Whether or not China is in a bubble, particularly in housing, is a source of great debate… even among your very own Daily Reckoners. Now, even a staff member from inside China’s own central bank has weighed in with a dour opinion.
Li Daokui, of the central bank’s monetary policy committee, has publicly stated to China’s State Council that their nation’s housing market is deeply troubled in way that could cause profoundly negative financial and social outcomes.
From the AFP:
“‘The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,’ said Li Daokui, a member of the bank’s monetary policy committee.
“‘It is more than (just) a bubble problem,’ he told the Financial Times in an interview published Tuesday. The property market in the United States collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up…
“…He warned the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home. ‘When prices go up, many people, especially young people, become very anxious,’ he said. ‘It is a social problem.'”
Chinese authorities have been looking at a variety of avenues to cool the potentially overheating market. A property tax will be tested in key areas like Beijing and Shanghai, and other new restrictions on home sales have been introduced. The real estate market is structured quite differently in China, but a collapse could be just as severe for its financial system, and possibly even worse in terms of social upheaval.
You can read more of Daokui’s comments in the AFP reporting on how China’s property woes could be worse than the US downturn.
The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
It's a theme we've shared with you since April. And it's only gotten worse. The gaming industry has come under all sorts of pressure--a situation I first noticed in the charts. The powerful, multi-year uptrends started showing cracks. And it wasn't long before those cracks turned into gaping holes you could drive a friggin' truck through. That's where things stand today.
The oil market has been under siege for six months. From service providers to producers this downturn has been painful. Of course, we’ve known all along that oil prices were a little toppy over the summer. In fact, when asked just how low oil prices could go I usually answered with a simple “lower than you’d expect…”
Our forecast that Cuba would be open and integrated within 5-10 years is on track after yesterday's big announcement. Ahead of schedule, even. Click here to see how some investors have profited and what the island's likely future is...
The opportunity to sell and install LEDs is enormous. We’re talking about over a billion lighting fixtures. And the areas with the largest potential -- like parking lots -- have barely begun to change. Banker to the presidents Chris Mayer says you could triple your money in this new tech trend. Here's what you need to know.
By the time you do… Kaboom! It’s too late. They’ve already blown up your retirement. There are three time bombs the mutual fund industry has planted within your 401(k). By the time you’re done with this article, you’ll know how to identify them. And, more importantly, how to disarm them. Dave Gonigam has the scoop...
The latest victim of the crude rout is none other than the stalwart tech stocks. These are the go-to trades that have held up all year long. I'm talking about stocks like Google, Yahoo! and Microsoft. Like I said before, these aren't no-name stocks you're seeing drop more than 10% from their highs last month.