The Economic Health of BRICS – Part 3/7

January 13, 2012

In China, where do you think most or all of the money from those 30% to 60% down payments mentioned in Part 2 go?  For a first-time property sale, the government owned banks loan the money to private citizens or businesses to buy property owned by the government. Once the loan is complete, the down payment and the amount of the loan flows to the same or another government owned bank and then the buyers make payments with interest to the government owned bank that holds the loan.

When re-sales of these properties take place, the first mortgage on the leased property is paid off and the second loan is either 70% (for a buyer’s first home) or 40% (for a second home).


Thirty percent of property in China is bought with cash.

Due to the high required down payment, the risk to China’s government owned banks is much less than the risk in the US private sector banking system, which really has no risk, since the government often steps in to make up for the losses in the private sector while ending up increasing the national debt.

In China, even when property values drop, the bank, which the government owns, may repossess the property (that the government always owned) and resell it.  This means after a property has dropped 50% of its value in China, the government may lose either 30% or 10% of the value of the loan.  In the US, if a bank cannot re-sell the house at the current value, then it losses all of the value of the loan.

However, when the same property that was repossessed is sold again, the down payment will be between 30% to 60% in addition to the fact that 30% of property sold in China is bought with cash.

In the long run, will the government owned banks in China make a profit or a loss?

Continued on January 14, 2012 in The Economic Health of BRICS – Part 4 or Return to Part 2

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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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The Economic Health of BRICS – Part 2/7

January 12, 2012

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.

Continued on January 13, 2012 in The Economic Health of BRICS – Part 3 or Return to Part 1

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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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The Economic Health of BRICS – Part 1/7

January 11, 2012

In 2001, Jim O’Neill, the chief economist for Goldman Sachs, coined the BRIC acronym to represent the combined economies of Brazil, Russia, India and China. He was also so bold as to predict that by 2032, or sooner, the BRIC would overtake the six largest western economies (which includes America) in terms of economic might.

Then in 2010, South Africa joined the BRIC turning that acronym into the BRICS.

In fact, the International Monetary Fund (IMF) has predicted that China, a member of BRICS, will beat the United States as the world’s largest economy by 2016 with a GDP of $19 trillion compared to $18.8 trillion for the US.

There are about seven billion people on the planet and almost half live in Brazil, Russia, India, China, and South Africa. The US, by comparison [I prefer factual comparisons over opinions], holds less than 5% of the world’s population. However, I thought I’d throw in this comparison as a footnote. The King’s College of London reported that in 2009, “More than 9.8 million people are held in penal institutions throughout the world… About 2.3 million were in the US,” which means 23% of the total global prison population was in America.


About prison slavery in the United States.

Did you pay attention?  A country [the US] with less than 5% of the global population has 23% of the  global prison population.

By comparison, the five BRICS countries [without the freedom American citizens seem to enjoy] has almost half of the world’s population but only 35% of the global prison population.

What does that tell us—that the more freedom and wealth a country has, the more crooks it grows and attracts?

Anyway, the world’s combined GDP, according to The World Bank was more than $63 trillion (US) in 2010. The GDP of the US was $14.6 trillion, while the BRICS’ combined GDP equaled about $11.6 trillion (US).

Recent drops of property values in China, sometimes reaching 50%, caused dire predictions in the Western media that China’s economy would soon crash and take the BRICS down with it causing their economies to suffer as well.

However, it is best to understand China’s economy and banking system to see if this wishful thinking on the part of China’s Western critics is valid.

Continued on January 12, 2012 in The Economic Health of BRICS – Part 2

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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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Facts about Education — China and the world versus America – Part 3/3

July 30, 2011

Myth:  “American Universities Are Being Overtaken.” (concerning research and development)

ANSWER: “NOT SO FAST.”

Wildavsky says, Asia’s share of the world’s research and development (R&D) spending grew from 27 to 32% from 2002 to 2007, led mostly by China, India, and South Korea.

However, R&D spending worldwide massively surged in the last decade from $790 billion to $1.1 trillion, up 45 percent, and in 2007, the U.S. spent $373 billion (up from $277 billion in 2002) on R&D, which was very high by global standards totaling more than all Asian countries’ combined ($352 billion was spent on R&D in Asia).

Myth: “THE WORLD WILL CATCH UP”

ANSWER: “Maybe, but don’t count on it anytime soon.”

While the global academic marketplace is without doubt growing more competitive, the United States doesn’t have just a few elite schools as most of its foreign competition does, and the U.S. spends about 2.9 percent of its GDP on postsecondary education, about twice the percentage spent by China, the European Union, and Japan in 2006.

If this three part series of posts sparked a curiosity to learn more on this topic, I urge you to take the time and click over to Foreign Policy magazine‘s Website and read all of FP’s Think Again: Education written by Ben Wildavsky.  It’s always nice to discover the facts before you form an opinion or believe someone that does not know what they are talking about. After reading Wildavsky’s piece in FP, it is obvious that America’s schools are not failing and have never been failing and are actually either holding their own or slowly improving.

That doesn’t mean the US should stop working at improving the public education system.  It means that many of the opinions and claims you may read or hear are probably wrong and the key to improving education in the US rests with the parents and not the teachers.

Considering the handicaps and competition teachers in the U.S. public schools face from the average child/adolescent’s poor lifestyles choices while eating horrible diets along with lack of proper sleep and spending far too much time dividing his or her daily hours (more than 10 hours a day on average) watching TV, playing video games, social networking on sites such as Facebook, and sending endless text messages instead of reading and studying, the evidence says American teachers are doing an incredible job.

Return to Facts about Education – Part 2 or start with Part 1

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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.

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Hard Landing for Who?

July 15, 2011

A friend sent me a link to a CNBC piece, and said, “I’m concerned how we are all so linked together economically.  if the republicans and democrats don’t come together, and the US defaults at some level of government, that could screw up China and other places as well setting off some sort of global chaos—that really scares me.”

After reading the CNBC piece, I could see why my friend was concerned.

On June 14, CNBC played on the “fear factor” and it worked.  The headline for the CNBC piece was ‘Meaningful Probability’ of Hard Landing for China: Roubini.

In the third paragraph, CNBC tells us “New York-based Roubini is closely followed by Wall Street because he predicted the U.S. housing meltdown that precipitated the global downturn.”

After establishing Roubini’s credentials, the piece focused on the US’s economic future and the language changed to “it is a glass that is half full and half empty,” while Europe is described as “kicking the can down the road”.

After reading the CNBC piece, if you were to pick one answer as the one with the most dire potential consequences, which would it be?

A.  ‘Meaningful Probability’ of Hard Landing for China

B.  The US is a glass that is “half full and half empty”.

C.  Europe is “kicking the can down the road…” (so is the US)

However, a clearer picture appears after reading what “The DailyTicker” published June 13, 2011, at Yahoo.com, Roubini Says “Perfect Storm” May Clobber Global Economy.

Henry Blodget wrote, “Roubini’s perfect storm consists of four factors: The U.S.’s basket-case of an economy and budget deficit, a potential slowdown in China, European debt restructuring and stagnation in Japan.”

Roubini predicts there’s a one-in-three chance that these factors will clobber the global economy in 2013. One-in-three means there is a 33.3% chance this will happen and a 66.6% that it won’t.

As for “Kicking the can”, Blodget writes that Bloomberg quotes Roubini saying, “Everybody’s kicking the can down the road of too much public and private debt (except China). The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”

Does a “potential slowdown in China” mean the same as CNBC’s “Meaningful Probability of Hard Landing for China”?

Consider that in January 2011, the Economist’s View said, “China’s current-account surplus … is the largest in the world. … China’s external surplus stands at $316 billion, or 6.1% of annual GDP.”

Then Ethics Sage says, “On February 1, it was reported that China’s foreign currency reserves totaled $1.2 trillion. That’s about 8% of the US National Debt,” which is $14.3 trillion and growing.

Bloomberg paints a better picture for China of $2.85 trillion in currency holdings.

Who is going to land harder if Roubini’s “Perfect Storm” strikes?

A. China

B. Europe

C. the US

D. B and C

E. none of the above

Now that you have read more than what CNBC had to say, your answer to this question stands a better chance of being correct.

Isn’t it interesting how easy it is for a major element of the media (CNBC) to  be misleading?

Learn more from A Panel Discussion on China’s Economy

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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.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.