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China's Property Woes.

Discussion in 'The Economy' started by Johny_come_lately, 23rd May, 2011.

  1. Johny_come_lately

    Johny_come_lately Well-Known Member

    1st Jul, 2009
    SE Queensland
    House sales are slowing in China and prices declining, Mr Chanos, founder of New York-based short selling firm Kynikos Associates, told the CNBC television network on Wednesday.

    "The cracks are spreading on the facade," he said, of China's economic growth story.

    "You're seeing real estate firms shutter, sales offices closed down.

    "Some of the engine behind the boom is at least beginning to sputter."

    Chinese developers are now turning to Hong Kong to raise capital through junk bonds as China's banks wind back lending, he said.

    Sixty per cent of China's economy is driven by the 12-year-old real estate construction and development market - twice the proportion of the Asian tigers before the Asia crisis hit in 1997, he told CNN earlier this year.

    By contrast, 10 to 15 per cent of Western economies are driven by construction.

    A sharp slowdown in the construction sector could plunge China into recession quickly, he said on Wednesday.

    "A lot of people are willing to say China will slow down.

    "The really scary thing is if you do the numbers and they cut back on construction there's not a slowdown - they go negative really fast."

    "We can debate China's numbers and the way they present them. But the fact of the matter is if they hit the brakes really hard, the economy goes into reverse."

    A Chinese economic slowdown or recession would have strong knock-on effects for commodity producers Australia, Brazil and Canada, and for Australia's housing market, he told website Data Diary last November.

    China's property boom has provided Australia's government with higher tax receipts which have been leveraged, via lower interest rates, into the local housing sector.

    A sharp China slowdown could deliver a terms of trade shock that sends local share prices lower and cuts income per capita through the multiplier effect of a showing housing sector, he said.

    "It's interesting that the only other countries that are experiencing a property boom besides China are Brazil, Australia and Canada."

  2. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Could you give the hard number to support the assertions? Why are they the bubbles which would definitely burst into pieces? What're the necessary conditions for bubbles to burst into pieces? Why did US' houses bubble burst? Do Australia and China both have too many house owners who are not qualified to get the loan or have not enough deposit or equity? No bad loan or credit crisis in US no house bubble burst in 2008. How many bad loan do Australia have? In 1990, the market predicted the house sectors were died. When I bought my houses no one said they were good investment but look back now, the market herd were wrong. GFC was good for China and Australia since it has made good enough worries. Bubbles only burst into the pieces in mania and happen when the herd to chase the quick money!

    Have you been in China recently? It is sure that some excessive or bubbles in the house sectors in China but is it really at the tipping off threshold? What is the threshold to tip off? Would US's house ruins automatically extend into everywhere in this world?

    That is a hypothesis and how could we be sure it would definitely the future development? How about 1.4 billion people's food, roof, and part-time facilities? China is not a developed country and its second economy position is due to the huge population. China if the fundamental communism could not take the power again, could slow down but should not stop to go forward. Most of resources used in China needs to be imported. It could not go on in high speed such as 12% for too long but doesn't mean it would say bye bye to the resources.

    Australia has a very flexible financial system which has been shown in the last 100 years at least. If we read the statement from RBA carefully, you could see how carefully its staffs tries to get balance between the risk and chances. Even China collapses, it doesn't mean Australia would have no tomorrow. Facing the same challenge, different people could have different responses or reaction. How could we say Australia would follow China to boom and bust only? In the last 100 years, only 10 years you could feel the exist of China in Australia's economy, which is the fact but the pessimistic view are mainly the panic reaction after the GFC since it tells the people everything could be collapsed. They are different "could be" and "will be"

    Which part of history tell us Australia was in the bust for generations just because the resource booming? It was very flexible even when the financial system was very weak. The most of important thing was what the real causes to make the bust? I have resource in my backyard and you need them for 10 years. Since it is great for me at least for 10 years should I cry the resource bust after the booming for 10 years now or get the money from the booming but prepare for the bust by getting some skills for the resource bust time when I could make new chances with the money accumulated from you?
    Last edited by a moderator: 27th May, 2011
  3. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    Generally saying, all of us tend to find darkest part in the darkness since light doesn't exist or too far from our natural eye; all of us tend to find brightest light in the atom exploding since you could not see the darkness at least before all gone.

    How many of market players have remembered what happened in IT boom and bust and the old economy boom and correction(I believe it was a correction since the old economy booming has been interrupted by the credit and house crisis in US suddenly before it could give out the brightest light. So far I didn't read any article who cried for old economy exuberance.)?

    Medias are powerful to spread popular market sentiment, which would change the market price and value definitely. However GFC has forced all of the people around the world to see the dark side more than the bright side of the global economies.

    So that Australia stock market really has decoupled from any good things from US, China, Emerging Economies, and then we see:

    1. excellence is so so

    2. good is bad

    3. bad is shi*

    If it is true that any high market price could not last too long if the market value could not be increased in steps for too long. it is also true that any low market price could not last forever if the market value keep its slow but definitely rising.

    What if China and Australia will not tip off and their house sectors just softly land? Future usually unfold different prospect from what most of market herd expect, which is fair since resource is scarce and money is scarce and it is unfair all of market players would get the money without efforts as they expect. So market always makes some tricks and confuses us. Is it trying to confuse us with the false appearance that old and new economies would go into the sink together? What are the possible black swans in future?

    I am reading and pondering about business cycles. More on wdongli - Member Blogs

    We need to educate ourselves to avoid going extremes by refusing the extreme market ideas and news. What is next mania? Could we be in it when no one notices it? Art of war said you need to move your army to the position before your enemy want to get there. Could we move earlier than the market, and take ease to wait for market herd for the party and get out of the market before it crashes?

    We need to be businesslike market players, right? What should a great businessman do in bad time and good time? Find the opportunities and avoid the risk to lose the capital!
    Last edited by a moderator: 29th May, 2011