Check out the property story below.
And they do seem very worried about inflation.
Not sure if they can control it without triggering a crash.
Maybe.
China’s Stocks Have ‘Corrected Enough,’ BofA Says
China’s Monthly Car-Sales Growth Slows Amid Inflation
China Think Tank Sees 4.2% Inflation, Urges Yuan Flexibility
‘Measures to cool property already working’
New loans set to grow in April
‘Measures to cool property already working’ (China Daily) The skyrocketing prices of property could harm the financial security and social stability of the nation, Qi Ji, vice-minister of housing and urban-rural development, said. “Excessive gains in prices are mainly due to a shortage of supply, and a major part of the demand for housing is due to unreasonable demand,” Qi said. “The government will strictly carry out current measures to curb such demands,” he said. Hangzhou, capital of eastern Zhejiang province, saw a 72.55-percent month-on-month plunge in properties sold during the week ending April 25. Beijing witnessed a 45-percent fall in property sales, while in Shanghai the drop was 38 percent, according to China Index Research Institute. EverGrande Real Estate is reportedly offering a 15-percent discount to push sales of apartments in one of its housing developments in Guangzhou, capital of Guangdong province.
New loans set to grow in April
New loans set to grow in April(China Daily) Analysts expect new loans to exceed 600 billion yuan ($87.88), or even top 700 billion yuan, in April, after dipping to 510.7 billion yuan in the previous month. The central bank is scheduled to release April lending figures next week. Mounting inflationary pressure and asset bubble risks are clouding the Chinese economy this year after nearly 9.6 trillion yuan in new loans flooded into the market in the previous year. The central bank revived the lending quota mechanism, a method to cope with economic overheating in early 2008, to help contain credit growth. To this end, Chinese lenders are allowed to give out roughly 2.25 trillion yuan in new loans in the second quarter, accounting for 30 percent of the 7.5 trillion yuan target set by the authority. In the first three months, more than one third of the 2.6 trillion yuan in new loans was directed to real estate developers and homebuyers.
The key questions about China seem to be whether there is the political will to stop inflation and in particular the land and property bubble if it might threaten GDP growth. It does appear that they are taking real steps to slow the market, but I dont know what they expect the impact to be on overall growth.
Chinese real estate buyers are likely less levered than was the case in the US given the loan to value restrictions and recent restrictions by the govt on non-primary residential property, but they may well be still in Ponzi, which would mean a crash might happen if price increases slow or even modestly reverse.
I think Jim Chanos is going to be right about the Chinese economy. Time will tell.
Not sure if they can control it without triggering a crash.
Andy Xie, who in the ground there, doesn’t think so. Last I heard, he is anticipating it 2012.
Lending quota system, now that’s an interesting way to control credit. Even without a hard cap, by regulating the size of each loan (a max or, less likely, a minimum) as well as the percentage of the required downpayment, you could slow down an overheating RE market without raising interest rates.
yes, but the question is can it slow down without crashing?
we shall see.
A good point. And it’s hard to tell as the accuracy of the data is in question, and the ability of the central government to control the behavior of local officials is also in question. The local officials are also often the ones taking out the loans.