Falling land prices may prompt Chinese property developers to write down the value of their assets, forcing a sober reassessment for those with vast land holdings, according to a survey released Monday by Credit Suisse.
Most at risk are those mainland Chinese and Hong Kong developers who added aggressively to their land banks in 2009 and 2010, the prices of which could come under pressure amid Beijing’s ongoing credit tightening, the investment bank said.
The findings were part of a poll of both listed and unlisted companies conducted by an independent research company and commissioned by Credit Suisse.
Prices for land sold at auction were down 20% so far this year, the report cited one industry expert as saying. Other data indicated price declines of up to 50% for the year to date, although the figures were affected by slumping transaction volumes in cities such as Beijing, possibly overstating the true rate of declines, the report said.
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I’ve written before about the Chinese bubble. Nobody knows when this bubble will burst or deflate, but it will. And now that China is such a major player, it will drag down economies around the world.
I previously wrote that “China has surpassed the United States as the lender of last resort.” Now, there is more evidence for this:
China is confident Spain will recover from its economic crisis and Beijing will buy Spanish public debt despite market fears of an Irish-style bailout, a top Chinese official said Monday.
The comments by Vice Premier Li Keqiang were made in an op-ed piece in Spain’s leading daily El Pais one day ahead of his arrival in Madrid for a three-day official visit, the start of a European tour that will also include Britain and Germany.
“Since China is a responsible investor country in the long-term on the European financial markets, and in particular in Spain, we have confidence in the Spanish financial market, which has been translated into the acquisition of its public debt, something we will continue to do in the future,” he said.
“China supports the measures adopted by Spain for its economic and financial readjustment, with the firm conviction that it will achieve a general economic recovery”, said Li, who is widely tipped to become China’s next premier.
It remains to be seen if this is good or bad. If China acts responsibly and withdraws their support if Spain fails to hold to their austerity measures, China is simply helping Spain avoid steps necessary to fix its mess and encouraging other countries to act irresponsibly too. But if China really forces Spain to cut back on its deficit spending, this could provide Spain the temporary support it needs to get its fiscal situation back on track.
My major concern is that China is still controlled by a ruling class that has its own interests in mind more than the economic well-being of the Spanish. China would hate to see the world economy decline and has every reason to prop it up. China figures that every year it can grow faster than the rest of the world, it becomes all that much more important and powerful. A collapse in the worldwide economy now would take China down with it before the country has a chance to flex its muscles. China would rather prop up the world for another ten years, by which time its power will have grown immensely.
Or I could be over-analyzing things. China could be making an investment and, if correct, a very profitable one. But with China’s secretive government, one never knows what they are really thinking.
China is giving the United States an economics lesson:
Beijing leveled new criticism at the latest round of quantitative easing unveiled by the Federal Reserve, warning the policy could swamp emerging economies with destabilizing inflows of speculative capital.
“For the U.S. to undertake a second round of quantitative easing at this time we feel is not recognizing the responsibility it should take as a reserve currency issuer, and not taking into account the effect of this excessive liquidity on emerging-market economies,” Vice Finance Minister Zhu Guangyao told reporters at a press conference in Beijing.
Zhu said the first round of quantitative easing by the Fed was justified to help stabilize markets “at the height of the financial crisis.”
However, the second round — dubbed “QE2” in financial circles — comes at a time when economic recovery is beginning to kick in, he said.
“Financial markets are not lacking capital; rather they are lacking confidence in the global economy. Financial institutions have large amounts of cash,” he said.
You know how low you’ve sunk when China, technically the People’s Republic of China ruled by the Communist Party of China, makes more economic sense than the Federal Reserve.
Posted in Capitalism, Economics, Federal Reserve, Quantitative Easing
Tagged Beijing, China, Emerging markets, Federal Reserve, Federal Reserve System, Finance minister, QE2, QEII, Quantitative easing, United States