5 ms·

This may actually be one of the worst times to move to China if you're looking for a fresh start. They've been on a lending binge that's created a massive fixed

by rkon 15y ago

This may actually be one of the worst times to move to China if you're looking for a fresh start. They've been on a lending binge that's created a massive fixed asset bubble (mainly real estate), and it looks like the correction has recently begun. It's a lot like what happened in the U.S. and Dubai, although on a much larger scale and without the fancy derivatives (at least not yet). Local governments have actually been forcing developers to borrow more money and buy land from them because they depend on those sales to meet their financial obligations. Real estate agents are offering luxury cars and bars of gold when you purchase an apartment, not to mention buy one get one free deals (the gold and luxury cars allow them to mask declines in the prices of apartments because list prices are still high). I would stay far, far away... at least for the next 6-12 months so we can see how hard the landing will be. A lot of wealth is potentially going up in smoke and that could wreak havoc on their domestic demand, which is what they were planning to rely on in order to continue their rapid GDP growth (which we now know has been largely artificial).

Raphael 15y ago
Couldn't you just rent until it's a good time to buy?
- nate_meurer 15y ago
  Excellent question. I've wondered this myself; is the real estate boom feeding the rental market, and if not, why?
  - Maarten_pi 15y ago
    I've asked my Chinese friends that same question. I've been told that rental prices aren't what we're used to. It's not lucrative business now.
- SilasX 15y ago
  I could ask the same thing about the Americans that pumped up the American real estate bubble...
Volpe 15y ago
Citations for any of your claims/assertions? Sounds like FUD to me. Some specifics on the following: > Local governments have actually been forcing developers to borrow more money and buy land from them > Real estate agents are offering luxury cars and bars of gold when you purchase an apartment > GDP growth (which we now know has been largely artificial).
- rkon 15y ago
  I wish it weren't true, since any economic collapse has global implications, but they've dug themselves into a serious hole and haven't made any drastic moves to pull themselves out. Numerous sources (and much better explanations of China's precarious financial situation) are in this post http://chovanec.wordpress.com/2011/12/24/china-data-part-1a-more-on-property-downturn/ http://chovanec.wordpress.com/2011/12/24/china-data-part-1a-... It's a blog by an American economist who teaches at Tsinghua University, the top ranking school in China. This sort of news is particularly distressing to hear as the bubble is only beginning to burst: "A source at a state-owned property firm in one provincial capital told Caixin that local agencies don't have enough money to cover basic healthcare costs or pay teachers." http://english.caixin.com/2011-12-19/100339928.html http://english.caixin.com/2011-12-19/100339928.html
  - nl 15y ago
    There isn't a lot of consensus about what the real situation with Chinese real estate is, and even less about what it means. One thing to bear in mind is that China is still a developing economy, which means that it doesn't behave the same way as the US economy does. Economic growth is high, inflation is 5% and population movement from the countryside into the cities is a huge factor. There is a school of thought that a real estate bubble in China is not a significant problem - the driver of economic growth in China is the manufacturing sector, not real estate and a crash in property prices would just raise the standard of living for those involved in the manufacturing industry (ie, they could buy houses).
    - nate_meurer 15y ago
      If the data I have read is to be believed, the biggest driver of the growth of China's GDP is real estate investment. I have read this in many places, including here: http://www.alsosprachanalyst.com/economy/nominal-vs-real-gdp-growth-of-china.html http://www.alsosprachanalyst.com/economy/nominal-vs-real-gdp...
gbog 15y ago
I have been living in China for 9 years now, and ever since (and certainly before) there's been fears and rumors about real estate bubbles, pollution, war, social crash, etc. I can understand that China raises fears and disbelief: how could dare a self-proclaimed communist country build the biggest capitalist market in the world? And, moreover, doing it using the exact opposite way as proposed by European social democracies (China has economic freedom without political openness, while France, for instance, has the opposite) But for anyone coming here in China, from Westerners to Indians to Africans, there is this stone-hard fact: it works, it is happening and it works. In China, they actually have highways all over, they build new factories everyday, they grab millions of peasants out of poverty every year. This process has a lot of difficulties, yes, but who would hope it wouldn't? So the real estate bubble fear: I can only talk about what I know, and what I have seen. I was in Chengdu for 3 years. An enormous percentage of the city center is actually owned by the local government. Same thing in Beijing, where I have lived for 6 years: in my street the local government did order renovation for all places it is owning during the post-olympic little depression (just a "post coitum anima triste"), so it was very clear: they own half of the hutong street. In Kunming, nearly half of the city is a University. What I mean is that, contrary to many Western govs, Chinese gov still has a strong leverage on real estate. They are already reacting in real time to stabilize the market. So, sorry to tell you that, but your eruption feels a bit ill-grounded.
- mjwalshe 15y ago
  Peopel ignord the looming real estate bubble in spain and Ireland for a long time and its not exactly working out for them is it
- hessenwolf 15y ago
  What is the investment return on buying an apartment? If it isn't a few percent above the government borrowing rate, it's a bubble. What is the multiple of median gross salary the average dwelling is selling for? If it is up around 5 or higher, it is very probably a bubble.
- RyanMcGreal 15y ago
  > how could dare a self-proclaimed communist country build the biggest capitalist market in the world? Capitalist markets are susceptible to bubbles, panics, crashes and recessions.
forensic 15y ago
At least Chinese economists are working in the interests of China, unlike the USA. For every dire economic indicator in China there are 100 in the USA and most of them are caused by the government/media/universit economics departments.

by rkon 15y ago

Raphael 15y ago

Couldn't you just rent until it's a good time to buy?

nate_meurer 15y ago
Excellent question. I've wondered this myself; is the real estate boom feeding the rental market, and if not, why?
- Maarten_pi 15y ago
  I've asked my Chinese friends that same question. I've been told that rental prices aren't what we're used to. It's not lucrative business now.
SilasX 15y ago
I could ask the same thing about the Americans that pumped up the American real estate bubble...

Volpe 15y ago

Citations for any of your claims/assertions? Sounds like FUD to me. Some specifics on the following: > Local governments have actually been forcing developers to borrow more money and buy land from them > Real estate agents are offering luxury cars and bars of gold when you purchase an apartment > GDP growth (which we now know has been largely artificial).

rkon 15y ago
I wish it weren't true, since any economic collapse has global implications, but they've dug themselves into a serious hole and haven't made any drastic moves to pull themselves out. Numerous sources (and much better explanations of China's precarious financial situation) are in this post http://chovanec.wordpress.com/2011/12/24/china-data-part-1a-more-on-property-downturn/ http://chovanec.wordpress.com/2011/12/24/china-data-part-1a-... It's a blog by an American economist who teaches at Tsinghua University, the top ranking school in China. This sort of news is particularly distressing to hear as the bubble is only beginning to burst: "A source at a state-owned property firm in one provincial capital told Caixin that local agencies don't have enough money to cover basic healthcare costs or pay teachers." http://english.caixin.com/2011-12-19/100339928.html http://english.caixin.com/2011-12-19/100339928.html
- nl 15y ago
  There isn't a lot of consensus about what the real situation with Chinese real estate is, and even less about what it means. One thing to bear in mind is that China is still a developing economy, which means that it doesn't behave the same way as the US economy does. Economic growth is high, inflation is 5% and population movement from the countryside into the cities is a huge factor. There is a school of thought that a real estate bubble in China is not a significant problem - the driver of economic growth in China is the manufacturing sector, not real estate and a crash in property prices would just raise the standard of living for those involved in the manufacturing industry (ie, they could buy houses).
  - nate_meurer 15y ago
    If the data I have read is to be believed, the biggest driver of the growth of China's GDP is real estate investment. I have read this in many places, including here: http://www.alsosprachanalyst.com/economy/nominal-vs-real-gdp-growth-of-china.html http://www.alsosprachanalyst.com/economy/nominal-vs-real-gdp...

gbog 15y ago

I have been living in China for 9 years now, and ever since (and certainly before) there's been fears and rumors about real estate bubbles, pollution, war, social crash, etc. I can understand that China raises fears and disbelief: how could dare a self-proclaimed communist country build the biggest capitalist market in the world? And, moreover, doing it using the exact opposite way as proposed by European social democracies (China has economic freedom without political openness, while France, for instance, has the opposite) But for anyone coming here in China, from Westerners to Indians to Africans, there is this stone-hard fact: it works, it is happening and it works. In China, they actually have highways all over, they build new factories everyday, they grab millions of peasants out of poverty every year. This process has a lot of difficulties, yes, but who would hope it wouldn't? So the real estate bubble fear: I can only talk about what I know, and what I have seen. I was in Chengdu for 3 years. An enormous percentage of the city center is actually owned by the local government. Same thing in Beijing, where I have lived for 6 years: in my street the local government did order renovation for all places it is owning during the post-olympic little depression (just a "post coitum anima triste"), so it was very clear: they own half of the hutong street. In Kunming, nearly half of the city is a University. What I mean is that, contrary to many Western govs, Chinese gov still has a strong leverage on real estate. They are already reacting in real time to stabilize the market. So, sorry to tell you that, but your eruption feels a bit ill-grounded.

mjwalshe 15y ago
Peopel ignord the looming real estate bubble in spain and Ireland for a long time and its not exactly working out for them is it
hessenwolf 15y ago
What is the investment return on buying an apartment? If it isn't a few percent above the government borrowing rate, it's a bubble. What is the multiple of median gross salary the average dwelling is selling for? If it is up around 5 or higher, it is very probably a bubble.
RyanMcGreal 15y ago
> how could dare a self-proclaimed communist country build the biggest capitalist market in the world? Capitalist markets are susceptible to bubbles, panics, crashes and recessions.

forensic 15y ago

At least Chinese economists are working in the interests of China, unlike the USA. For every dire economic indicator in China there are 100 in the USA and most of them are caused by the government/media/universit economics departments.