| Can property tax ease the high housing prices? | |
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| Feb 4, 2011 05:53 | #11   |
 | Bob, I still remember the good old day when experts said that gold would never rise above US$500. Thanks for stirring the pot. Dodger. |
| Feb 4, 2011 10:06 | #12 |
| if the pig can climb tree or government find another way to increase her finance income,the housing price would drop down. it's my viewpoint. |
| Feb 4, 2011 14:24 | #13 |
| CHINALISI; Many in America and Europe shared your optimism untill recently ......but it still happened nonetheless. Although the government receives easy income from property price rises, it's not in it's interest for the price to rise above affordability, which is exactly what's happening right now. China must dampen ALL infaltion, including property or risk Egyptian style social unrest. Dodger; Before anyone takes any advice from "experts" they should look at the woeful succes rate of predictions from the weather bureau "experts". All that education, all that esquipment, all that expertise.. but a layman sticking his head out the window still gets better results. |
| Feb 4, 2011 14:31 | #14 |
| CARLOS; This extract is well worth reading and considering: According to the Chinese zodiac, the Year of the Rabbit is now underway, a time when investors will be hoping to see increased tranquility in share markets, in place of the wild swings of recent years. But many prominent investors are warning of upcoming instability in the Chinese economy, which holds the potential to roil global markets. Prominent New York fund manager Jim Chanos, who made a massive fortune by predicting the collapse of Enron and other debt-laden US corporates, continues to warn that the country is in the grip of a major property bubble. As a result, he’s built up short positions on Chinese property and financial stocks. Meanwhile, Niels Jensen, from London-based Absolute Return Partners, argues that the 'actual' Chinese economy is in worse shape than many assume, with economic growth lower, and inflation higher, than official Chinese data suggests. Scepticism about the accuracy of Chinese figures has been increasing ever since Wikileaks published leaked US diplomatic cables from 2007 in which Li Keqiang – who is tipped to become China’s next premier – referred to some Chinese economic figures as “man made” and “for reference only”. Instead, he preferred to use figures on bank lending, rail freight volumes and energy consumption to give a more accurate reading of the economy. Jensen has decided to follow this approach, and has uncovered an interesting pattern. Over the past 15 years, whenever Chinese economic activity weakened – such as during the Asian crisis, and the global credit crisis in 2008-9 – Chinese GDP growth was much faster than the increase in electricity output. On the other hand, whenever Chinese growth was strong (such as 2002-7 and 2010), GDP growth was lower than the power output. “Clearly the GDP numbers are massaged”, he concludes. But his investigation points to an even more alarming trend – the growth in Chinese power output slowed rapidly over the course of 2010. Total power consumption (measured year on year) grew at an astounding 22.7 per cent in the first quarter of 2010, but this slowed to a mere 5.5 per cent in the fourth quarter. In fact, the slowdown in the final three months of the year was so drastic that power output was 6.3 per cent below the previous quarter. So while official Chinese stats show China’s growth rate dropping from 11.9 per cent in the first quarter to 9.8 per cent by the fourth quarter, Chinese electricity output showed a much more pronounced slowdown – from 22.7 per cent to 5.5 per cent. Now, part of the reason for this drop could be the restrictions on electricity use that Chinese authorities imposed last year. But since these were dropped in November, it cannot be the only explanation. |
| Feb 4, 2011 14:32 | #15 |
| Jensen similarly highlights problems with official Chinese inflation numbers. Official figures show that inflation eased to 4.6 per cent in December, from November’s 5.1 per cent, but anecdotal evidence suggests the actual inflation rate, particularly in the big cities, is running closer to 20 per cent. What’s more, the Chinese have also taken the extraordinary step of reducing the weight of food in the consumer price index – at a time when sharp rises in food prices mean that households are likely to be spending even more of their income on food. It’s clear that Chinese inflationary pressures are gathering strength, but the Chinese authorities are immensely proud of their track record of strong economic growth, and are reluctant to raise interest rates sharply for fear of plunging the economy into recession. As Jensen points out, the situation is further complicated because China is on the brink of a leadership change. “The transition of power from current President Hu Jintao and Premier Wen Jiabao to the next generation of leaders is fast approaching. Although the National People’s Congress, where the new leaders will be officially instated, is not taking place until March 2012, the new power structure will almost certainly become apparent to the outside world at the next party congress, scheduled for October of this year. “Given the importance of this changeover and the significance the Chinese assign to not losing face, the leadership will do anything in its power to maintain the economic momentum until after the March 2012 congress. This increases the probability that the Chinese monetary authorities will fall further behind the curve in the months to come and make the landing so much harder when it ultimately happens.” In the meantime, the forces of instability will continue to build. Jensen points out the Chinese property market is already dangerously overheated, with residential properties now being sold in both Beijing and Shanghai at values that exceed 20 times disposable income (compared to a peak of 8 times in Tokyo at the peak of its boom, and the US peak of 6.5 times). |
| Feb 4, 2011 14:33 | #16 |
| He also notes that China’s level of investments in recent years – with fixed investments accounting for nearly 50 per cent of GDP – is unprecedented. But, he adds, the problem is that “when you create too much capacity, the return on invested capital will ultimately prove disappointing. But China is not a capitalist economy where one needs to worry about petty things like that (or so they seem to think). It is driven as much by its desire to dominate on a global scale, as it is by basic economic considerations.” Ultimately, however, the Chinese economy will succumb to economic forces, and the pain will reverberate widely outside the country. Commodity producers, such as Australia, will be hit hard. According to Jensen, “when the Chinese ultimately bite the bullet and force the economy to slow down meaningfully (and I believe it is a question of when, not if), the biggest victim is likely to be commodity prices, and none more so than base metal prices, which in recent years have been highly correlated to the fortunes of China. “Remember – when an economy, which has grown accustomed to expanding by 10 per cent per year for more than a decade, suddenly experiences ‘only’ 5 per cent growth, it will feel like a recession, and its people will react accordingly.” |
| Feb 6, 2011 03:48 | #17 |
| Dodger, don´t be sorry. As you know I am not a fluent english speaker nor writer so sometimes it may be difficult for people who have english as a mother language to understand my writings. "lecture" was ment to be humorous so "sorry" is my line. Bob, thank you for that. It took a long time for me to read but I did it ;=) Understood? I am not sure... Looks like there are nothing but threads in the chinese economy but is it really so? The US don´t like China keeping yuen low so perhaps US will devalue dollar. That would cause changes in the import-export between US-China. The more important change might be that Euro could be in pressure to be devalued too to keep Europe in the trade. As we know, China has taken part for saving EU and given massive loans to countries in trouble. Devaluing Euro would cause significant rising for the debts. Only positive to China. Could it be so that in the end China will win anyway? I still feel that China is in some kind of dead end because of home economy. China can not revalue yuen remarkably because that would cause unemployment. Controlled or not, housing prices are high and getting higher, inflation is high and seems like it is getting higher. Wages are not high and not getting higher. Explosion is easy to predict, what kind of explosion and when are the issues... Carlos |
| Feb 6, 2011 13:40 | #18 |
| CARLOS, for "not a fluent english speaker" you are amazingly articulate. Your account of the state of the economy in China and the likely outcomes coincide with most world economists. If China devalues then the value of debt owed by other countries will rise. However without the undervalued yuan, China would lose it's competitive advantage. The result is a short term gain but a long term loss. Highly unlikely China will take that path unless pressured by the U.S. Nobody can predict what will happen in China over the next few years. However it's a safe bet that sometime in the future China will be much richer than now. Good luck with your decision. |
| Feb 6, 2011 19:47 | #19 |
| Carlos, Bob beat me to it in regards to your latest post, and he mirrors my thought on your. When I read your post last night I half expected to find a whole in the ground this morning were it had been, so was just a little surprised to see that yours and Bob’s posts have so far stuck. “Explosion is easy to predict, what kind of explosion and when are the issues.” The regime still suffer lingering doubts about their own legitimacy, but have hung their hat on being able to delivery continuing growth to All. Social stability is the underlying key. Dodger. |
| Feb 10, 2011 00:02 | #20 |
| GUEST2873 | The US also imposes property tax. I guess that China just copied it from the US. Is there any difference? |
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