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A lot of $$$ was stored away in housing assets in China. When I was in Chongqing in 2014 it was clear -- building for building's sake with the expectation that

A lot of $$$ was stored away in housing assets in China. When I was in Chongqing in 2014 it was clear -- building for building's sake with the expectation that these empty properties would ultimately accrue in value and demand would exist at some point... I think much of this open housing is in new urban cities -- the 10M person cities that are mostly west and on the Silk Road built to support trade (but not quite built because of actual need just yet)

NicoJuicy 8y ago
I don't think so, according to what I read/learned it had to do with defaulted loans. In a "us knows us" world, the big loans are given to people approving the regime. The loan is 10 million for example, the collateral is the property. The loan is 50% used and defaults. 5 million profit. Some articles around shadow banking, if you want to look it up
- annefauvre 8y ago
  Yeah that's interesting. What I've also read is that property was one of the only private assets not taxed at the same rate in China so is a good place to store capital (or that was the expectation). Secondly, a huge initiative of the Chinese Government beginning in 2008 was to "go west" and they started providing a significant amount of funding for major infrastructure and development projects with the "if you build it they will come" mentality. Still possible that type of migration west could happen -- particularly as China expands trade relationships with the countries to their west as well...
  - ThrustVectoring 8y ago
    The explanation I heard was more about capital controls. A fairly well-off middle class Chinese citizen cannot plan for retirement by buying into an S&P 500 fund and waiting three decades. Chinese bonds have negative real rates. And the fate of the stock prices of domestic Chinese companies are subject to the vagarities of the shifting whims of the Chinese government. Where else are they going to put their money? An apartment that sits there empty for two decades and then gets sold looks quite attractive in that context.
  - NicoJuicy 8y ago
    Yeah, the curious thing is. China still borrows cheaply from the world bank and they use that ( partially) for the one road, one belt initiative. This has very recently changed, if I'm not mistaken. It's part of not being an developed countries. And the requirements were accepted by a loan to the world bank of 7,7 billion $ from America ( from memory)

NicoJuicy 8y ago

I don't think so, according to what I read/learned it had to do with defaulted loans. In a "us knows us" world, the big loans are given to people approving the regime. The loan is 10 million for example, the collateral is the property. The loan is 50% used and defaults. 5 million profit. Some articles around shadow banking, if you want to look it up

annefauvre 8y ago
Yeah that's interesting. What I've also read is that property was one of the only private assets not taxed at the same rate in China so is a good place to store capital (or that was the expectation). Secondly, a huge initiative of the Chinese Government beginning in 2008 was to "go west" and they started providing a significant amount of funding for major infrastructure and development projects with the "if you build it they will come" mentality. Still possible that type of migration west could happen -- particularly as China expands trade relationships with the countries to their west as well...
- ThrustVectoring 8y ago
  The explanation I heard was more about capital controls. A fairly well-off middle class Chinese citizen cannot plan for retirement by buying into an S&P 500 fund and waiting three decades. Chinese bonds have negative real rates. And the fate of the stock prices of domestic Chinese companies are subject to the vagarities of the shifting whims of the Chinese government. Where else are they going to put their money? An apartment that sits there empty for two decades and then gets sold looks quite attractive in that context.
- NicoJuicy 8y ago
  Yeah, the curious thing is. China still borrows cheaply from the world bank and they use that ( partially) for the one road, one belt initiative. This has very recently changed, if I'm not mistaken. It's part of not being an developed countries. And the requirements were accepted by a loan to the world bank of 7,7 billion $ from America ( from memory)