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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (54567)	8/10/2006 4:25:00 AM
From: shades	Respond to of 116555

Why is china so anti globalization? They are being like japan - not letting all those foreigners come in and flood them with immigration and buying up assets. So sad. What if USA had such policies?

To: RealMuLan who wrote (54567)	8/10/2006 4:41:28 AM
From: shades	Respond to of 116555

Cultural Revolution Dies (capitalism kills Mao's Dream - Kudlow snickers) news.moneycentral.msn.com China's Housing Headache The ever-morphing commercial skylines of Beijing, Shanghai, and Shenzhen; the stories of buy-and-flip property speculators; the sometimes garish consumer culture of Chinas urban monied elite -- no doubt about it, the new opiate of the masses on the mainland is real estate. In roughly a decade or so, urban China has evolved from having a heavily subsidized system of government-owned housing to a free-wheeling, market-driven one with all the opportunities and inequalities that come with it. Chinese of a certain age -- now in their 40s or so -- who worked for government-owned enterprises in the late 1980s or early '90s, started out in their careers paying only a fraction of their earnings for housing. As economic reforms deepened in the mid-1990s, both Chinese President Jiang Zemin and Premier Zhu Rongji started to dismantle that system, which was pretty much history by 1998. A more market-driven China needed labor mobility, a dynamic private sector, and a housing market that better reflected demand. "To get rich is glorious" became the new mantra. SCORCHING GROWTH. Today, China is richer, and that's unquestionably a good thing. A huge wave of privatizations, mergers, and shutdowns within the once-sprawling state-owned corporate sector has cleared away a lot of deadwood. Home ownership in big cities such as Beijing and Shanghai is high by global standards. Yet China is also home to far more income inequality, environmental wreckage, and social unrest. Mainlanders lucky enough to have gotten into the housing market over the last decade are enjoying a sweet ride. Younger couples and rural transplants are having a tough time finding affordable housing. Such is the social backdrop to the current great economic debate over how best to handle Chinas overheated property market. Since April, Chinese President Hu Jintaos government has taken steps to cool things down. Beijing now requires bigger down payments on higher-end properties and has imposed sales and capital gains on speculative property transactions. Developers, meanwhile, face higher financing costs and penalties for hoarding land. There are sound macroeconomic reasons behind these moves. Nearly half of Chinas GDP growth -- the economy grew a scorching 11.3% year-on-year during the second quarter -- has come from fixed-asset investment, and a big chunk of that is tied to spending on office towers, shopping complexes, and residential apartment blocks in big coastal cities such as Beijing, Shanghai, and Shenzhen [see BusinessWeek.com, 7/18/06, "Is China Growing Too Fast for Comfort?"]. SOCIAL BACKLASH? In Chinas 70 largest cities, residential and commercial property prices on average jumped 5.8% in June year-on-year, according to the National Development & Reform Commission. That includes an 11.2% increase in Beijing, where 2008 Summer Olympic-related construction is fast and furious, and a head-turning 14.6% in Shenzhen, a thriving Southern Chinese city in the Pearl River Delta region. Chinas banking system also has a huge exposure to commercial real estate and mortgage lending. Nobody wants to see a Japanese-style property bust visit a still-developing economy like China's. Yet even if it doesnt come to that, Hus government needs to worry about a possible social backlash among a sizable chunk of the population whose incomes arent growing fast enough to keep up with spiraling housing costs. And we arent even talking here about the 800 million or so Chinese living in rural regions [where outrageous land seizures by local governments are common] but rather urban dwellers in Beijing and Shanghai. Back in July, the Ministry of Finance reported an alarming shortage of low-rent apartments in major cities, the state-owned news service Xinhua reported. Only $593 million had been spent on low-rent housing since the early 1990s, the Finance Minister concluded, and 70 cities werent providing any subsidized housing at all. Given that China is now a $2 trillion economy growing at blistering speeds, that is a problem that demands a serious look by the government. LOWERING THE TEMPERATURE. The real high-wire act that Hus government faces is how to gently simmer down the property market without over-reaching and triggering a nasty correction. Going after the speculative excesses makes sense, and to its credit, the central government has been trying to do so since 2003. The trouble is local government regulators have blithely ignored entreaties from Beijing. For instance, a law on the books designed to penalize speculators who hoard land [yet dont actually develop it] is rarely enforced. (evil chinese sticking it to thier own - pathetic) If Hus team can get this right, it would shore up the governments street credentials with the masses. A robust and stable housing market and increased home ownership would also have a healthy economic multiplier effect for industries such as home appliances and various service industries. The Chinese are no different than Americans, Japanese, and Europeans in this respect: Buying a home is the purchase of a lifetime and a major financial asset. And if that opportunity is out of reach for too many families, the political blowback could be very nasty indeed. Capitalism - does a country good! It whats for dinner! Is Mao spinning in his grave?