Either wrote something and then removed it or it stands for dot
it's a micro-dot, essentially a condensed version of large post that can be viewed with a micro dot reader - just scroll over with your mouse and presto it appears in a popup window or right click and you can download in an instant. The micro-dot in the above post links to these four articles:
http://english.people.com.cn/90001/90778/90859/6855647.html
http://english.people.com.cn/90001/90778/90862/6855889.html
http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cb...
http://www.ft.com/cms/s/0/bcd45022-f116-11de-bcfc-00144feab49a.html?ncli...
Oh, THAT'S what a micro-dot is. Wish I'd known that in college. That would have made a difference.
Yeah, dang it! Too bad it's still obscure tech - it's not even in the first results on Google. Maybe you have to Bing! it - nice articles though.
WOW. Thanks for that mate.
hehehe - best summary of the late unlamented 2009 I've seen so far. Be even funnier if I knew who is Lady Gaga?
I wonder what "entertainment" will be like in a decade?
http://costumepop.com/wp-content/uploads/2009/10/lady_gaga-blood.jpg
Here's an interesting take. I can't top it:
http://vigilantcitizen.com/?p=2614
Brilliant! Seems to be another of the underappreciated lineage of Alice Cooper & Marily Manson. I shall now have to become a fan. Dammit just when I was all set to become quietly fat & middle-aged too.
>2009: the year nothing happened.
>[snip] no wars
No wars? Isn't the US at war? Or are Iraq/Afghanistan just minor differences of opinion and not really wars?
That's a good question. I don't consider mass slaughter of civilians a war. It's just the mass slaughter of civilians.
Let's see, peg your currency to ours, and you get the hyperinflation that we are exporting. And you are surprised?
Not rearry.
Their stimurous was three times the size of ours in terms of % GDP. They probabry wont even need to import it.
I've finally understood that in a fiat-money system, hyperinflation is just a revelation of what the currency is in fact worth. But fiat currency is always just government make-believe. That's just when the population *realises* that it's worth nothing - confidence collapses in the ability of the central bank (king, government) to interfere in trade.
Every fiat-money government right now has 'hyperinflation' - it's just that their populations are at different stages of seeing it.
In a fiat system, it really doesn't matter at all whether the government 'prints' $1 or $100 trillion. It's all worth exactly the same - 0. As long as the government can generate confidence in its $1 or $100T, the currency is fine.
When the population quits believing that the government must interfere/legitimise its trade, then you have hyperinflation, even if the 'printing' were to be only $1. It's just that it usually takes the larger number for the population to see the scam.
In essence, the US went into hyperinflation in 1971. But it hasn't been 'official' yet, even though we've gone within a year from talking in 'billions' to 'trillions', only because the population still has confidence in its government's ability to legitimise (value) its trade.
I'm very proud of myself, as this realisation dawned on me only very recently!! I saw the big picture and felt like jumping out of the bath and yelling Eureka. Would have if I was in the bath at the time.
I've now made a resolution that our family's wealth will always henceforth be stored in hard assets, not in paper, at least as long as our currency is central bank fiat, and maybe even after that, when there is an asset- or energy-backed currency as well. We will own land, water, agri, gold, etc. but paper money will only be used for expenses (and buying real stuff from whoever will accept the paper in exchange). When we are old we will die with gold, land, silver, etc. but zero in a bank account.
Oh... but in 2100AD we'll all be using Kredits(tm).
This isn't totally accurate.
Fiat currencies are not inherently bad...the government could print the money it needed and then tax it out of existence. This is how tally sticks worked. They ran fine, the system was stable until the King decided to inflate, to try to get something for nothing. And the goldsmiths who were discounting tallies forward into the markets got shafted by the King. Not much they could do about it, he had all the swords.
Our system of fiat paper is debt money. It is lent into existence and represents a claim upon the future (the interest on the loan). It represents now a promise to pay more promises in the future and the hope that it will be exchangeable for real things at that future time. Our currency or debt is discounted against our ability to produce real things to exchange the notes for.
Worldwide dollar hegemony gives the USD a lot more value than competing currencies. A majority of world debt is denominated in it, oil is traded in it, etc. It's the underlier for trade payments settlements for nearly everything until quite recently. So, the "confidence" a dollar would exchange for something real in the future was and is quite good despite the apparent inability of the US to maintain growth.
The USD is the world's currency and we collect fees for maintaining it.
Not exactly inconspicuous, huh trav777(7)?
[Edit]
#183187
#183398
That's two "jew" comments yesterday afternoon, the second of which got flagged 11 times AND got you banned. I'm actually surprised that your IP wasn't banned, as well.
You better tone that "jew" shit down this time!
You explained it well. It also explains why outsourcing (especially by commodity deficit countries) has become so entrenched as other economies need to generate surplus dollars to buy commodities and energy. 40When you net it out, USD provides the US economy an advantage and a free ride.
Thanks Trav - you were one of the people here who I hoped would see that and comment. I don't always agree with your views but I always learn from your fiat&credit explanations.
I think you are saying that the US government promises of future goods/services (confidence) is better founded than other sovereign promises b/c of the USD 'world reserve' status, which forces the goods/services/labour of other countries to support it. So it's a claim on other countries as well.
While I can see this, I can't help thinking that this 'world reserve currency' status is nothing but a failed experiment (Bretton Woods), which was the result of a unique situation (WWII) and is now close to its end. I think it is unlikely to be repeated - would other countries ever again accept being forced to support another government's fiat? Perhaps that's naive - anyway, will ponder some more!
China has a huge problem. There are entire cities built on spec. While government sponsored banks, hold much of the paper much has been purchased by individual investors. There are going to be a whole bunch of unhappy folks. I am guessing most paid cash and not 5% down. It is going to be very interesting.
http://prudentinvestor.blogspot.com/2009/08/4-minute-tour-of-china-property-bubble.html
When the Russians of old ‘built” their Potemkin Villages, they only built the facades. China’s masters said build and build they did but much has been China’s versions of bridges to nowhere.
http://video.pbs.org/video/1218530801/ is a video about a mall TWICE the size of the Mall of America and it sits empty in a third tier city.
I think we just heard the first pin-prick of the bubble in China. The question is: are we going to go down with them?
and why again did we go into Iraq and not end up owning all the oil??? so we get all the bad PR and none of the dirty gains??? its all global interests.. any talk of U.S. patroism is a total disgrace by our erected officials
There simply aren't enough Chinese with this type of cash. Just aren't.
Look at the metrics, the size of the "middle class" and what it means there in terms of income to be middle class. There's no way in hell that all these empty cities were bought by cash buyers with real savings. It's impossible.
Perhaps by spec buyers who rolled other spec properties and used capgains to do it...that's possible, but that will come crashing down frighteningly.
As an old pro said in 2007: this time its Austrian
Niall Fergason has some views on the inevitable divorce of Chimerica and how this will affect asset prices in China, like housing, and lead to currency distortions in Asia and Europe: http://hbswk.hbs.edu/item/6094.html . Page has a link to the full working paper for those inclined.
Anyone know the proportion of China's population that live in caves? Are these people complaining that living in a rock is a hard place? Just wondering...
Well at least china admits it has a problem, Mr Bean (Beananke non?) still doesn't think he is America's problem. In fact he doesn't believe there is any problem in america, it is the stupid chinese saving too much and buying too much of our treasuries, it was only under chinese coercion that the Treasury increased our national debt beyond 12 trillion (that is, 15 zeroes non?) got it folks.
djCandi Very intresting paper you referenced. Thanks for the link.
This is much better news to ponder - "time to unpeg" - the boldest statement I heard in quite while, with US busy in Yemen and head up it ass and such... Quite a maneuver... The econo-political implications would be huge for US. Bet Hillary is getiing AF1 fueled up ...
http://www.marketwatch.com/story/chinese-group-says-time-is-right-for-st...
If they unpeg, their export mercantilist ponzi implodes immediately.
China was BUILT on our cheap credit funding their GDP. Our inflation went THERE.
Good little piece, but one flaw regarding your swipe at keynes:
Keynesian economics has never been tried before b/c no central bank/government ever rose rates quick enough or reined in spending during the good times. THat was his central premise: for the government to be counter-cyclical during booms and busts.
On a side note: Minsky was the only known economist to build a model that could account for these busts (austrian school doesn't). Minsky was a keynesian...
+100
"Minsky was a Keyesian.." You'll give Steve Keen a heart attack saying that.
Ahem...
This is from: http://en.wikipedia.org/wiki/Hyman_Minsky
You are welcome.
Jeez. Let's get rid of the Central Bank and fiat currencies and see if we even need Keynes at all.
This headline scratches my itch. I keep turning over all I hear and read in my head, wondering, "why?" Why all this? What for? Sheer greed from U.S. socioeconomic elites? My point:
Maybe all of this economic upheaval was orchestrated by the US powers-that-be for the sole purpose of destabilizing China? Think about it.
Setting: Smoky back room in a Manhattan restaurant circa 1970
Q. E. Moneybags: "I say there are 1 billion Chinese people."
Thaddeus G. I. Friday: "That sounds like there is a great deal of money to be made there."
Q.E. Moneybags: "Only problem is their government won't let us into the sandbox. Plus, if they become powerful enough, we may be done for. And there are so many of them they may gobble up the world's resources that rightfully belong to white people!"
Friday: "I say, let's do something about this. We can make a killing and cut their ascendency off at the knees. Harumph."
So, the US enacts a plan to create the illusion of enormous growth and prosperity by unfettering accounting principles and firing up the debt-wagon. Insta-GDP growth through sheer fantasy. China sees this and since they want to be the big dog, starts to ratchet up their game. Initially, they compete through straight production. Social well-being and pollution be damned. Production is up 500%!! We'll beat those Yanks at their own game! Now China has been roped into a game they cannot win because the game really doesn't exist.
The pivotal players in this game are the fair citizens of both countries. Americans are fat and happy, blah blah blah. Their standard of living is still very high. Chinese citizens, not so much. 2007 comes along and the U.S. game starts to visibly wobble. Uh oh, I might lose my 401k and the house I bought to flip just dropped 30% in price. Sheeeit. The Chinese counterpart (though this hasn't happened yet, but judging by this article it may be starting) falls even harder. Their standard of living isn't as high, and even a little dip can lead to civil unrest. The Chinese have shown themselves to be far less tolerant of blatant government shenanigans over the years while Americans can be financially backhanded repeatedly without flinching. Just don't you dare take the cable tv away.
Basically, Americans will eat unlimited buckets of shit and not get off the couch to do anything about it while the Chinese will get run over by a tank to prove a point. If the situation gets bad enough in China, they will tear themselves apart. Perhaps they embark on a much more "free" society as a result? Great news for Moneybags and Friday and the future of all whitemankind.
Trying to figure out the "why", I would say the above play in three acts is best-case scenario for the US. However, this is just a conspiracy theory to pass the time and the world is most likely truly fucked. My money is on everything has just gotten out of control because, at heart, we're all just a bunch of dumb greedy monkeys jerking ourselves off.
Review the history of the Bank of England and the Sterling Bill and the history of the Colonies. There is your answer.
Inflation into a developing zone is not a new game. The English used the Sterling Bill as an instrument of war.
"we're all just a bunch of dumb greedy monkeys jerking ourselves off"
How true...
+10
Conspiracy? Why?
Surely US had a consistent policy towards Soviet Union between 1945 - 1988. So US is able to have a consistent policy against perceived enemy.
Why didn't China take the role of Soviet Union as an enemy after 1988 (Tien An Men)? Why didn't US take a consistent policy toward China?
Kreso
Just wondering, among all the Chinese bears here, how many have flown to China even once.
Twenty-five years in and around China. I'm a bear.
I remember as a soldier trying to convince my superiors that there was a bubble in 2005-2006. I would be sitting in a cafe or something with my bosses and they would talk about the houses they were buying and how mcuh they were going to make and all that. I would tell them that it seemed a little strange for common soldiers to be speculating in real estate) and they brushed me off.
China is a withces brew of corruption and lies behind only Wall St and the City. Most of their growth is a hustle based of "3rd shift" production and bootlegging. Happy meal toys only take you so far in a quest for supremacy. A great nation actually needs to be able to develop the best high quality high technology things like America used to do in the past. They are just as dead and bankrupt as anyone else. There were over 70000 riots or somethi8ng last year in China, they are barely holding it together.
thank the lord for ginnie mae!
Let them collapse, and hard. The Chinese model of "thugs peddling junk" along with their corrupt company towns disappeared from the First World nations for a reason. No, Detroit does not count, for it hasn't sold itself to the Third World.
They spurned quality, progress and about everything else for efficient transactions. Now they get to pay for it.
Unlike China, the US's recovery is more likely to be bloodless.
This article brings good tidings, actually. It tells us 2 things:
1. There is real, insatiable demand for urban housing in China
2. Beijing is as nervous as ever about upsetting the people, which keeps excesses in check
A little background info: China has had a long history of peasant-led uprisings, almost every single one of which ended in the toppling of a dynasty (the most striking examples being the Han and Ming). Mao himself had peasant roots. Thus he (and those after him) knew all too well, the hardships of the common folks, as well as the danger when they are stirred up en masse.
As someone mentioned above, it's ironic that although China is a communist state, her leadership has more compelling reasons to constantly act in its citizens' interests compared to the typical western democratic govts. Really questions one's beliefs, doesn't it?
Things get done in Asia. When an official gets the idea that all the major cities should be connected by affordable high-speed rail, it gets built fast. In the West, all the dirty old men in politics struggle to get a piece of the pie and argue over the deal for 5-10 years, then the Union workers come in and demand they get the contracts to build it, but only if it uses materials that are certain to breakdown over time. The Union and politicians then argue for another 5-10 years over the details, then work starts on the project. Ten union workers are assigned to build a 200 mile stretch of the project, where 5 of the workers will actually work and the other 5 will stand around a watch for $75.00 an hour. In 40 years the project will near completion, but will be obsolete.
"Things get done in Asia". True. But why?
I submit it is because the system of graft and kickbacks is so well developed that everyone knows the part they have to play and the share has been agreed upon beforehand.
In Japan you have the construction companies which used to be the key source of funding for the LDP.
In Thailand, under Thaksin, they spent more than $3 billion on a $1 billion airport (though that was forty years idea-to-completion).
In China the system is smooth and only messes up when an unauthorized embezzler enters the fray.
In Korea a former President accumulated $750 million in kickbcks.
In Singapore, the monarchy---oops, democratically elected Lee family relative controls all.
In the past anything done in Indonesia carried the stamp of approval of the various Suharto's, and in Malaysia the son of Mahathir.
Yes, Asia gets things done.
Mr. Tyler,
I fear you have not done your homework. The US housing bubble was not caused by primarily by 'loose money'.
Many countries, including Ireland and Spain, had huge housing bubbles despite the fact that European countries such as Germany and the Netherlands did not.
Yet all these countries were on the Euro and therefore subject to the same monetary policy.
What was the real difference? Regulation ...
In France it is illegal to provide a housing loan whose monthly payment exceeds 30% of the client's monthly income. Similarly it is illegal to provide mortgages without verifying income.
In contrast, Ireland copied many of the same practices as the US sub-mortgage banks. Little documentation. Negative amortization. ...
Chairman Ben??? Welcome to ZH!!!
What about the fact that the DC spigot showers the whole world with cash, not just the American market? In reality it is a combination of the two--loose money and regulation. The idea that we have to construct this debate around an "either-or" deludes and misdirects.
They're walking a tightrope without a net and the wind is starting to blow. The distribution of wealth is heavily skewed toward the Party, their families and friends, and these are the folks buying multiple homes and driving prices out of the reach of the great unwashed masses.
If the CP really tries to tame the RE market, expect some capital flight as the more prescient among the elite try to save themselves from an unkind fate at the hands of a billion angry peasants.
Factor in the already overwhelming level of bad debts in their banking system, the massive amount of money printing, and the possibility of upcoming capital flight, and two trillion in FX reserves can evaporate in a flash. A tumbling yuan might be the unexpected consequence.
Could be a bull market in pitchforks and meat cleavers.
Well, they won't be as welcome in the US, especially the Manufacturing Belt. Whereever they end up in the US, they'll not be able to hide.
It'll be like jumping from one Gehenna to another.
I've done a few corporate events in China in the past couple years. May 2008 I was in Beijing and got stuck in traffic with a talkative cabbie who spoke great English. I had just seen a story in China Daily (English-language Party-published paper, so take your chances...) that mentioned the average cabbie made about RMB 2500/month (~$366, today). The cabbie indicated that figure was about right.
I had housing on the mind and we were inching past mile after mile of enormous 30-story apartment blocks in the Late Stalin style, so we talked housing. The Government does guarantee housing to everyone, but only if they live in their home district and meet other criteria. Since nobody lives in their home district (there's no money in farming dirt), it's an empty promise; surprise, surprise, like the guaranteed health care which doesn't exist there either.
He told me the average unit of housing was the condominium. The average condo in those buildings would be 2-bedroom, and after we did the metric-to-English conversion, about 650 square feet. That would cost, he said, about $150,000 US. I made him repeat that a few times, and check the conversion.
I asked him how the hell anybody could afford to make a payment on that, making ~$366 a month. He smirked and said more people than I thought could do it. I assumed he was implying there was a huge amount of unreported income going on. Also, he said a lot of mortgages are inter-generational--80 years! Also he said interest rates are very low, and several generations of a family cram into those 650 square feet. Maybe 8 people, 6 of whom contribute to the monthly nut, for 80 years? And this was over a year and a half ago; if the bubble effect has continued unabated, things can only be worse.
Anyway, from the airport to the city center has to be 30 miles, and there must be 100,000 units right along the freeway on the way in. Shanghai has got to be even worse. Do the math. Do it any way you like; it doesn't add up. If all those people get pissed-off, ugly will be an understatement.
I discovered he, like modern Chinese (but very unlike more traditional Chinese) would accept a hefty tip.
While both China and The US are printing more paper money in massive quantity, the main difference is that China's central bank is not privately owned; therefore, the public debt is artificial. On the other hand, US's banker-owned and operated printing press/Fed will put our children in debt forever.
Too bad I saw this article while at work - hence a short response.
I lived in China, specifically Hang Zhou (think Atlanta), Harbin (think Detroit), and Shanghai (think New York) from 2001 through 2006. This is what I learned about housing in China:
1. I thought the price to wages was insane in 2004 [8,000 rmb a square meter in good places in Shanghai]- it has only gotten far worse;
2. People will subway ride 'til they qualify - and commutes of 90 minutes EACH WAY become routine;
3. Monies are borrowed/gifted from everyone in the family to buy property;
4. Chinese generally do NOT like to buy used units - so many units remain bought and "off market";
5. One essentially buys a condo, and owes a monthly fee for use of common areas, trash removal, etc.;
6. One must pay extra, as in hundreds of thousands of RMB extra, for a parking space in the garage;
7. Most homes are sold unfinished, as in raw concrete structures, and you must spend extra to complete it;
8. The construction quality is TERRIBLE - I have seen structural cracks in HIGH END homes and condos months after completion.
Finally, the developer rents the property use for 70 years, and a couple of years later you have a building. Perhaps you only get 65 years of use out of your apartment; what then?
8. The construction quality is TERRIBLE - I have seen structural cracks in HIGH END homes and condos months after completion.
So they're willing to cut corners towards their own people, much less so the world?
I am not surprised, for they are already known to be "thugs that make junk".
"Could it be that China will succeed in curbing the very greed that destroyed America? If so, Karl Marx will truly be vindicated."
If Karl were alive today, he would have to condemn all the exploitation of the Chinese worker by the party bosses. China is nominally communist just like America is nominally capitalist.
Anyway, Marxism never worked.
The government in China is definitely not Marxist; they are despotic in ways that "company towns" in the US have been.
I'd argue that they're worse in that respect given that they don't even want to deal with quality or safety as much as they do quantity.
Tough for slaves to become middle class.
Easy for middle class to become slaves.
+1
I found an interesting video on newsy.com that summarizes what analysts predict and explains multiple opinions: http://www.newsy.com/videos/analysts-fear-china-s-housing-bubble-may-burst
I found an interesting video on newsy.com that summarizes what analysts predict and explains multiple opinions: http://www.newsy.com/videos/analysts-fear-china-s-housing-bubble-may-burst