"How China fooled the world" debt 200% of GDP

CLAPTON

Chinese government borrows most of debts from it's own citizens just like Japan does

Large sovereign debts are totally sustainable if borrowed from one's own people : given a choice between your government increasing taxes to pay for things and borrowing from you many prefer the latter


China has very high foreign currency reserves.

Better to borrow and invest in useful infrastructure that people need than to have no debts but no infrastructure

wotsthat

cells wrote: »

That means she needs to construct close to 1 million homes per MONTH. To give you an idea of the scale of that...it is a Birmingham every other week

So an empty block or ten is nothing in china. The demand is there for 1 million new homes per month

Multiple 'Birminghams' are being built but people want to live in 'London'.

You can see lots of them from the bullet train - there's a massive oversupply of housing where people don't want to live and not enough where they do.

cells

wotsthat wrote: »

Multiple 'Birminghams' are being built but people want to live in 'London'.

You can see lots of them from the bullet train - there's a massive oversupply of housing where people don't want to live and not enough where they do.

This is a possibility but price will fix that issue.

Chinese wages will rise 10% a year for the foreseeable. A house is virtually all wages from the wages of the builders to the wages of the brick makers etc.

If a block of apartments is built today for $1m. The same apartment will cost $10m to build in 25 years time as wages/materials/etc will be 10x higher. Even if the $1m block was built in a place of lower demand the huge price differential will ensure they are filled.

It makes perfect sense for China to build out its infrastructure. ..including homes...now.

wotsthat

cells wrote: »

This is a possibility but price will fix that issue.

Only if price is the issue that is keeping these places unoccupied.

There's a point of view that much of the building in the west of China is a massive job creation scheme to prevent the mass exodus of the population East to find work and because the Chinese government are worried about a 'Chinese Spring'.

cells

wotsthat wrote: »

Only if price is the issue that is keeping these places unoccupied.

There's a point of view that much of the building in the west of China is a massive job creation scheme to prevent the mass exodus of the population East to find work and because the Chinese government are worried about a 'Chinese Spring'.

Is there a building boom in china at all or is it just its sheer size that distorts the picture?

For instance France has built 12 million homes over the last 30 years.
China is 20x as populous as France so it doesn't seem far fetched to suggest china needs 240 million more homes over the next 30 years.

In fact it is likely to need more as France is already a first world nation whereas China is trying to become one. I wouldn't be surprised if she needs abd builds 300m homes over the next 30 years


as for the argument that they are building them in the wrong places. According to who? So long as the new builds are within commuting distance of cities its not likely that they will never be used. And as already pointed out an apartment built today will cost 1/10th the price of one built in 25 years time. China should build as many homes as it can right now upto a figure of 700m homes a number they are not close to. It doesn't matter if they go unoccupied for a time

wotsthat

cells wrote: »

Is there a building boom in china at all or is it just its sheer size that distorts the picture?

For instance France has built 12 million homes over the last 30 years.
China is 20x as populous as France so it doesn't seem far fetched to suggest china needs 240 million more homes over the next 30 years.

In fact it is likely to need more as France is already a first world nation whereas China is trying to become one. I wouldn't be surprised if she needs abd builds 300m homes over the next 30 years


as for the argument that they are building them in the wrong places. According to who? So long as the new builds are within commuting distance of cities its not likely that they will never be used. And as already pointed out an apartment built today will cost 1/10th the price of one built in 25 years time. China should build as many homes as it can right now upto a figure of 700m homes a number they are not close to. It doesn't matter if they go unoccupied for a time

How do you work out that an apartment built in 25 years time will cost 10x more than today?

China seems to be taking the 'build them and they'll come' theory to the extreme. The ghost cities are unoccupied - they've been built for people that aren't there. Building 700m houses and assuming it doesn't matter that they aren't used any time soon is a huge punt.

Voyager2002

cells wrote: »

Is there a building boom in china at all or is it just its sheer size that distorts the picture?

For instance France has built 12 million homes over the last 30 years.
China is 20x as populous as France so it doesn't seem far fetched to suggest china needs 240 million more homes over the next 30 years.

In fact it is likely to need more as France is already a first world nation whereas China is trying to become one. I wouldn't be surprised if she needs abd builds 300m homes over the next 30 years


as for the argument that they are building them in the wrong places. According to who? So long as the new builds are within commuting distance of cities its not likely that they will never be used. And as already pointed out an apartment built today will cost 1/10th the price of one built in 25 years time. China should build as many homes as it can right now upto a figure of 700m homes a number they are not close to. It doesn't matter if they go unoccupied for a time

Housing is being built in places and at prices for which there is no market. Large numbers of apartments remain empty, with the owners hoping to sell at a profit in the future.

cells

wotsthat wrote: »

How do you work out that an apartment built in 25 years time will cost 10x more than today?

China seems to be taking the 'build them and they'll come' theory to the extreme. The ghost cities are unoccupied - they've been built for people that aren't there. Building 700m houses and assuming it doesn't matter that they aren't used any time soon is a huge punt.

How much did a house cost in the uk in the year 25 years ago vs today?

Wages in China are low now, GDP per capita is only $6k whereas in western nations it is closer to $40k.

In 25 years time GDP per capita in nominal terms will be corca $80k nominal whereas china will likely be closer to the $60k mark. This means china over the next 25 years will grow faster than the west which has been the case over the last 25 years.

with Chinese GDP per capita going up 10x so will the cost of most things in China. Bread eggs milk and homes.

So with homes costing 10x as much to build in 2040 as they do today it nakes good sense for china to build as many as she can.

and once more china is 20x the size of the uk or france. The UK has and needs about 500k empty homes so china needs 10m empty. That os a lot of empty homes nominally but not as a percentage

cells

Voyager2002 wrote: »

Housing is being built in places and at prices for which there is no market. Large numbers of apartments remain ebuilding in the owners hoping to sell at a profit in the future.

How do you know this? Are you an expert on the needs of the chinese people and its housing requirements going into theufuture or are you an Internet expert that is just reapting crap from other Internet experts?

What we know for sure without a doubt is that china has far fewer homes per capita than Germany or France two nations you would not claim as building too many homes for no market

What we also know for sure is that building costs (ie wages and materials) will go up a lot in China over the next 20 years.

SunReader

cells wrote: »

How do you know this? Are you an expert on the needs of the chinese people and its housing requirements going into theufuture or are you an Internet expert that is just reapting crap from other Internet experts?

What we know for sure without a doubt is that china has far fewer homes per capita than Germany or France two nations you would not claim as building too many homes for no market

What we also know for sure is that building costs (ie wages and materials) will go up a lot in China over the next 20 years.

I'd be interested to hear your analysis as to why there are so many deserted cities in China. Peasants working in paddy fields can't afford to live in mock Victorian mansions overlooking replica Eiffel towers..


As for wage and commodity inflation over the next twenty years, yes very clever, probable but not a sure certainty if there is deflation (as japan suffered). Fewer houses per capita compared to France or Germany, sure but much less wealth per capita too, not enough to buy their own properties it would seem.


As just another layman's opinion on a forum I have no inside knowledge of the Chinese housing market, judging by your comments nor are you either. That's the deal with China, it is a secret corrupt society, and without open facts people speculate - in both senses of the word...


http://www.bbc.co.uk/news/magazine-19049254