China Investment Research : The Looming Chinese Housing Bubble

by \!/_PeacePlusOne

Article by Z.zhengfeng

There is a trend rising up in China financial news –fear of a looming real estate bubble in China have begun to rise to the surface, alarming Chinese and Asian economic researchers throughout the regions. The IMF is warning that unless China can increase interest rates and enforce a property tax, there will be a "disorderly fall" in property prices. Currently, China's measures to curtail a bubble are "acting like a band-aid, rather than fixing the actual causes of high residential real estate inflation." The measures taken include: "suspending mortgages for third home purchases, promises to speed up trials of a property tax, and an interest rate hike for the first time in almost three years." Even still, low borrowing costs and lack of alternatives for investing led to excessive inflation in the price of houses. For China investment research firms, the alarm bells have begun to sound. Property prices cannot rely on government measures alone to fall, according to Chinese Premier Wen Jiabaoand. The aforementioned IMF China investment research report is unsure if these measures are likely to curtail the impact on the housing market in the long term. A sign of an impending housing bubble are the fact that real estate prices across 70 cities went up 8.6% in October from the previous year. Some critics wonder if the housing bubble is being overblown, as with any financial situation with potential political implications. China's housing bubble has a chance to be worse than the United States, which could have major implications on investing in Chinese stock. Investments in real estate grew 26% annually in China from 2001 to 2008, and prices in the market have tripled while capacity has doubled. Urbanization is a driver of housing investment trends. And, obviously, speculation is another according to leading China equity research firms.What happens next is up in the air. In an article on Fool.com, Sean Sun, an expert on China company research, says: "The housing bubble is no doubt speculative an! d unsust ainable, but the chances of it causing a total meltdown are slim. With less credit in the market, there's a lower chance of a systemic domino effect. That's not to say people aren't going to lose their shirts, but at least they'll probably walk away with their pants, socks, and maybe even their shoes on." Similarly, Tim Hanson, from the same article, agrees with Sean that "there's a discrepancy in the real estate valuations" but that he doesn't "know the magnitude of that looming correction. He goes on to say, "I don't expect a real estate correction, as some bears do, to obliterate China's economy, and so I am finding opportunities in defensive consumer stocks such as China Mobile." Another take: "If we do see strong growth in domestic consumption, exports will become a less vital source of employment, so Beijing will be less averse to letting the Yuan appreciate. A stronger Yuan would give Chinese consumers more buying power when it comes to imported goods." It is possible also that a massive Keynesian spending program has misallocated capital and set the stage for a crisis. China definitely has a bubble on their hands. To what effect it will have is up for speculation.

China investing in Africa - part 1

18 Oct 2011 abndigital.com Originally uploaded by abndigital.com Background: With increasing penetration of China in African markets is spearheaded by the major Chinese state owned companies who have access to long-term financial support from the Chinese government. This is an opportunity for African countries to address the backlog of infrastructure investments that has long kept Africa under developed and disadvantaged. Presenter -- Professor Chege, anectodally, when I was in Nairobi there were roads being refurbished there were bridges being built, and I was told this was all due to the Chinese. So there is definitely benefit on the part of the Kenya-China relationship. What more is Kenya gaining? Chege -- That is wrong! Though Chinese construction companies that's true, but the money is mostly coming from the Kenyan government, the African development bank, the World Bank. The Chinese construction companies here are winning hands down when it comes to tendering. This is what you're observing there. In addition to that, the presence of large Chinese construction companies is of course the entry into investment into the private sector. But most important of all Trade. Presenter -- So we're partnering with the Chinese on infrastructure development but we haven't ransomed the country. That's what many people raise when they're dealing with China's investment strategy in Africa...commodities for infrastructure, commodities for loans? Chege -- I would say the way it is ...

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