Chinese Economics Thread

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AndrewS

Brigadier
Registered Member
KYli said:
US was over-leveraged during the crash in 2008. People are paying less than 5% down payment or nothing or sometime even cash incentives for borrowing. Compare with the US and China, it is not really the same.

I would say Hong Kong can offer a great example. When Hong Kong property crash during 1998, it didn't really become detrimental to the economy until it was down 50%-70%. A 20% correction is nothing in China.

China has two small corrections over the last decade. One is 5% and another one is little over 10%. Basically, both times the property prices rebound so quickly. It looks very bad for the government as it was unable to rein in the property prices.
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With a 20% drop, it's the developers who would be even more overleveraged and unable to complete even more existing projects.

Whilst the property construction industry does need to shrink, you don't want them all to default.

I think they can manage with a modest drop and then keep on top in preventing any property price rebounds.
 
K

KYli

Brigadier
AndrewS said:
With a 20% drop, it's the developers who would be even more overleveraged and unable to complete even more existing projects.

Whilst the property construction industry does need to shrink, you don't want them all to default.

I think they can manage with a modest drop and then keep on top in preventing any property price rebounds.
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State firms are buying up some of the unfinished property projects and the government is relaxing rules and allowing developers more access to loan and cash.

However, if these developers can't re-stand a mere 20% drop in property prices then they shouldn't exist in the first place. I don't pity these developers. For years these developers have engaged in self-dealing. By paying enormous amount of dividends, offering outrageous interests for loan that they and their buddies buy up themselves, paying ridiculous prices for projects in UK, NZ, Australia, and the US.
 
j17wang

j17wang

Senior Member
Registered Member
mossen said:
Evergrande is a sideshow. Much bigger issue is that housing is vastly overpriced across the board.

It's not just a few big cities either.

View attachment 81862

China's financial-property sector is safer than in the US since the state is more heavily involved, so any major financial crisis is unlikely to happen but a major push towards affordability is needed, not least since it will increase fertility as family formation becomes more affordable. Chinese house ownership is high because the entire family's wealth pool is tapped, but this isn't a good model. If China's price-to-income ratio fell by 50% or more, it would lessen the burden on the entire family by a great amount.
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LOL, if this is what the housing affordability issue looks like I might as well move to Beijing. The ratio is well over 30 in Toronto now.
 
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