Guest Post: Boots On The Ground In China: Signs Of A Slowdown Are Obvious

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man

Boots On The Ground In China: Signs Of A Slowdown Are Obvious

Stunned. That probably best describes the mood of China's vast pool of property owners. For the last few years, anyone with as much as a taxi driver's salary has been speculating in the real estate market, scooping up off-plan properties at terms that would make a Countrywide mortgage broker blush.

And why not? Chinese culture has almost universally adopted the attitude that property prices never go down. Minor fluctuations and corrections over the last several months have been written off as statistical error.  Well, reality has now uncomfortably set in.

Recent reports from the National Bureau of Statistics show that home prices have fallen up to 50% in many parts of the country in the period from July to September. But who gives a damn about government reports? The real evidence is on the ground.

Here in Shanghai, nearly 300 angry customers stormed a sales office of Longfor Properties Co Ltd after finding out that the developer had slashed prices on one of its projects by nearly 25%... practically overnight.

Another angry mob in Shanghai assembled outside the sales office of China Overseas Property Group Co after that company made similar price concessions for new buyers. 

These were obviously the poor suckers who bought in months (or years) ago at a much higher price... and they're not especially happy about a property crash.

The most significant contributor to the price decline is tightening credit; after dumping trillions of dollars into the economy to ward off the effects of the global financial crisis, the Chinese government is now pressuring banks to reduce loans.

This is bringing much of China's credit-intensive economy to a screeching halt. So much for China leading the world out of the global financial crisis. And it doesn't just affect the property market.

Auto dealers are having the same issues, with many luxury brands ranging from BMW to Mercedes offering steep discounts up to 20% to lure buyers onto the showroom floor. 

Growth has definitely slowed dramatically, and the tightening of credit is having widespread effect across the economy... and the prospect for increased social unrest here is growing.

Taking a page from America's playbook, the government is responding by playing up threats of terrorism. It's an easy distraction, and it keeps people in line. In fact, China's government is revising its policy to ensure that anyone who might rock the boat is branded a 'terrorist' and will be subject to asset seizure.

Many people with money or significant assets in China see the writing on the wall and are lining up to diversify internationally-- citizenships, trusts, foreign bank accounts, etc. I should know, I just spent the day in a room packed with Chinese people trying to learn about their internationalization options. I'll tell you more about that tomorrow.

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hambone's picture

And as the Chinese are trying to diversify out of China (knowing it for the ponzi it is), the rest of the developed world rushes to get in (to avoid the ponzi they currently occupy)!!! 

Ancient chinese secret, Confucius say, buy gold (bitchezzzz)!

lemonobrien's picture

Actually, Buddhist never turn down gold as a gift; but will turn down almost everything else.

TruthInSunshine's picture

Real estate, bitchez.

They quit making it...

...but it sure does get recycled a lot.


*It's always a great time to buy a house! This message brought to you by The National Association of Realtors™,  The National Mortgage Brokers Association , ReMAX, your local property tax assessor's office, and Bang Dae-Ho.

PulauHantu29's picture

About 18 months ago The Middle Kingdom advised itsw people to buy gold and that RE was too high....the PRC began tightening credit, bank reserves, etc..

The gubberment there even opened numerous "offical" gold stores with the royal approval and official prices I read...

Many people listened...some did not. These are the protesters I suspect.

Wait until The Land of Oz feels these effects of a slower Dragon that eats less copper, iron,'s gonna be painful....

Seasmoke's picture

i dont think the Chineese treat those who scam them , as nice, as the American sheep do when they are scammed

trav7777's picture

ROTFL...the entire national economy is a scam

Imminent Crucible's picture

Chanos 1, Rogers 0.

Game over.

Raging Debate's picture

Ya. But it was fun globally while it lasted! Now time for organized decentrialization. The good news is the Internet and flow of information make it shorter cycle to recover. Plus Interwebs is fun.

kito's picture

Chanos 1 rogers 0????? Bwahahahahah based on simon "chilean utopia" black???? Bwhahahah dream on. China is doing just fine. Growing pains are about all china will have while the u.s. needs morphine as it dies a slow painful death....

malikai's picture

Ditto. I spent 4 months in Beijing throughout this year. I'll be spending the next two months there as well. I haven't seen ANY of what he's talking about.

LowProfile's picture

Beijing, eh?

Funny, Maryland has the lowest employment rate here in the US, perhaps that has something to do with it's proximity to...  Washington, DC?

You may want to spend some time outside the capital city.  Collapse starts at the periphery.

e-recep's picture

Shenzhen is doing fine and it's nowhere near Beijing. What's all this "China is in trouble" claptrap? I see it all the time on Mish's blog and less often here. Does it alleviate the pain or what?

sub Z's picture

Yeah… China has its share of problems but, from an observation standpoint, Shenzhen looks fine. Restaurants are packed, shoppers are buying expensive luxury brands, movie theaters are hopping, I have never seen so many expensive cars packed in one place, the Chinese are savers and have little debt, the middle class is small but the same size of the US population, lots of rich people, lots of competition - something lacking in the US, practices a thing called capitalism, they are investors economically and in themselves, modernized infrastructure, big name global businesses investing and have a large stake in, a medical system that doesn't squeeze the life out of people and has good food (xrays, doctor visits, medication, about the same cost as co pays, good service, you can stay in one building to get all the testing done), nice public transportation system, an education system that works, low taxes, actual electric vehicles… ever hear of a Buick Excelle XT or Envision or a $1.44 million (9.18 million yuan) Dartz armored vehicle? Expected to be popular among China's new money, who are in desperate need of ever more ostentatious vehicles. There is hope there and nothing but fear here.  

From a business standpoint, would you want a market of 1.3 billion hard working and motivated Chinese or a milked dry to the bone, filled with despair, highly regulated, socialized, jobless, homeless, no-good, rotten, four-flushing, low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-ass, bug-eyed, stiff-legged, spotty-lipped, worm-headed sack of monkey shit and taxed to death 300mm with a debt to GDP ratio of over 600% not counting obligations? The US has overcome the obstacles thrown at it in the past and I don’t see much difference in China. So the rich speculator gets squeezed and the people who couldn’t afford a nice place get a chance hopefully. What happens when they are better off and demanding things with a stronger currency? To have no jobs, high inflation, deflated property values, high taxes, and huge debt at the same time while the other guy sucks the food out of your kids mouth? That is the question folks, yes it is.


defencev's picture

Sure. Charlatans are now moving to so-called front markets. After recommending to put your savings in Mongolian tugriks SB is now suggesting to get rid of Yuans he just recommended a month ago. Whatever. Just continue your subsrcription to "Sovereignman:Confidential"...

sub Z's picture

lulz... see it's ok, he saw it on the television

Fake Jim Quinn's picture

Real estate bust, female Char Peis

Debtless's picture

Even after a major slowdown - they'll still lap everyone else. Solly.

jcaz's picture

I thought that land in China was state-owned,  which would be the ultimate fuck-yoo....  Oh look, your property has gone up 200%.... Oh, I mean OUR property has gone up 300%,  the shell YOU own atop of it has dropped 100%-  seeyabye.

Bunga Bunga's picture

Sorry, OT: ALL trading on the Australian stock exchange has been halted indefinitely.

chump666's picture

thats' good, safe my ASX 200 futures shorts. 

chump666's picture

on topic: a China hack job huh?

jcaz's picture

Hahahah!!!!  That is AWESOME!   Just when it looked like the pixie dust was going to carry stocks higher.....   This will make the flash crash look like a hiccup....

What can take stocks down?  


chump666's picture

ASX news.  somthing is up, looks like a hack IMO

ASX spokesman Matthew Gibbs said that the market was halted at 10.05am after market participants were unable to conduct transactions.

  • At that time 6700 trades had already taken place, he said, but the nature of the problem was still unknown.
  • "At this stage we just don't know what the problem is," he said.
StychoKiller's picture

Hmm, Stuxnet or Skynet...flip a coin...

crazyjsmith's picture

Best headline of the day...We now move markets with HOPE!!

US Stocks Edge Up As Investors HOPE For European-Debt Solution

chump666's picture

wow! I have seen markets break, but this, this is something else.  Should shatter confidence for a few hrs once it's fixed, if it's fixed.

TruthInSunshine's picture

A major stock index stops trading - period - for an undetermined amount of time.

That should instill a lot of confidence in the greatest ponzi ever!


Practice run, bitchez.

chump666's picture's funny because it's true

Quintus's picture

Gold is, and has always been, fully internationalized.  There is no country in the world where it cannot be traded for anything you might want or need.

Seems like the best thing you could advise these clients to do is start stacking.

YesWeKahn's picture

in china, properties don't sell anymore, trust me

chump666's picture

It's all Wenzhou going sub-prime meltdown style.  Plus the grey/black money markets imploding should take out most businesses, developments, insurance, banks etc etc etc.

Europe is old news.

Now China.

Drunken Monkey's picture

Their Kung Fu is good, but not good enough to save the Princess.

doug79's picture

Hi China  Hey my house in Vancouver is for sale.  Great way to diversify.

e-recep's picture

Land is like gold. It's scarce and will never be as worthless as Citi shares.

Gordon Freeman's picture

This is all bullshit--as if China is some American-style Ponzi scheme.  I am looking out of a downtown Beijing hotel room as I write, so I have "boots on the ground" here, too, Simon baby.

Yes, they are going through a property bubble bust.  Remember when silver was $50/oz?  Remember what happened next?  Same thing. Didthat destroy the PM market?  Uh, no.

The attitude here is: so what if some people lose money?  That's what happens when you speculate, remember?  The young people here are fucking dancing in the street about this--Simon Black is a moron.

The Chinese economy is a fucking colossus, and almost everything you read in the U.S. financial media about this place is wrong.  Let me put it this way: if you can't get rich trading with the Chinese, you really, really, really ought to find another line of work...

jcaz's picture

Wow- you're up early then.... You're on a blog at 8am and not at work?


Gordon Freeman's picture

Fuck you, asshole. This is work.

Freddie's picture

LOL! GE obsolete wind power technoiogy salesman Gordon got no dinky do boy last night so he no happy man.  You funny boy Gordon.

Mark123's picture is a dynamic place and people, but you would have said the same thing in the USA in the 1920's.  China has increased it's internal debt by about $3.5 trillion over the last couple of years to keep the party going.



chump666's picture

China is a HUGE speculative time bomb and it's ready to blowup.  The only people buying China stocks is the Chinese goverment.

We are all watching China now. 

jm's picture

The Chinese conomy will be fine after some indigestion, but that doesn't make it a good place for investors.  Workers, politicians and bureaucrats have capital seignority on default recovery.  Creditors have next to none.  

Stay out.

chump666's picture

and I repeat

"We are all watching China now."


trav7777's picture

yes, that is exactly what China is...a ponzi.

peekcrackers's picture

ponzi was going to be the new walmart china car for just under 3k in the U S

Moon Pie's picture

A near 3 million man army vs. a corrupt banking/legal system in the U.S. and U Rope?

I'm laying China +7 (months to total destruction from commencement of hostilities).

Over/Under 888 million people killed.

malikai's picture

If that happens, you'll be part of the +/- 888 million killed, so the bet is worthless.

bahaar's picture

Ponzi can happen anywhere in the world.  In fact ponzis happen only when economy looks upbeat.  Everyone jumps in because no one wants to be left behind.  I don't know about China, but I know property prices have sky rocketed in India.  Price of two bedroom condo in a second tier city costs 10 times the average salary.  And underground economy is booming.  Apparently in Bangalore most poor people (maid-servants, house painters etc) hand over a chunk of money (probably borrowed fromt eh bank) to apartment owners who then lets them live rent free.  Obviously the owner of the apartment lends it out ( or hands it over to a pool) at much higher interest rate, most probably to developers.  Who then buildd and sells aprtements for yet higher price.  And then the owner of the new apartment charges a higher rent and some individual borrows fromt the bank and hands it over to the aprtment owner....


so to say that Indians and Chinese are savers, that they make hefty downpayment on housing and therefore there oculd be no ponzi is not correct.