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 China's Red Flags |
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momotaro 70
头衔: 海归上校
声望: 教授
性别:  年龄: 44
加入时间: 2010/01/26
文章: 206
海归分: 76235
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作者：momotaro 70 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
对屁塔拉阿迪的房地产泡沫的分析，仅供参考。洋人不了解中国的专制环境，所以判断只是理论上有意义。
GMO's Edward Chancellor - China's Red Flags
CONGRESS HAS NO PEER IN LEGISLATING for the last cycle. All the more surprising, then, that our much-adored lawmakers have broken with a tradition that's almost as old as the republic itself and addressed themselves to China. More particularly, they've accused China with some justice of being a currency manipulator by striving to maintain the value of yuan artificially de- pressed so as to keep its exports booming. As we noted, Beijing, which long has contented itself with scolding us for our fiscal imprudence, is expected to trot out a trade deficit as proof that the charge is patently untrue.
But, as we've felt for some time now, China has more to worry about than the barking displeasure of our legislators. For although it has enjoyed an awesome record of growth stretching back over three decades, it also shows more than a few of the telltale evidences of an economy headed for trouble -- but real trouble.
As luck would have it, we've come across a recent piece by GMO's Edward Chancellor that provides eloquent chapter and verse for that less than cheerful view. Entitled "China's Red Flags," it contends "China today exhibits many of the characteristics of great speculative manias" over the past three centuries and then outlines those characteristics.
Such debacles usually start, Edward has found, with a compelling growth story. Another feature is a blind faith in the competence of the authorities. The ignominious list includes: excessive capital investment; a surge in corruption; easy money; fixed- currency regimes; rampant credit growth; moral hazard; precarious financial structures; and rapidly rising property prices powered by dodgy loans.
Of these, rapid credit growth is the most important leading indicator of financial instability, followed by an asset price bubble. Low interest rates and strong money growth play a significant part, too, in creating memorably bad outcomes. China, unhappily, has its share of these dubious qualities as well as being inflicted by a huge speculative mania.
Edward points out that "forecasts for urbanization and economic growth make for a compelling Wall Street pitch." But he cautions that like the extravagant expectations for Internet growth during the dot-com mania, investors seem to be swallowing whole China's growth forecasts. A good example is the reckoning that the urban population will increase some 350 million by 2025.
Edward suggests those numbers may not accurately reflect the present density of urban areas in China because a) many rural migrants to the cities tend not to be included in the official count as they lack residency status; and b) officials are rewarded on GDP growth per capita in their districts, so they have an obvious interest in understating how many people those districts contain.
He also notes that "Wall Street tends to downplay the darker aspects of the Chinese demographic story." China's population is set to decline in 2015 and the worker participation rate will peak this year. That will cause a sharp shrinkage in the number of people who migrate to the cities and supply China with its seemingly inexhaustible reservoir of cheap labor, key to its spectacular export success.
In recent years, no secret, Beijing has built up a vast treasury of foreign reserves of some $2.4 trillion. But Edward believes it's a mistake to think that China's gargantuan foreign-exchange reserves render its economy invincible. "These reserves," he acknowledges, "can be used to buy foreign assets, pay for imports or defend a currency under attack." But they aren't especially effective in wrestling with the problems that follow, say, the collapse of an asset-price bubble, such as a broken banking system or a legacy of bad investments.
And, on that score, he quotes approvingly the observation in a recent book on China that "the only two countries which have previously accumulated such large foreign-exchange reserves relative to global GDP were the U.S. in 1929 and Japan in 1989."
While surging credit has "revived the animal spirits of Chinese investors" and hugely whetted their appetites for all manner of stocks, including initial public offerings, quick trades and other classic signs of speculative euphoria, the real action has been in "China's overheating property market." And a goodly number of Edward's red flags are "fluttering around" over-stretched real-estate valuations, rampant speculation and frenzied new construction. Housing, he says, "has become a national obsession."
Pinpointing when the real-estate bubble will burst is a bit tricky, Edward concedes, in part because China is "not a pure market economy. State-owned enterprises can be called upon to prop up markets. Losses may be concealed or shuffled around like a shell game...Such measures, however, won't cure China's problems. They only delay the denouement."
And he cautions that "just because the timing of any future crisis is imponderable, doesn't mean the risk posed by the real- estate bubble should be ignored." All the more so because the property market looms so large in the Chinese economy and financial system. Real-estate investment accounts for roughly 12% of GDP. Construction is the main source of demand for much of China's heavy industry. Real-estate is gobbling up 20% of new bank loans.
China, Edward muses, "has become a field of dreams, a build-and-they-will-come economy." He predicts that were the economy to slow below Beijing's 8% growth target, "bad things are likely to happen." Much of the new infrastructure will turn out to be otiose; excess capacity would linger in many industries; real estate would take a bath, and the banking system would be swamped by a wave of nonperforming loans.
His morose conclusion: "Investors who are immersed in the China Dream ignore this scenario. When the China juggernaut eventually stalls, they face a rude awakening."
China: hard to extinguish speculators’ animal spirits
By Edward Chancellor
Published: January 31 2010 11:36 | Last updated: January 31 2010 11:36
Recent moves in Beijing to tighten lending conditions have spooked Chinese investors. Given that easy money fuels asset price bubbles, it is tempting to believe that the withdrawal of liquidity signals an imminent end to the good times. However, history suggests that once a boom has got going, it takes several sharp blows with the monetary cudgel to extinguish the speculators’ animal spirits.
Around the middle of January, Beijing made clear that it wanted to bring to a halt what one regulator described as a domestic lending “binge”. Admittedly, this declaration only took place after a pick-up of lending in the first two weeks of the year, which saw more than Rmb1,000bn (£90.7bn, €105bn, $146bn) of new loans originated. This rate of lending growth was some three times higher than last year’s already inflated levels. Several banks have apparently been ordered to suspend all new loans. Credit Suisse reports that letters of credit have suddenly been withdrawn. “Mortgage lending has been virtually suspended,” claims the investment bank, “leading to a slowdown in property transactions”. The Shanghai Composite has swooned in sympathy.
This lending diktat coincides with other measures, including an increase in bank reserve requirements and stricter mortgage rules, to tighten credit conditions in China. Beijing apparently wants to control the various real estate bubbles that are popping up around the country. Home prices in the coastal regions were up more than 20 per cent in the last year. Despite low interest rates, new homebuyers in Beijing are spending up to 70 per cent of disposable income on servicing mortgages, says CLSA. High end property sales more than doubled in 2009, says the brokerage firm. A large portion of these purchases were made by investors.
The lack of affordable housing is fast becoming a political issue in the capital. A popular television drama, Snail House, which deals with the travails of “mortgage slaves”, has recently been taken off the air. Furthermore, inflation is picking up, hardly surprising given that the money supply growth approached 30 per cent towards the end of last year. In theory, tighter monetary conditions should raise the cost and limit the supply of credit, thereby helping to cool the financial markets. In practice, however, great booms tend to continue long after policy has become restrictive.
For example, the Federal Reserve raised interest rates in January 1928 with the intent of halting speculation on the Big Board. Despite this, US stocks rose by a further 70 per cent over the following 20 months before finally peaking in September 1929. The end of the tech bubble followed a similar course. Although the Fed Funds Rate was increased in June 1999, the Nasdaq nearly doubled over the following 10 months. Other stock market booms have likewise continued long after tightening commenced.
Real estate booms appear even less responsive to the initial tightening. In 1989, the Bank of Japan started a series of five hikes that saw interest rates climb from 4.75 per cent to 6 per cent. Although the Nikkei peaked towards the end of the year, Japanese commercial real estate continued rising until late 1990, by which time land prices had risen a further 45 per cent. The recent US housing bubble also took a long while to cool. The Greenspan Fed raised rates in June 2004. Some 24 months and 16 rate rises later, US home prices finally ground to a halt. The S&P/Case-Shiller Composite Home Price index had climbed 25 per cent since the first rate increase.
The last time the Chinese authorities attempted to deflate an asset price bubble was in January 2007. At that time interest rates were raised, bank reserve requirements increased, and important officials spoke openly about the need to quell speculation. Several commentators anticipated an imminent collapse of the Chinese stock market, which had doubled over the previous year. The outcome was rather different. Over the following months the Shanghai Composite entered a period of exponential growth. The market finally peaked in October 2007 after five rate hikes and 13 increases in bank reserve requirements since the beginning of the year.
Experience suggests that recent tightening in Beijing is unlikely to mark the immediate demise of the frenzied Chinese real estate boom. Nevertheless, it brings that end one step closer.
作者：momotaro 70 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 China's Red Flags -- momotaro 70 - (10757 Byte) 2010-4-14 周三, 09:35 (1109 reads)
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