Saturday, March 5, 2011

Bottom Line Manageable Decline in China is 30%

CHINA NPC: China Banking Regulator: Maximum Fall Of 30% For Property Prices Acceptable
BEIJING (Dow Jones)--Stress tests found the scope of risk from real-estate loans in China is controllable, but the "bottom line" for a fall in real-estate prices is 30%, China Banking Regulatory Commission Assistant Chairman Yan Qingmin said Saturday.

Raise your hand if you think China has any top tier cities that are only 43% overvalued.

Eh, so what, the central government will just use all that cash to bail out the banks, right? In one of his interviews, Chanos insists those holdings are tied up in sterilizing the exchange rate and aren't actually available. I have a feeling we'll be finding out.

4 comments:

jesse said...

Good find. This shows the force by which Chinese authorities are willing to quench asset prices, and how far prices have increased that a 30% drop would be deemed acceptable.

I see some subtext going on inside the central government, that these announcements are becoming repetitive and more frequent. I think what's going on is the fear/realisation that city states are beginning to form with too much power. That the central gov't has had such a problem instituting property taxes and changing land sale regulations is a hint that they were asleep at the wheel in the past few years and the balance of power is leaving Beijing. Look for some big name city officials to be skewered in the coming year as that power is retrenched.

GG said...

It is a remarkably Medieval structure, isn't it? Absolute authority rests with one figure but that power cannot be wielded subtly except by edict. They are going to have to come down hard on someone as an example to get traction.

But at the same time, this article shows. The richest 70 of the 2,987 members have a combined wealth of 493.1 billion yuan ($75.1 billion), and include China’s richest man, Hangzhou Wahaha Group Chairman Zong Qinghou, according to the research group Hurun Report. By comparison, the wealthiest 70 people in the 535-member U.S. House and Senate, who represent a country with about 10 times China’s per-capita income, had a maximum combined wealth of $4.8 billion, data from the Washington-based Center for Responsive Politics show.

There has been government capture at the top by locally based interests who will be trying to protect their "partners" in local government.

jesse said...

"Absolute authority rests with one figure"

I don't know enough about the internals of politburo machinations but redistributing the wealth of top officials seems rather slow and only relatively low-down officials are being targeted. My sense is they need a big kill and hope the redistribution percolates down the chain, as other officials scramble to avoid a similar fate.

Henrik said...

Great job.

So there are only 4 countries left to pop?
CAN; AUS; CHI and Norway.

Norway is a commodityproducer as well, but housing does not seem to bust anytime yet. Can one country really stand alone without a bursting bubble when the whole freaking world pops?