China’s banking system has undergone significant changes in the last two decades and is functioning more like western banks than before but remains owned by China’s government.
That is a significant difference. For example, in America, there are no government owned banks but the public sector insures any risk taking the private sector banks take. This means that private sector banks may lose trillions and the government will step in, as Washington D.C. did in 2008, and go deep into debt to save the banks from drowning and taking America and the West’s economies down with them into a black hole.
The biggest difference between the west and China is the money trail.
In America and the west, most people borrow from private banks to buy private property and when the value of the property drops, as it has in the United States, and the borrowers walk away letting the bank reposes a property that is worth much less than the loan amount, much of the money is gone—when the house sold, the equity went to the previous owner and any mortgage that existed was paid off. The US government made no money on the deal (property tax goes to state governments).
It doesn’t work that way in China because the banks are owned (and controlled) by the central government and so is the land. A better idea of the difference between buying private property in the west and government owned property in China comes from Global Property Guide.com that says, “The slowdown (drop in property values in China) follows market-cooling measures first introduced in April 2010. The campaign intensified in 2011. The down payment for first-time buyers’ mortgages was increased to 30% from 20%, and for second homes rose to 60% from 50%.”
By comparison, in America, down payments may be as low as no money down or 3.5% and as high as 20% depending on the loan and the qualifications of the buyer/s.
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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