cobran20

Property Prices Collapse in China. Is This a Crash?

21 posts in this topic

Is China following the US?

link

Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun,” said Alan Chiang Sheung-lai of property consultant DTZ to the South China Morning Post.

What started slowly in September turned into a rout by the middle of last month—normally a good period for sales—when Shanghai developers started to slash asking prices. Analysts then expected falling property values to move Premier Wen Jiabao to relax tightening measures, such as increases in mortgage rates and prohibitions on second-home purchases, intended to cool the market.....

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fyi article is from June.

nah that's just how they write the date in the US... its 2 or 3 days old (6th Nov)

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nah that's just how they write the date in the US... its 2 or 3 days old (6th Nov)

Yep check the url where the date is written in the only true date format. I spit upon other formats ptoooi!

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Yep check the url where the date is written in the only true date format. I spit upon other formats ptoooi!

The other giveaway is the reference to September sales... :D

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The other giveaway is the reference to September sales... :D

now i look like an idiot.

if only we could decimalise time i would be very happy.

i assumed it was a slow train wreck in china like elsewhere where nine months was a reasonable time for the tide to change. it appears it is happening very quickly in china. in the space of 5.57 months we have gone from boom to discounts, to buyers protesting rea sales offices. can you imagine high rise harry offering 30% off his towers? no wonder he left china.

i live in Brisbane china town, so i have a limited understanding of the Chinese psyche. imo it's extremely herd focused, stand still and you will be run over. i suspect by early next year the world will be hearing, loud and clear, the hiss of the china bubble deflating.

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now i look like an idiot.

if only we could decimalise time i would be very happy.

i assumed it was a slow train wreck in china like elsewhere where nine months was a reasonable time for the tide to change. it appears it is happening very quickly in china. in the space of 5.57 months we have gone from boom to discounts, to buyers protesting rea sales offices. can you imagine high rise harry offering 30% off his towers? no wonder he left china.

i live in Brisbane china town, so i have a limited understanding of the Chinese psyche. imo it's extremely herd focused, stand still and you will be run over. i suspect by early next year the world will be hearing, loud and clear, the hiss of the china bubble deflating.

Here is how SAP helpfully shows timestamps 20,111,109,231,356

China is odd. New flats are more valuable than used - similar to cars. So people keep them empty. The growth is visible to anyone wandering around the cities. Shenzhen was a fishing village in the eighties. I think there is a lot more spare capacity in China than Australia.

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Nov 9 (Reuters) - A property developer in the eastern Chinese province of Zhejiang was sentenced to death for swindling more than $867 million from investors in an illegal fund-raising scheme, a newspaper reported on Wednesday.

Zhejiang's capital, Wenzhou, has been hit by a debt crisis and a wave of high-profile corporate bankruptcies, with firms unable to repay loans from shady underground lenders at extortionate interest rates amid a nationwide credit squeeze.

more at http://www.reuters.com/article/2011/11/09/idUSL4E7M901F20111109

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That is a lot of money, but death sentence? Yikes!

I think this guy must have made some powerful enemies (creditors) to finish up this way.

I suspect he burned somebody high on the communist ladder. No second chance there!

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If this article is true, then there is something good about communist China. I wonder how Bernie Maddoff feels about it!

Chinese Fund Managers Sentenced to Death after Cheating Investors out of 1 Billion USD

HANGZHOU – Two brothers and their father were sentenced to death on Monday for cheating 15,000 investors out of over $1.1 billion in east China’s Zhejiang province.

Ji Wenhua, president of the Yintai Real Estate and Investment Group, was sentenced to death for the crime of fund-raising fraud, said the Intermediate People’s Court in the city of Lishui, where the company was based.

However, his brother, Ji Shengjun, and father, Ji Linqing, could be spared execution as their death penalties have a two-year reprieve.

The family, along with others, had illegally raised over 7.04 billion yuan ($1.12 billion) between 2003 and 2008 before they were taken into police custody in 2008, holding the truth from investors that their company had been losing money for years, according to the court.

A third brother, Ji Yongjun, was sentenced to life imprisonment.

The four men also had their political rights deprived for life and personal property confiscated.

The court also sentenced two other people involved in the case to three years in prison each.

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If this article is true, then there is something good about communist China. I wonder how Bernie Maddoff feels about it!

Obviously the death sentence didn't discourage those people. If anything I suspect that extreme risks make people more careful about getting caught and that therefore there is probably more corruption in countries with the extreme penalties.

I base this on my theory that most people cannot balance risk and reward accurately.

Living in a country where the risk of being massively corrupt leads to a few years in prison, I think, is more discouraging than one where you get killed for it mostly because the risk is not so high.

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The country is doomed, the provinces bankrupt, the executioner really needs to be on 24/7 shifts for a year to catch up.

http://www.chrismart...nent-bust/65040

1920s Japan. Rinse and repeat.

http://usa.chinadail...nt_14102057.htm

Slightly off topic but acquaintances and friends of mine are now talking about the probability of China collapsing and it's unsustainable economy. This is coming from the usually economically illiterate crowd as it's become mainstream news. Ho hum.

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Amazing when reality sets in?

http://globaleconomicanalysis.blogspot.com/2011/11/chinas-vice-premier-sees-chronic-global.html

A long-term global recession is certain to happen and China must focus on domestic problems, Chinese Vice Premier Wang Qishan has said.

"The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic," Wang was quoted by the official Xinhua news agency as saying at the weekend.

Wang's comments were the most bearish forecast ever by a top Chinese decision-maker about the world economy, and Beijing's worry about a worsening global environment could translate into an impetus for pro-growth policies at home.

I like this

In a world of global economic denial about the Euro, about deficits in the US, about housing bubbles in Australia, China, and Canada, and in general denial about every economic woe the world faces, one might ask "why this astonishing admission?"

I have a 3-part answer

  1. As China shifts from an untenable infrastructure model to a consumption model, as Europe faces a Eurozone breakup and harsh recession, as the US faces a deficit crisis (albeit halfheartedly at best), much global pain is in order.
  2. By framing the problem as a global problem, the vice-premier gets to blame the world economy for the internal strife in China.
  3. This is an indication that China is falling apart right here, right now, much faster than the Western world believes.

The admission by the vice-premier simply reflects the demise of China's export model in the face of a rapidly slowing global economy accompanied by a regime change in China that will be forced to shift its internal priorities.

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A must read

http://seekingalpha.com/article/308830-the-coming-china-collapse-economic-political-or-both

Even with this enormous credit expansion, recent estimates (.pdf) still place the number of Chinese living on less than $2 per day at approximately 480 million, over a third of the entire population. The credit push has lead China to consume more than half of the world's cement, 47% of the world's coal and 48% of all iron ore. This, for a country whose GDP is just 10.7% of the entire global economy and hundreds of millions wallow in poverty.

Sustaining the credit expansion in an attempt to prevent a recession has built the world's largest house of cards. Estimates have put the number of vacant apartments built as high as 64 million. Entire ghost cities have been constructed and sit virtually empty. The homes are simply unaffordable. The average Beijing citizen's entire annual income would purchase just 10 square feet of residential property. In the commercial sector, China holds the record for the world's largest shopping mall. Currently it is 98% vacant.

China's real estate bubble, one of the few remaining, is losing air at an astonishing speed. In just the past few weeks, hundreds of real estate brokerages have shuttered and thousands of workers have been laid off. The private SouFun Group in Beijing announced that the number of transactions fell by more than half in six of the 35 cities it surveyed just this month compared to last year. At least some declines were seen in 80% of the cities it surveyed.

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John Mauldin

“We saw today that 80% of Chinese construction firms say developers are now behind on payments (late cash flow), and that consequently land purchases are already 42% down y/y (slowing local authority cash flow). We also heard that pricing controls means that utility companies no longer have the cash flow to afford vital imports. Q3 corporate cash flow was down 27%.

“China's trade surplus is annualizing this year at USD152bn, FDI [Foreign Direct Investing] @ USD114bn yet its FX reserve increase is USD472bn. The attached chart [below] shows Chinese external borrowings which unfortunately were last updated at the end of last year, but the data would infer these have continued to soar.

“I am being told that European banks are now starting to shrink their foreign loan books to meet domestic needs, with Mexico, Brazil and China all big losers. With China now saying they may run a full-year trade deficit next year, and with them unable to afford to import vital coal and other resources without either suffering domestic inflation or without selling its FX reserves, it may now well be time to consider some sort of puts on the yuan. In fact the only reason perhaps not to is that India may collapse first, reducing the competition for coal and giving China a little more breathing room.

China is not a problem in the short term. But there have to be adjustments to keep that status of “not a problem.” The situation bears watching and becoming familiar with, as I am on the record that Japan is the next in line to suffer a real world-shaking crisis. And China, which does not adjust in advance, can suffer contagion effects from Japan.

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China's epic hangover begins.

http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html

Ambrose Evans Pritchard in the UK Telegraph. China's impending crash has gone mainstream.

Mark Williams from Capital Economics said the great hope was that China would use is credit spree after 2008 to buy time, switching from chronic over-investment to consumer-led growth. "It hasn't work out as planned. The next few weeks are likely to reveal how little progress has been made. China may ride out the storm over the next few months, but the dangers of over-capacity and bad debt will only intensify".

In truth, China faces an epic deleveraging hangover, like the rest of us.

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