I´m taking a quick break from my "Time-Out".... With "QE 2.0 & 3.0" just around the corner & the € crises off the front pages i think the links are not "unimportant".......
Verabscheide mich nach diesen Posting wieder in die angekündigte "Auszeit".... Im Zusammenhang mit der bevorstehenden "QE Version 2.0, 3.0 usw...." sowie der "fast vergessenen" € Krise erscheinen mir die kompletten Links besonders lesenwert....
Spain’s debt for 2010 according to the EDP is expected to reach around 77% of GDP (EU Commission spring forecast), and while we feel it is still possible to agree with the IMF when they say that that “Spain’s (public) debt ratio is low compared with many other countries in Europe”, it is only possible to do so if we do not forget that if we add in the 6% that is held by the Social Security Fund, the 7% that has built up in Accounts Payable and the 5% owed by Spains Public Corporations, we end up with a total of something like 95% debt to GDP, which is, of course, above the average. And this is not to even begin to count all those impending pension liabilities.
My impression is that Ben Bernanke has little sense of the damage he is about to provoke. A central banker who talks about throwing money from helicopters is not only arrogant but foolish.
Nearly a century ago, the great economist Ludwig von Mises observed that massive central bank easing is invariably a form of cowardice that attempts to avoid the need to restructure debt or correct fiscal deficits, avoiding wiser but more difficult choices by instead destroying the value of the currency.
When the Fed or the European Central Bank tries to stimulate, they are actually stimulating the global economy as a whole. Water, no matter where it comes from, flows downwards. Stimulus, similarly, flows to where costs are low and banking systems are healthy.
If you believe this logic, the actions of the Fed and the ECB fuel inflation and asset bubbles in emerging economies rather than stimulate growth at home.
Lots of damage has already been done...... Regarding "healthy" banking systems China has nothing to worry about... ;-)
Denke das wir bereits heute mehr als genügend Auswirkungen dieser Erkenntnis sehen können.....Immerhin hat China in Sachen "gesunden" Bankensystem nichts zu befürchten.... ;-)
Not only the cracks regarding the Three Gorges Dam are getting more and more obvious on a daily basis...... You can read my earlier takes on China here
Nicht nur der Drei Schluchten Damm zeigt erste Risse...... Mehr von mir zum Thema China gibt es hier
How many flats in China are sitting empty?The media recently floated a story — denied by power companies — that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people….
What especially distinguishes China’s property bubble…is an unprecedented amount of living space. This huge stock of empty flats equals the nation’s quantity bubble.
Although the government doesn’t publish vacancy data, I think the vacancy rate for the nation’s private, commercial housing stock is between 25% and 30%. That’s at least double what’s required in a normal market. The gap between what’s needed and what’s available can be viewed as speculative inventory. The value of this inventory held by speculators is probably around 15% of GDP.
It’s being kept on ice, just as copper and other commodities are hoarded in anticipation of rising prices…
China’s stress tests of banks will assess the risk that a possible slump in property prices may strain developers’ finances and cause homebuyers to default, a person with knowledge of the matter said.
The banking regulator told lenders to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively
Banks were also told to stress test loans to industries including steel, cement, construction materials and home appliances that are related to housing, the person said
Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.
....the rule of law remains weak in Chinese property overall — 24 out of 30 developers surveyed said they knew of companies that had illegally taken out bank loans to buy land.
China's Ministry of Land and Resources has found 1,457 unused plots of land nationwide and given a list of what companies hold rights to these plots to the China Banking Regulatory Commission, the China Securities Journal reported today, citing a person familiar with the situation.
The banking regulator will use the list to conduct a risk assessment, the Beijing-based newspaper reported. About 80 percent of the unused plots may be repossessed by the government, according to the report.
It looks like the latest spin attempt to keep the "story" intact comes along the line "excluding Tier 1 cities everything is fine "..... Where have i heard this bevore.... ? ;-)....
Sieht ganz so aus als wenn die nächste Sau die durchs Dorf getrieben wird um zumindest den Anschein zu erwecken das noch nicht alles verloren ist die Überschrift trägt "Abseits der Tier 1 Städte ist der Immobilienmarkt noch intakt"....... Wo habe ich das bloß vorher schon einmal gehört.... ? ;-)
while the focus is on Tier 1 cities, there is a good chance that they do not represent the national trend.
There are, after all, hundreds of other cities around China that are busy growing, and in which people might be still busy building and selling apartments.
Sales have fallen in Tier 2 and Tier 3 cities too, but not by as much as in Tier 1 cities, as Chart 2 shows [above]. (In our chart, we have used data from 10 cities: Tianjin, Chongqing, Chengdu, Hefei, Wuhan, Changsha, Dalian, Nanjing, Suzhou and Changchun).
Indeed, in some cities – Hangzhou in Zhejiang province, for instance – we have actually seen prices push up a little since April.
This was a Tier 1 bubble and it looks to have been pricked without killing the Tier 2 and Tier 3 markets
At least they acknowledge that Tier 1 is a bubble.....Take a secound look at the volume stat on page 2...... Crashing is defintely not an overstatement....UPDATE:StanChart: Chinese property correction imminent
Immerhin wird richtigerweise der Tier1 Immobilienmarkt als Bubble identifiziert.....Denke die Volumenangabe auf Seite 2 ist besonders "beeindruckend"..... Der Begriff "Crash" ist sicher nicht als übertrieben einzustufen....UPDATE: StanChart: Chinese property correction imminent
As equity markets should act as a leading indicator of broader economic growth trends, it seems, therefore, that the Chinese equity market has recently become ‘the leading indicator of the leading indicators’. Given that the local Shanghai Composite index and MSCI China have both rebounded by 13-15% from their recent lows and our China strategist, Minggao Shen, has just turned more bullish on the market1, these events are a positive mix for global emerging markets as a whole. This is, therefore, a good time to consider the Chinese market’s role as a signaling mechanism for GEMs as a whole.
China is now a very large economy (the second biggest in the world, accounting for an estimated 9% of global GDP in 2010) and a big stock market (the ninth biggest in the world).
The Chinese economy is also expected to account for as much as 23%10 of global growth (i.e., the rise in global GDP) in 2010, a share that is higher at present due to the weakness of developed economies . . .
China not only now accounts for a significant proportion of global growth in a but it is, by far, the biggest consumer of commodities. Our commodities analyst, Alan Heap11, reports that China currently accounts for the consumption of around 40% of several major metals including copper, nickel, and aluminum . . .
Oh boy.... Wall Street Finest / Shanghai strikes again.... Too bad that he didn´t mention that one reason for the rise in the stock market is probably the stalling real estate market.... With negative real interest rates Chinese have besides GOLD almost no place to put their money to work..... If my view on real estate is correct all his bullish arguments would be turned upside down......
Mal wieder perfektes ( Experten ) Timing..... Wäre nett gewesen wenn zumindest in einem Nebensatz erwähnt worden wäre das einer der Haupttreiber für den Geldfluss in die Aktienmärkte der rapide abkühlenden Immobiliensektor ist....Da die Chinesen mit negativen Realzinsen leben müssen und Abseits von GOLD nur der Aktienmarkt als Alternative übrig bleibt verwundert die gesehene "Stärke" nicht....Sollte ich mit meiner Meinung zum Immobilienmarkt in China auch nur im Ansatz Recht behalten drehen sich die o.a. "bullischen" Argumente über Nacht ins Gegenteil....
Empty : Though many of the properties in Kangbashi have been sold and a million people were projected to be living in Kangbashi by 2010, the city is still empty.
The central government has unleashed another round of property tightening measures. This time it is focusing on mortgage lending terms: the mortgage interest discount for first-time homebuyers has been reduced; the discount for second-time homebuyers has been abolished and the down payment requirement raised to 40%; and the rate for third-time buyers is being left to the banks' discretion with down payments raised to 60%.
Predictably, sales volumes in both primary and secondary markets have collapsed. But no one is panicking, not even those who live off the property bubble. Why? Aren't they supposed to be terrified of the government's crackdown?
It seems we have seen this movie before. China has launched property-tightening measures several times but it relaxed them just when they began to bite.
The bottom line is that local governments, and the central government through them, depend very much on property for revenue. The market doesn't believe the government will cut off the hand that feeds it.
Local governments and developers are sitting on massive liquidity that they raised last year through land and property sales and borrowings, taking advantage of the "anything goes" window during the stimulus period. They seem to believe that the central government will change its mind before they run out of liquidity. So they are comfortable waiting and not cutting prices.
Cutting prices doesn't make sense if the government is expected to loosen policy again soon. The current lending terms effectively keep second- and third-time homebuyers out of the market. To sell, developers must cut prices to levels affordable to the buyers of first homes, who have low incomes and little wealth. All the players will play by the new rules only if the central government proves its credibility by maintaining the tightening policy until local governments and developers run out of money.
Contrary to the policies' intent, local governments are readying for another round of property inflation. Local governments have been using bank loans to resettle residents, and resettlement costs have skyrocketed since those being moved need enough compensation to buy properties at today's prices. Unless property prices rise considerably, local governments will end up losing money, which they cannot afford to do.
Resettlements played an important role in supporting demand for property last year. The overwhelming majority of end-user purchases probably came from resettled residents who used their compensation money for a down payment.
Resettlement compensation is the biggest transfer of wealth from the government to the household sector since the privatization of public housing at low prices a decade ago. It is probably the most important government action supporting today's economy.
The positive elements of resettlement compensation come with two major negatives. First, it is using a form of leverage to support demand. Local governments borrow to pay the compensation packages, using the land as collateral. The resettled residents use the compensation as down payment for mortgage borrowing; so government debt becomes equity for mortgage debt.
There is no real equity in the financing chain
China's property market is a massive bubble. The stock of residential properties, developers' inventories, and land that local governments have pledged to banks may exceed by three times the gross domestic product.
Yuan appreciation hype ignores China's need for higher rates
The intensity and persistence of yuan appreciation expectations point to support for China's vast property bubble. These expectations have increased the concentration of hot money in China, which in turn has caused excess liquidity and speculation, fueling the property bubble.
By all measures (stock value to gross domestic product ratios, inventory value to GDP ratios, new property sales to GDP ratios, price to income ratios, rental yields and vacancy rates), China's property market is one of the biggest bubbles ever. It's probably much bigger than the U.S. property bubble relative to GDP.
Now, the same liquidity that fueled the property bubble is leading to a rapid pickup for consumer price inflation. One just needs to look around to see the seriousness of the inflation picture, regardless of how it's measured. Denying that inflation is serious in China right now is akin to burying one's head in the sand.This sort of denial is how countries in Southeast Asia got into a crisis situation in the past: They kept real interest rates too low and fueled speculation that eventually destroyed their banking systems.
If China's economic stimulus is withdrawn, the property bubble will cool. And it may even burst. This is why so many interest groups consistently argue against higher interest rates. Instead, they support using currency appreciation to cool inflation.
Many analysts argue that raising interest rates would attract more hot money. This is wrong. Hot money comes to China for currency appreciation and asset-bubble reasons, not to chase interest rates. When an interest rate is raised, expectations for property-price appreciation wane and hot money is more likely to fall than rise.
Increasing the yuan's value a bit would certainly trigger more frenzy. Any new property booms that follow may support the economy for a time. But the long-term consequences would be severe. Indeed, a small appreciation could make a crisis inevitable.
Edward Hugh
