Chinese Economics Thread
- Thread starter Norfolk
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It's a good thing that there is a property slowdown.
10 years ago, most properties were sold to owner-occupiers who actually lived in the property.
But in recent years, it flipped to 86% being sold to investors, with many properties being left empty on the assumption that prices keep increasing.
So 2 things come out of this:
1. The construction industry needs to reduce in size. So the government deliberately deflating the market is a good thing.
2. This will also lower costs for construction materials, which will make existing property projects more profitable or reduce selling prices.
But an orderly deflating of property prices means keeping prices stable or a small decline.
Then the effect of increasing wages and inflation will make property much more affordable.
That could be in the region of 10% per year, which means in 7 years time, nominal wages have doubled whilst housing prices could still be the same.
That would bring the [house price to income ratio] from 17 to 8.5, which is comparable to the UK.
And given Chinese income levels, we could see nominal wages increase by 7% per year
That means nominal incomes double in the space of 10 years, and the [house price to income ratio] dropping to 4.25, which is below the US at 5.4. Theoretically, that means house prices in China could actually see further modest increases and still be affordable in 17 years time, but it wouldn't be prudent to expect or want to see property prices increase.
In comparison, when the Japanese stock and property bubble burst in 1991, Japan was already a developed country so wages only grew at <1% per year plus barely any inflation. Plus the Japanese property market was much more overvalued in comparison, so there was no alternative but for prices to come crashing down.
So in conclusion, I would say Chinese policymakers have done a far better job so far, in comparison to the housing bubbles seen in Japan (1991) and the USA (2008).
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Couple of other comparisons from today.
Banking Assets
China: $50 Trillion
USA: $23 Trillion
Housing Market Value
China: $60 Trillion
USA: $33 Trillion
So we can see banking assets and the total housing stock in China is about twice the size of the USA.
But China does have 4x the population of the USA, so theoretically a prosperous middle-class China could support a housing market valuation which is twice what it is today, based on US levels.
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A couple more from Japan in 1991.
Back in 1991, the Japanese property market was worth four times more than the US property market.
But Japan was already a developed country with only half the population of the USA.
References below
Banking Assets
China: $50 Trillion
USA: $23 Trillion
Housing Market Value
China: $60 Trillion
USA: $33 Trillion
So we can see banking assets and the total housing stock in China is about twice the size of the USA.
But China does have 4x the population of the USA, so theoretically a prosperous middle-class China could support a housing market valuation which is twice what it is today, based on US levels.
---
A couple more from Japan in 1991.
Back in 1991, the Japanese property market was worth four times more than the US property market.
But Japan was already a developed country with only half the population of the USA.
References below
less money to Australia is probably a good thing. and cheaper steel to build, you know, what we care about here.
Looks like you have grown up from wholesaling second hand western MSM garbage to trying to add your own. If Bloomberg didn't twisted Lou Jiwei's words, you are twisting Bloomberg's. Trying to climb up on the value chain, aren't you?
Lou Jiwei is a former Finance Minister of the Chinese government. No one with the average comprehension would consider him a "Chinese leader". Even if he was a leader by any stretched definition, Bloomberg only mentioned Lou alone, yet you used the plural form "leaders".
I cannot find any other source to fact check it. And given Bloomberg's dark history of lying on reporting China, I throw this story in the pile of "Western MSM Lies".
manqiangrexue
Brigadier
Oh yeah, it might even be a 0.1-0.2% drop on a 5-7% growth Chinese economy while Western economies dance back and forth with recession. So the guys in the hospital in whole body casts can laugh at China as it "suffers" from that slap on the arm. But don't laugh too hard cus that hurts LOL
More banking assets is not necessarily a good thing. Every dollar of asset is also a dollar of liability. China may have four times the population of America but the nominal GDP is only little over 70% of the US. And the per capita income is only one sixth of the US. rather China is able to better handle its bubble's compared to either the US or Japan remains to be seen.
This on the other hand is definitely a bad thing. China's slower growth is helping to keep inflation at bay. China once again is back at stimulating the economy. If inflation rises its going to be a much bigger problem than slower growth.
Of course you'll say that. It's like you have no opinion at all other than simply latching onto every critical hit pieces against China and that's enough "evidence" for you to back up your unhinged anti-China agenda.
You sure, you're not Gordon Chang's long lost child? I mean, Othon rhymes with Gordon.
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