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Political issues in the People's Republic of China.

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By late
#15195901
"Yet the more closely you look at how China has been able to keep its economy going, the more problematic it looks. Basically, China has masked underlying imbalances by creating an immense housing bubble. And it’s hard to see how this ends well.

This demographic factor is reinforced by the weakness of China’s social safety net: People can’t count on the government to support them in their later years or to pay for health care, so they feel the need to accumulate assets as a precaution.

Chinese policymakers know all this, but somehow haven’t been able to deal with these underlying issues. Instead, they’ve kept the rate of investment very high despite slowing growth — mainly by encouraging huge spending on housing construction. A 2020 paper by Kenneth Rogoff and Yuanchen Yang shows that Chinese investment in real estate now greatly exceeds U.S. levels at the height of the 2000s housing bubble, both in dollar terms and as a share of G.D.P.:

Image

China does, however, have an autocratic government — the kind of government that in other times and places has tended to respond to internal problems by looking for an external enemy. And China is also a superpower. It’s not hard to tell scary stories about where all this might lead."

https://www.nytimes.com/2021/10/22/opinion/china-bubble-economy.html
By Patrickov
#15195902
I told you war is inevitable.

Be prepared to give a good beating.

(EDIT: I am not saying that we are necessarily capable of this, but you know what happens if we don't win this time)
By late
#15195911
Patrickov wrote:
I told you war is inevitable.



Clearly, Krugman is concerned, but there is nothing in that editorial saying war is inevitable.
User avatar
By ingliz
#15195915
late wrote:China has masked underlying imbalances by creating an immense housing bubble.

England has been doing this for years, and everyone is happy.

Happy enough anyway.

The voters keep voting for the Tories, who keep stoking the fire.


:lol:
User avatar
By Potemkin
#15195921
ingliz wrote:England has been doing this for years, and everyone is happy.

Happy enough anyway.

The voters keep voting for the Tories, who keep stoking the fire.


:lol:

Hey, who would say 'no' to free money? :excited:
By late
#15195922
ingliz wrote:
England has been doing this for years, and everyone is happy.

Happy enough anyway.

The voters keep voting for the Tories, who keep stoking the fire.




The magnitude is much smaller. In addition, just as in America, the bubble is largely driven by the pandemic. China wants to control the economy, and has created their housing bubble. It's not temporary, and it's massive.
User avatar
By ingliz
#15195928
@late

Analysis by the Halifax, a trading division of the Bank of Scotland, has revealed that the average price of a home has risen by 207 percent in the last 20 years. In Greater London, the rise has been even steeper, up by 239 percent since the millennium.
By B0ycey
#15195934
The difference of course is demand and low supply drives up the price in the West @ingliz whereas in China, property is unable to be sold in large areas of China and priced out in high demand locations due to the artifical bubble of asset inflation. Chinas problem was caused by their population investing in the property as an investment and now they have reached their ceiling and the market simply isn't there to keep prices high. But given the government isn't concerned I find it bizarre that the West are. The truth is the government is manipulating the market and property is worth exactly what someone is prepared to pay for it and that has always been the case. Having done some research on this since Johnrawls brought it up last time, the Chinese government seem more concerned in their local population being able to afford homes than the Bourgeois losing money on their property not selling. In other words, I don't think they see this as a problem. And why should they. All property in China is leased and at some point those who invested in property in China was going to be fucked over. At least if the bubble bursts now they can blame Evergrande and get them to pay for the mess buy removing CEOs assets.
User avatar
By Potemkin
#15195946
ingliz wrote:@late

Analysis by the Halifax, a trading division of the Bank of Scotland, has revealed that the average price of a home has risen by 207 percent in the last 20 years. In Greater London, the rise has been even steeper, up by 239 percent since the millennium.

The housing bubble gives people the illusion of being wealthy. This, of course, has been the central plank of Tory government policy since the 1980s - inflate the housing bubble some more, and keep reminding people of how wealthy they've become under a Tory government. Lol.
User avatar
By Rancid
#15195958
Potemkin wrote:The housing bubble gives people the illusion of being wealthy. This, of course, has been the central plank of Tory government policy since the 1980s - inflate the housing bubble some more, and keep reminding people of how wealthy they've become under a Tory government. Lol.


House rich, cash poor!
By Rugoz
#15195964
ingliz wrote:Analysis by the Halifax, a trading division of the Bank of Scotland, has revealed that the average price of a home has risen by 207 percent in the last 20 years. In Greater London, the rise has been even steeper, up by 239 percent since the millennium.


So what? Rising house prices are not evidence of a bubble.
User avatar
By Rancid
#15195966
207% in 20 years sounds decent. Here in Austin, we got 100% (doubling) in 5 years. :hmm: no sign of that slowing down either.

HOUSE RICH & CASH POOR! HELL YEA!
By late
#15196035
ingliz wrote:
@late

Analysis by the Halifax, a trading division of the Bank of Scotland, has revealed that the average price of a home has risen by 207 percent in the last 20 years. In Greater London, the rise has been even steeper, up by 239 percent since the millennium.



That's interesting, but not enough information. Do you know the % of GDP?
User avatar
By Rancid
#15196048
The thing @ingliz is missing is that in the west, the houses are at least occupied, which means there is some inherit need/value in those properties. Where as in China, many are just sitting empty, and are shoddily built.

That said, I think China will manage it just fine. To @B0ycey, those that stand to lose in China are those with money. Those with money are the biggest threat to the CCP anyway, so they will be ok with them losing out. Most of this money is domestic anyway, so it won't impact foreign investors too much. Even if China didn't pay out foreign bonds, investors in the west will still invest in China anyway because in the west we are too addicted to money.

China/CCP will be fine when this bubble pops.
User avatar
By ingliz
#15196050
late wrote:Do you know the % of GDP?

Housing's combined contribution to GDP: 12.3%.

Source: ONS

Building alone: 4% (2017)

Source: Statista

Investment by region:

UK Real Estate Portfolios and UK GDP in 2020.

Image

Source: Schroders


@Rancid

According to the most recent government figures released in November 2020, 268,385 homes in England had been empty for at least six months.
By late
#15196051
ingliz wrote:
Housing's combined contribution to GDP: 12.3%.



If that's using the same metric as Krugman used in the OP, that is really, really high.

Here is something I just found:

"House prices have soared over the past 15 years, often by more than 10% a year in large cities. Yet developers have borrowed huge amounts in the process. The industry’s total debt is about 18.4trn yuan ($2.8trn, equivalent to 18% of GDP)"
https://www.economist.com/finance-and-economics/how-a-housing-downturn-could-wreck-chinas-growth-model/21805115

"This combination of high and unproductive investment with soaring debt is closely related to the size and rapid growth of the property sector. A 2020 paper by Kenneth Rogoff and Yuanchen Yang argues that China’s property sector contributed 29 per cent of GDP in 2016."
https://www.ft.com/content/1abd9d4b-8d94-4797-bdd7-bee0f960746a

The problem, of course, is I can't get a good comparison. Is there an economist in the house?
Last edited by late on 27 Oct 2021 15:27, edited 2 times in total.
By B0ycey
#15196052
Rancid wrote:The thing @ingliz is missing is that in the west, the houses are at least occupied, which means there is some inherit need/value in those properties. Where as in China, many are just sitting empty, and are shoddily built.

That said, I think China will manage it just fine. To @B0ycey, those that stand to lose in China are those with money. Those with money are the biggest threat to the CCP anyway, so they will be ok with them losing out. Most of this money is domestic anyway, so it won't impact foreign investors too much. Even if China didn't pay out foreign bonds, investors in the west will still invest in China anyway because in the west we are too addicted to money.

China/CCP will be fine when this bubble pops.


Actually this is pretty much spot on. In the West and particularly in the UK given Ingliz brought it up, the price is due to demand and low supply. The bubble won't burst whilst people want homes because they will just pay what they can afford. In China people were buying home, not to live but in invest so you cannot even compare the two. One has low stock high demand, the other has too much stock and not enough demand. Even the stupidest user should understand this but clearly not. So completely different situations.

But even so that doesn't effect China directly and as long as people assume their property is worth what they paid for and continue paying off their mortgages, it wouldn't even effect their economy then. This isn't a financial timebomb in the sense China will go broke, but those who have invested in Chinese property will struggle to sell their assets and lose money. In other words, it is a domestic bubble and not a national bubble hence why the Chinese government wants to control the prices of their real estate right now. Stop people being priced out in high demand areas and make sure people buy homes at the assumed price in low demand areas.
By wat0n
#15196053
In the end, it's just a matter of degree. Clearly, China's GDP is more dependent on housing than the US' or the UK's, even at the height of the bubble. That's not great news.

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