Sunday, December 2, 2007

China's Sub-Subprime Housing

November 30, 2007
In Asia, Housing Is Booming
Yi Xianrong, a prominent economist at the China Academy of Social Sciences, a government think tank, is one of those sounding the alarm.

He contends that China's housing loans are riskier than those in the U.S. because most loan applicants give false information about their assets and income.

Because China lacks a comprehensive credit data system, borrowers often manage to qualify for loans using false information, Yi says. He believes that the overall quality of property loans in China may be even worse than the risky mortgages that are causing so much trouble in the U.S.

"I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans," Yi said in an interview with the state-run magazine Oriental Outlook.

A collapse of China's property market would reverberate throughout the world financial system, although few experts believe it would happen anytime soon.

Let's just hope "Corruption and Cronyism" will ride in on white stallions to rescue the damsels in distress.

June 6, 2005
China's Unyielding Banking Crisis
Corruption and Cronyism Often Thwart Efforts to Eradicate Bad Debts

CHENGDU, China -- As he rose through the ranks at China's largest lender, Zhang Guilin helped build the bad debt crisis plaguing his country's banks, the gravest threat to this fast-growing economy. Zhang directed funds to cronies and political allies, authorities here say, adding to a national toll of bad loans estimated at $500 billion.

November 28, 2007
China's corruption a crisis in the making
Financier Warren Buffett and Prime Minister Stephen Harper make an astute team of investment advisers. Mr. Buffett says people should be wary of investing in China. Mr. Harper says people should be wary of Chinese investment in Canada. Now, in a devastating analysis of China's systemic corruption, a distinguished academic predicts - "inevitably" - an end to the country's three decades of rapid economic expansion.


Anonymous said...

thanks for mentioning the issue - do you think China will be able to "keep" it together through 2008?

Stagflationary Mark said...


There seems to be a lot of people betting that it can hang on through the Olympics, but I'm not nearly as sure.

Our Olympics were held in 1932. We obviously couldn't hold it together when we were on top of the world.

It would be especially difficult if the market really does try to look six months ahead. If the Olympics repesent the peak, the markets would seemingly know that shortly. Maybe we're seeing that now.

China's stock market is trading at about 4,900. That's 20% off its 52 week high.