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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (109701)	3/10/2011 7:45:44 PM
From: GST	1 Recommendation Respond to of 110194

I was just rereading your blog: wallstreetexaminer.com The issue of how local government is financed in China is a big one -- perhaps the biggest issue in China today in my view. It should be obvious by now that I am not convinced that China is going off an economic cliff -- I see real estate as a big problem but not of decisive importance and the reduction in the trade surplus and the ratcheting down of migrant labor along with huge leaps in take home pay for workers and the stimulation of local demand are all positive steps forward. But on the issue of land 'sales', as you call them (land ownership rights have been a moving target for some time) as a means of financing government, this is indeed problematic. I assume you have been distinguishing between the common practice of land leasing and land 'sales' -- both of which might be called 'sales' as they generate income. We are not used to governments leasing land, unless you live in Hawaii where land is leased to occupants by large estates. leasing revenue is recurring, land sales are a one-time event. The tax system at the local level is not yet fully developed. The market for municipal bonds for example is worth trillions of dollars and represents an untapped new financial frontier. But to the extent that local government 'sells' land and is on the hook for recurring payments without recurring revenue, there is a major problem. At the expense of sounding like a broken record, this is a transitional problem blended in with waste, corruption, fraud stupidity and blind greed -- but not necessarily a problem that will become a global calamity. My response to your blogging and posts continues to be "watch what you assume and conclude when looking at 'data' from China". Is a bust coming in China? Maybe -- but I would not bet on it.