"Housing And Local Debt Are China's Time Bombs", Chinese Billionaire Warns

Via Investing In Chinese Stocks blog,

An interview with Chinese billionaire Zhang Baoquan. A top article in the real estate section at iFeng today.



iFeng: 张宝全:中国人缺乏投资工具 把不动产当硬通货

"China now has two 'bombs', one 'bomb' is a real estate bubble and the other is a local debt. Any explosion to the Chinese economy is devastating."

“Why do local governments dare to bear so many debts, why Chinese financial institutions dare to lend money to locals, but also because of real estate.” Zhang Baoquan said the close relationship between the real estate bubble and local debt, and believed that the real estate bubble has one stone and two birds. effect.

He says China had more than 100 percent home ownership a decade ago:

Phoenix Network Real Estate: Before and after 2008, the first 10 years after the housing reform, then what do you feel when you look back?

Zhang Baoquan: Actually, I considered this issue in 2007. I personally think that from the perspective of China's real estate data in 2009, it should be the turning point of China's real estate, but I feel that there is no turning. What was the chance of becoming an inflection point? First, the private housing rate in China has reached 120% in 2009. A large part of this 120% is the housing reform housing. After the change, it entered the market. That is to say, the average household has reached 120%, while the private housing rate in the world is less than 60%.

Phoenix Real Estate: Not only is it self-occupied, but Chinese people also love to buy a house.

Zhang Baoquan: China lacks investment tools, so people treat real estate as a hard currency of their own importance. Therefore, I feel that if I turn around in 2008, I believe that the development of China's real estate can become very benign.

The reason for not turning around is twofold: at that time, real estate was an important engine for our economic development. It drove many industries and had a great impact on the GDP of each city. Most importantly, it has become an important source of local fiscal revenue. A very important reference indicator for predicting the future repayment ability of a local government is land sales data, which is also the main source of fiscal revenue.

Phoenix Network Real Estate: But people still have expectations for the future growth of the house, and a habit has been formed.

Zhang Baoquan: In the past 10 years, we have been safeguarding the interests of the industry. Today, I personally think that any economy does not exist in isolation, and any industry is not isolated. The real estate industry, especially our chamber of commerce, should look at China as a whole from a macroeconomic perspective. Economic structure and composition. The Chinese people have the lowest debt ratio in the world more than a decade ago. What is the current situation? The Chinese people are one of the highest personal debt groups in the world because the money is all in the house.

Phoenix Real Estate: What are the risks?

Zhang Baoquan: I think China now has two “time bombs”, one is a real estate bubble and there is a bomb local debt. I think China needs to consider how to prevent the real estate bubble from bursting. This should be one of our strategic priorities. If we are still pushing ourselves up, we can not cure the bubble if it is not limited, once there is a bad possibility. It will burst quickly. Just like the grievances of the Yellow River, it keeps raising and raising, and once it is gathered, it will quickly flood the underside. Therefore, today's two land mines in China, I think have to be prevented, any mine explosion may make the results of reform and opening up for so many years may be seriously damaged, and even have to retreat many years ago.

Comments

Dickguzinya pasha ivanov Mon, 07/09/2018 - 22:45 Permalink

    Those of you who are old enough, will remember the haughty, pomposity and hubris of the Japanese.  Who, during the mid to late 1980's, experienced an economic boom.  They took their highly overvalued Japanese Yen, converted it to undervalued/cheap United States currency, and proceeded to go on a US spending spree, that entailed commercial and residential real estate, among other assets.  Yada, yada, yada, by the early 1990's, their bubbles (Equities, Real Estate, Bond Market, et. al.) exploded, resulting in their inability to recover, to this day(along with their shrinking population).  

    The Chinese economy, is much larger, as well as their population.  Fasten your seatbelts, because in addition to having a paper tiger military, they also have a paper tiger economy, stock market, currency, and  propensity to steal intellectual property, that will catch up with them, and bring them all back down to reality.  Hubris has a funny way of catching up with you, at the most inopportune time.  Ask o-scumbag/o-zero.

 

Can you say "Ghost Cities," and Paper tiger Military?  I knew that you could boys and girls.  It's a beautiful day in the neighborhood.

In reply to by pasha ivanov

GunnerySgtHartman American Snipper Mon, 07/09/2018 - 22:10 Permalink

The Chinese ghost cities, buildings constructed with nobody to live in them -

http://www.businessinsider.com/these-chinese-cities-are-ghost-towns-201…

http://www.bbc.com/future/story/20170223-chinas-zombie-factories-and-un…

It will be interesting to see which government officials stand in front of Chinese army firing squads when this house of cards collapses.

In reply to by American Snipper

roddy6667 GunnerySgtHartman Tue, 07/10/2018 - 04:34 Permalink

You look at a photo of a residential project and assume it's a city. In Chinese, people can live in one gated community that holds a hundred thousand people. You can take a photo while it is under construction and make an article like this. Often a project will pause for months and then resume. Sometimes builders go broke and their is a battle in court for a couple of years. Eventually, another builder will buy it cheap and finish it.

Another famous example, used by Time magazine in their ten year old article on ghost cities is Kanbashi New City in Ordos. first of all, it is not a city. It is a district in an existing city. It's a large real estate project, but not a city. The article reads "planned for a million people". The reader assumes that it was built for a million people. No. the author conveniently left that out. This area is rich in coal, and this construction was supposed to handle the influx of outsiders and the locals who wished to upgrade from rural poverty after they got paid for the coal. There was a worldwide downturn in commodities, so the project was cut back in size to 500,000. This was before they began building. Then China began a massive effort to clean up the air, first cutting way back on coal usage. The project, now started, was reduced to 300,000. It is a 20 year project. Almost all of the units were sold, for cash, before they were finished. No mention of that in the Time Magazine article. 150,000 people live there now, less than halfway through a 20 year project. This is a success story, not an example of failure. The builder sold everything and paid off his construction loan. He moved on. A lot of the rural people who purchased have been slow to move into their new, unfinished homes. It is a big move for people in this VERY remote area. They have classes for them in how to live in a city. No chickens or pigs in your home. Poop in the toilet. Don't spit. It will take time, but they are moving as their land becomes coal mines.

Americans sit on the other side of the planet and get opinions on China by reading misleading articles. All they have to go on is false third hand "information". 

Chinese people read things like this and are amazed at how ignorant and gullible they are. They believe amazingly stupid things about China, and will never go there to see how wrong they have been. When I first visited China in 2009, within 3 days I realized that most of what I thought I knew was bullshit. The American media keeps the citizens from knowing what is going on outside the country, much like North Korea does. 

 

In reply to by GunnerySgtHartman

mark1955 mark1955 Tue, 07/10/2018 - 02:33 Permalink

As FRIDAY THE 13th ( A key Satanist/illuminati date ) Approaches, it's important to remember that life long registered democrat FRAUD Trump, attacked Syria on  FRIDAY April 13th, 2018!

 

With all of this conspicuous  Anti-Chinese "Fear Porn", I fully expect some type of STAGED False Flag by Trump and his Globalist Masters this week!

 

It could be as simple as another FBI STAGED mass "Shooting" to Try and get more Gun Control. 

It could also be a Naval Confrontation with China/North Korea with Trump and the globalist actually sinking a US Navy vessel and blame it Falsely on China.

 

It could also be a STAGED chemical attack against the Syrian people blamed Falsely on Syrian President Assad and the Syrian military!

 

     The possibilities are endless!

In reply to by mark1955

shovelhead mark1955 Tue, 07/10/2018 - 07:45 Permalink

Ooohh, scary.

Friday the 13th. The French King is going to kill all the Templars, that's one way to cancel a debt.

The voodoo dead will rise and Mr. Juju Obama will scour the Earth with his minions. The Atlantians with beat them down and return to their home planet.

So it will all work out and we'll enter the Age of Aquarius.

I saw it on You Tube so it has to be true.

In reply to by mark1955

Dickguzinya BankSurfyMan Mon, 07/09/2018 - 22:49 Permalink

Scumbags like slick willy clinton, and head chines lobbyist, bob dole, were part and parcel to picking up American Factories, and moving them, in their entirety, to china.  Stealing American jobs, and self-esteem in the process.  I say:  Flush China right down the toilet where they belong.  You steal our jobs and intellectual property, we steal your soul.  Stick that in your fortune cookie, and then go fuck yourselves.

In reply to by BankSurfyMan

milanolarry Mon, 07/09/2018 - 22:28 Permalink

The Chinese government knew all these ages ago, but most people just don't know how strictly regulated the property market in China is. The government limited the number of flats developers can sell,usually less than 5 percent of a project. At the same time, they also promised unlimited loans from banks so that developers can keep building more and more ghost cities. These are the reasons why people see more and more vacant blocks / cities, but property prices can still rise at the same time. Without such a policy, the Chinese economy would have collapsed long ago. In China, the number of flats built and the number of flats supplied in the market are two different things. There is not much relations between the two.

Charvo Mon, 07/09/2018 - 23:04 Permalink

The persistent rate hikes by the Fed is aggravating the situation for China.  They have been raising rates in step with the Fed UNTIL last month when the Fed hiked, but they didn't.  Why didn't they raise rates?  They were probably already seeing weakening in the general economy which is increasingly debt driven.  This is why the yuan tanked bigtime after the non-hike by the PBOC.  I guarantee that the younger people in China have taken on extreme levels of debt in order to buy houses.  Every guy seems to need a house in order to marry, and there are a ton of guys.  My guess is stocks of property (like Vanke) and banks (like Bank of China) must be under some extreme pressure in China especially if folks are defaulting on their debt or can't roll them over anymore.  Because of this PBOC has probably stopped hiking in this cycle.  Any continued hiking by the Fed is going to pull even more capital out of the Chinese economy since hot money will flow back to the USA.  I anticipate even more strict capital controls for its citizens in the 2nd half of the year.

roddy6667 Mon, 07/09/2018 - 23:15 Permalink

"The Chinese people are one of the highest personal debt groups in the world because the money is all in the house."???

82% of Chinese own their own home without a mortgage. Most real estate sales are cash. How does this "raise debt"?

Dr. Bonzo SergeA.Storms Tue, 07/10/2018 - 01:59 Permalink

Enter "Chinese mortgage debt" in any search, cut and paste. Takes less than 5 minutes. Cheers.

 

SCMP… Chinese soaring household debt and runaway lending….

https://www.scmp.com/news/china/economy/article/2112873/chinas-househol…

Wall street Journal…. Ballooning Chinese mortgage debt…

https://www.wsj.com/articles/chinas-ballooning-mortgage-debt-built-on-s…

Forbes… Mortage debt-to-income ratio predicted to reach 127% in China…

https://www.forbes.com/sites/sarahsu/2017/09/27/chinas-tamping-down-pro…

CNBC… Chinese savings plummeting… personal debts soaring

“RESIDENTIAL MORTGAGES COMPRISE 60.7% OF PERSONAL DEBT…”

https://www.cnbc.com/2017/08/06/how-chinas-billion-savers-embarked-on-a…

These 2 guys have lived in China over a decade, speak fluent putonghwa, revisit a housing development in Guangdong that was built about 4 years ago, still largely abandoned and in a horrific state of disrepair and rapidly succumbing to Southern China's harsh climate....

https://www.youtube.com/watch?v=XopSDJq6w8E

In reply to by SergeA.Storms

roddy6667 Dr. Bonzo Tue, 07/10/2018 - 04:45 Permalink

Dr. Bonzo does not live in mainland China. He quotes these guys he knows. One of them has actually lost money by buying the only fucking building in China that went down in value. He claims the elevators in his building seldom work, blah blah. What a loser! Why not sell and move? No, he likes being a loser. Typical fear porn. They find one project that failed and examine it under a microscope. Then they claim it represents the current situation in all of China. Ignorant readers on the other side of the planet believe this. I am not writing a Gloom & Doom blog, so I have no reason to misrepresent things like the Good Doctor's friends with the world's worst investing acumen.

I don't think Dr. Bonzo can actually state anything from first hand personal experience. I have personally traveled all over China, and follow new home construction. In my younger days, I was in construction for 15 years. I have watched countless projects go up. I have been inside them after they were finished and sold. I track prices. I know a lot of people who have purchased them. This is all real, not somebody else's blog.

Dr. Bonzo seems to be a bitter old man who spends a lot of time looking a the bottom of a whisky glass.

In reply to by Dr. Bonzo

keep the basta… Tue, 07/10/2018 - 00:28 Permalink

Chinese people were encouraged to buy gold and have. They can’t take it out of the country. Great.  It provides a cushion against govt but the govt is the USA. Hope is they keep buying gold. Keeping wealth in china. Not in my country.

Cabreado Tue, 07/10/2018 - 00:34 Permalink

One might think there's a common theme going on... 

We in the US were supposed to have access -- via Representation -- to fend-off the common theme.

But We in the US have become too critically ignorant.

(but that's another common theme)

So in effect, We become as stupid as China.

marcel tjoeng Tue, 07/10/2018 - 01:24 Permalink

 

Just another 'china's debt is to big' faux articles.

China's Central Bank is self financing unlike all of the rest of the BIS.

A central bank that self finances, CAN NOT run out of money.

Idiots.

 

 

Charvo Tue, 07/10/2018 - 04:02 Permalink

Forget any articles you read.  Just look at the stock charts of real estate and bank stocks in China.  Vanke and Bank of China are at 52 week lows.  I think they might be at 2 or 3 year lows.

Let it Go Tue, 07/10/2018 - 07:42 Permalink

The importance of the housing market in China's economy should not be underestimated, this is where almost 75% of the country's household wealth is stored and it is deeply interwoven with shadow banking. A close look at housing in China and the customs under which deals are completed will give Americans some real surprises. One thing that will shock Americans is that apartments are sold by the developer at the "roughed in" stage with no interior. After reading the article below you may question both the quality of how well these housing units have been finished and how many may never get "finished" or occupied.

 http://China's Housing Market Has Customs That Seem Bizarre To Us.html

everything1 Tue, 07/10/2018 - 09:03 Permalink

They've been calling for doom in China for years.  Ain't happening folks, your looking the wrong way.  And, Chinese banks are not controlled by lobbyists, they are controlled by the government, big difference!, in recession they can lower mortgage rates and give the people a break!, here they'll just take your house!  China is already raising it's mortgage rates increasing down payments now to keep that sector mitigated, cooling it's housing sector, so it's you know actually affordable?

They saw what the last U.S. recession did to them, do you think they did not learn, they learned.  Unlike the U.S. they actually want the people to own housing, it's called discretionary spending.  They are big savers, overtaking India in public gold buying!  Their economy is roaring meaning people can pay debts down, and they are already deleveraging while it's balls to the wall here in the U.S. The U.S. is raising rates in the wake of Chinese deleveraging, that tells me something, China is calling the shots now.

AND, they don't DO thirty year loans!

If China economy crashes so will the U.S. they switched to a consumer driven economy, but China has built a strong middle class, and they have many trading partners.

Look at the local debt in U.S. 

 

https://www.globalpropertyguide.com/Asia/China/Price-History