Betting Against China’s Housing Market

June 21, 2010

You may have seen stories or headlines predicting a housing bubble bursting in China as it did in the US. China bashers are probably praying this will happen, but don’t count on it.  Placing a bet that China is going to stop growing its economy soon is throwing money away.

The Market Oracle talks about this in “Will China Housing Market Follow the U.S. In a Mortgage Bust?” Although the Bank of China held $10 billion in US subprime assets when the  US bubble burst, Chinese banks don’t make those loans in China—the risky subprime loans to poor people with bad credit was in US. The only reason the Bank of China held those assets was that they trusted America—then.

Older Housing in China

The real estate market in China is different. Chinese families contribute and buyers often pay 30 to 50% down. Also, when the bubble burst in the US, housing loans to GDP were 79% but in China that number was 15.3%.

In fact, according to the May 29 – June 4, 2010 The Economist, about 20 – 30% of urban housing is owned by the top income earners. The rest live in free housing provided by employers or in  state owned housing with low or no rent. It also helps that most Chinese save and avoid using credit cards. Then there is rural China where 750 million live and all the housing belongs to collectives and there are no mortgages or rent.

See Greedy Buyers Beware

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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Posted by Lloyd Lofthouse

See, Hear, Touch No Truth—Just Lies, Please

June 18, 2010

The “Wall Street Journal” published China: Not Intentionally Pursing Trade Surplus With US, and I agree. The American thirst for high wages with benefits and cheap products created this mess.  After all, when you balance global exports and imports for China, they are close to even. China has a small trade surplus with the world—nothing compared with the “HUGE” trade surplus with the US, where far too many people use plastic to live beyond their means. 

However, most Americans don’t know that. Politicians who tell American voters the truth lose elections and the media seldom shows the whole picture—only the American slice. It seems that most Americans are not interested in the truth.

Qin Gang, a Chinese foreign ministry spokesperson, mentioned the problem was with low US savings rates and high levels of borrowing and unemployment.  He should have mentioned Wall Street risk taking too, which caused the current world economic crises and most of the job losses. Even China lost about 20 million jobs thanks to greed in the US.

People who accuse China of taking jobs from US workers don’t take into account that there are about 12 million illegal aliens in the US working low pay jobs most Americans refuse to do. Even Mexico and Canada, because of NATFA, have taken more jobs than China has.

Gang said, “We hope politician in the U.S. will think seriously about how to resolve the structural problems in their own economy, rather than invariably blaming others.”

Right again. Americans and US politicians spend too much time finding scapegoats while disagreeing on how to fix the problems in America. The US Federal deficit is in the trillions, and the average credit card debt per household is $15,519.  Source: CreditCard.com

The personal savings rate in the US as a percent of personal income is about 3%, while in China that rate is more than 30% and the Chinese government saves too—its cultural.  What’s more embarrassing for grumbling Americans is the fact that the Chinese work longer hours for much lower pay and still manage to save.

See Chinese Work Ethic

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Lloyd Lofthouse is the author of the award winning My Splendid Concubine and writes The Soulful Veteran and Crazy Normal.

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Posted by Lloyd Lofthouse

China’s Goal to Clean Dirty Coal

June 15, 2010

Bill Chameides writes in the Huffington Post about China’s efforts to reduce greenhouse gasses by 40 to 45 percent by 2020.  His goes into detail how the Chinese plan to accomplish this.

Since 70% of China’s electricity comes from thousands of coal burning power plants,  Chameides expresses doubts that China will be able to meet these lofty goals.  However, I disagree.  When you discover the downside of China’s coal burning power plants, it is obvious there is no choice but to clean up.

China’s one-party system has demonstrated the ability to get things done quickly and mistakes are made but so are course corrections.  I witnessed China’s ability to get things done in Shanghai. We were staying in what was once the French concession. The stately mansions that had housed wealthy French families and servants had been converted to communal multi-family homes still surrounded by tall walls.  When we went to sleep, the walls were there. In the morning, they were gone. 

An army of workers arrived at night, took down the walls and trucked out the debris without making enough noise to wake people.

Although I disagree with Chameides conclusion, his piece is worth reading.

See Electricity is the Key

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Lloyd Lofthouse is the author of the award winning My Splendid Concubine and writes The Soulful Veteran and Crazy Normal.

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Posted by Lloyd Lofthouse

Middle Kingdom Wages Rising

June 14, 2010

William Pesek,  a Bloomberg columnist, writes a piece for the Jakarta Globe about Chinese workers demanding raises.  He mentions the walkout that shut down Honda’s Chinese production lines and the 24% pay raise to get people working again.

more money equals a better quality of life

A flock of suicides at Foxconn, a Taiwan owned company, also demonstrated Chinese worker unrest over low pay and long hours resulting in recent pay increases of 30% with promises of more to come. Since Foxconn turns out Apple, Dell and HP products, this could mean a  jump in high-tech prices around the globe and/or slimmer profits for Wall Street giants.

Pesek says, “Chinese workers demanding higher wages, as they should, must have the folks at Wal-Mart Stores quaking.  It’s hard to exaggerate the effect a big increase in Chinese pay would have on international profit margins and on inflation.”

What choice does China’s government have? Unrest crashed Imperial China in 1911 and changed the country again in 1949. Then after Mao’s death in 1976, China morphed into an open-market economy on steroids under Deng Xiaoping’s management. Recent news signals a possible change from an export-driven economy to one that sprouts from within.

See Deng Xiaoping’s 20/20 Vision or Why China is Studying Singapore

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Lloyd Lofthouse is the author of the award winning My Splendid Concubine and writes The Soulful Veteran and Crazy Normal.

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Move Over America, the BRIC is Coming

June 6, 2010

McCombs Today says that during 2001, Goldman Sachs predicted Brazil, Russia, India and China (known as the BRIC) would dominate global economic markets in the 21st century. China, for one, has set goals to clean their environment, build a colony on the moon and technologically match the US military.  It helps that China has become America’s banker or should I say landlord.

History demonstrates that powerful nations often act arrogant and bully others. America was no different after World War II when much of Europe and Asia’s infrastructure and industrial capacity had been destroyed.  For about five decades after the war, the U.S. was the best source of manufacturing which grew a middle class who lived better than most kings and emperors from earlier times. From such riches came an attitude that American democracy and capitalism was superior to any other system.

Goldman predicts by 2035, China will be the world’s largest economy and India will be tied with America for second place.  This prediction is because 42 percent of the world’s population lives in the BRIC countries, which have 22 percent of the world’s land mass and 24 percent of global gross domestic product.

Soon, other nations will listen carefully When China Speaks

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too. 

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.

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Posted by Lloyd Lofthouse

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