Monday, March 4, 2013

China's prices down 6% since start of Feb

It's been a China extravaganza in the news lately. China Gets Tough on Property Sales
China's cabinet, or State Council, said Friday that it plans to enforce a 20 percent capital gains tax on the sale of second-hand homes, as well as higher downpayments and interest rates. Mainland China has tumbled more than six percent since the start of February as government interference with property prices has loomed.

While this has ripple effects — the Australian dollar has weakened — this does not appear to be the start of an economy-wide credit squeeze. Instead, it appears to be limited to the property sector.

60 Minutes Covers the China Real Estate Bubble

Covers the ghost cities. Claims 12 to 24 new cities being built every year. Malls with make-believe brand signs. Multiple classes will be wiped out when the bubble bursts: multigenerational family savings, construction workers. Shanghai average apartment costs 45 times average salary. The fake Manhattan in the port city of Tianjin has ceased development. City officials claim they stopped because they want to put on all the facades at once so they match, but workers say otherwise. First sign of the crash is the migrant workers go home and in this development, at least, they have. Price declines have led to demonstrations outside developers. The head of Vanke worries that a real burst could lead to an Arab Spring situation.

Saturday, March 2, 2013

100 Judges Assigned to Bad Debt Resolution

Wenzhou City Assigns 100 Judges to Resolve Bad Loans, News Says
The judges will work with 50 to 100 financial institutions starting next month to deal with soured assets in the city’s banking system, the state news agency reported yesterday, citing unidentified court officials. Wenzhou’s non-performing loans have soared to 23.86 billion yuan ($3.8 billion), from 8.6 billion yuan in 2011, according to the news agency.
That's the trouble with a shadow banking system, it doesn't have a reserve.
The judges will provide legal assistance to companies that have promising outlooks, while weeding out failing enterprises in industries with high pollution and energy consumption through bankruptcy, the news service said.
The Chinese are about to learn about the creative destruction portion of the economic cycle.