Unemployment rises again

Neil_F · Nov 17, 2011

There was an IMF report this week about the Chinese banking system. It has the potential to blow up in an even bigger way than 2008.

Political interference means that loans have been issued on non-commercial terms on such a huge scale that there will a huge problem in the event of a property crash in China.

steveo · Nov 17, 2011

Neil_F said:
There was an IMF report this week about the Chinese banking system. It has the potential to blow up in an even bigger way than 2008.

Political interference means that loans have been issued on non-commercial terms on such a huge scale that there will a huge problem in the event of a property crash in China.

Briefly Neil, what is the property situation like in China? I would have assumed not many people will own their own home and if they are still building Cities that no one wants to live in, surely that will cause prices to plummet for whoever wants to buy something. If that’s the case your prophecy could come true sooner rather than later.

Cricko · Nov 17, 2011

Aren't a lot of the houses that are built in China built by the companies that bring in the cheap labour from the villages and give them somewhere to stay?

Neil_F · Nov 17, 2011

steveo said:
Briefly Neil, what is the property situation like in China? .

Pass. I don't profess to be an expert on this issue. Since 2009 the Chinese government increased lending significantly, but the allocation of capital is often polticially directed to state sponsored firms who then operate on small profit margins.

Most of that lending (30-45% in the IMF report) is backed by real estate.

One of the major problems with the financial sector cited in the report is the lack of transparency. As the Chinese financial system integrates with the rest of the world that lack of transparency will be a hinderence in the event of a turn in the property market. Liquidity ground to a halt in 2008 because no one knew which banks were exposed and by how much; the same is likely to apply to the Chinese financial system.

It might not happen, who knows. Let's hope it doesn't.