I had heard about this a few years ago, but I didn’t believe it. This is really bizarre.
treemagnet
May 9, 2013 12:12 pm
Now that its been on 60 minutes, its real. From seedy underworld blogging to truth, all thanks to our bullshit media. Wish old Leslie would point that camera on the fed or metal etfs, etc.
If trouble comes in threes, then what’ll be the next global market to melt down after the U.S. and Europe? Some are looking nervously at China.
China has been nothing short of a financial miracle. In just 30 years, this state-controlled economy became the world’s second largest, deftly managed by government policies and decrees.
One sector the authorities concentrated on was real estate and construction. But that may have created the largest housing bubble in human history. If you go to China, it’s easy to see why there’s all the talk of a bubble. We discovered that the most populated nation on earth is building houses, districts and cities with no one in them.
Lesley Stahl: So this is Zhengzhou. And we are on the major highway, or the major road. And it’s rush hour.
Gillem Tulloch: Yeah –
Lesley Stahl: And it’s almost empty.
Gillem Tulloch is a Hong Kong based financial analyst who was one of the first to draw attention to the housing bubble in China. He’s showing us around the new eastern district of Zhengzhou, in one of the most populated provinces in China – not that you’d know it. We found what they call a “ghost city” of new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles, and miles, and miles, and miles of empty apartments.
Lesley Stahl: Why are they empty? I’ve heard that they have actually been sold.
Gillem Tulloch: They’ve all been sold. They’ve all been sold.
Lesley Stahl: They’ve all been sold? They’re owned.
Gillem Tulloch: Absolutely.
Owned by people in China’s emerging middle class, who now have enough money to invest but few ways to do it. They’re not allowed to invest abroad, banks offer paltry returns, and the stock market is a rollercoaster. But 15 years ago, the government changed its policy and allowed people to buy their own homes and the flood gates opened.
Gillem Tulloch: So what they do is they invest in property because property prices have always gone up by more than inflation.
Lesley Stahl: And they believe it will always go up?
Gillem Tulloch: Yeah, just like they believed in the U.S.
Actually, property values have doubled and tripled and more — so people in the middle class have sunk every last penny into buying five, even 10 apartments, fueling a building bonanza unprecedented in human history. No nation has ever built so much so fast.
Lesley Stahl: How important is real estate to the Chinese economy? Is it central?
Gillem Tulloch: Yes. It’s the main driver of growth and has been for the last few years. Some estimates have it as high as 20 or 30 percent of the whole economy.
Lesley Stahl: But they’re not just building housing. They’re building cities.
Gillem Tulloch: Yes. That’s right.
Lesley Stahl: Giant cities being built with people not coming to live here.
Gillem Tulloch: Yes. I think they’re building somewhere between 12 and 24 new cities every single year.
Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming.
Stucky
May 9, 2013 1:08 pm
I read somewhere that the Chinese build those cities / suburban communities WITHOUT supporting infrastructure … like, you know, .. sewer lines.
lol
Within a decade those pretty little cities will become one massive 30 blocks of squalor. Admin’s dream.
Stucky
May 9, 2013 1:13 pm
When Nature takes over unmaintained manmade structures.
[img[/img]
Steve Hogan
May 9, 2013 3:21 pm
We’ve got lots of people here who could fill up those places. I’m thinking about 800,000 lawyers, the banking class, the entire Obama administration, Congress, the homeless, telemarketers….
Kill Bill
May 9, 2013 3:33 pm
in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing.
Absolutely Insane.
Thirteener
May 9, 2013 6:32 pm
“Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming.”
Sorry Leslie…”Our G’mnt” just printed eight TRILLION on god knows what to prop up and create the next bubble!!
Anonymous
May 9, 2013 10:55 pm
Is this any worse than multi trillion dollar faked up ‘wars’ in the Middle East? Iraq? Afghanistan?
How about multi-billion dollar weapons systems that the military doesn’t want that cost many billions but cannot be cancelled for political reasons?
Or maybe printing $85+ billion per month forever and blowing it into the big financial bubble we are building here?
At least, these buildings will be there if needed. Japan was offered one when Fukushima was thought to require the evacuation of Tokyo, or so I read.
Now turn to the Us. Millions of homes standing empty due to foreclosure, and millions more in the process. Malls that are becoming empty shells. Cities sliding into ruin. (Detroit, Chicago, NYC, LA, etc.). 18,000 miles of soup lines. Factories closing.
Where is the difference? After all this is the ‘Bash China’ decade by order of your masters. You will hear no positive info about China from the MSM. Better keep in mind that most of your ‘stuff’ comes from China or the parts that it is made from.
And I only watched this commercial riddled video to the second commercial. That is all America is anymore. Commercial propaganda.
Administrator
Author
May 10, 2013 9:12 am
Credit Shock Dead Ahead: China Money Formation Soars To 2-Year High As Delinquent Loans Surge By 29%
Submitted by Tyler Durden on 05/10/2013 08:33 -0400
A month ago we pointed out that even as the Chinese credit bubble – at a record 240% of GDP on a consolidated basis – is now clearly out of control, the far more disturbing aspect of China’s credit-fueled economy is the ever declining boost to economic growth as a result of every incremental dollar created. Indeed, as the economic response to “credit shock” becomes lower and lower, even as the inflationary impact lingers, the PBOC is caught between a stagnating rock and an inflationary hard place. Nonetheless, there are few options and with the shark-like need to continue growing, or at least moving, in order to prevent collapse, China did precisely what we expected it to do: boost credit growth even more despite the obvious tapering economic impact of such money creation. Sure enough, overnight China reported that its M2 growth accelerated in April from 15.7% in March, to 16.1% on a Y/Y basis: the fastest pace of credit creation in two years. Yes, the PBOC may not be creating money, but the Chinese pseudo-sovereign commercial banks, sure are, and at a pace that puts the rest of the world to shame.
From SocGen:
China’s M2 growth accelerated unexpectedly from 15.7% yoy in March to 16.1% yoy in April (Cons. 15.5%; SG 15.2%), the fastest pace in two years. Although a base effect was partly responsible, it is also the case that credit conditions continued to be very accommodative. The bigger than anticipated new bank lending figure – CNY 792.9bn or 26.9% yoy – is one piece of proof. Although the flow of total social financing normalised lower from CNY 2.5tn in March to CNY 1.7tn, the stock growth sped up further to 22.3% yoy from 21.6% yoy.
And there are those who wonder why food prices soared in April despite the obviously contractionary tumble in the PPI…
Furthermore, as we pointed out two days ago when we looked at the glaringly obvious export data manipulation, the idle-money inflationary pressures in China are likely far, far worse than what is reported, and with the SHCOMP unable to absorb excess liquidity due to its shallow nature (unlike the S&P or the Nikkei225), and with the government establishing new and improved housing market curbs with every passing day, all this soaring hot money is about to spill over into the economy, and which point it will not be the USD that Chinese consumers flocks to in order to preserve their wealth (hint: see 2011 when China had its last episode of outright spiking inflation).
But, as usually happens, that’s just half of story.
Since in China, unlike the G-0 world, loan creation is still mediated by commercial banks (at least as long as the PBOC continues to sit on the sidelines), and not sourced directly by the monetary authority which can absorb virtually infinite bad loans before faith in the currency is shaken, the problem of bad loans is starting to become quite tangible. As China Daily reports, citing PwC research, the total mount of overdue loans among China’s top 10 listed banks exploded by 29% in one year, rising to $79.3 billion at the end of 2012 compared to 2011.
Bad loans are weighing heavily on China’s top commercial banks this year, and are likely to hit profitability and asset quality, a report released by PwC claimed on Thursday.
The study revealed that total overdue loans among the country’s top 10 listed banks had increased to 486.5 billion yuan ($79.3 billion) by the end of last year, up 29 percent from 2011.
The average overdue loan ratio rose to 1.21 percent from 1.06 percent, “a considerable deterioration”, said Jimmy Leung, PwC’s banking and capital markets leader for China.
In some regions, the ratio reached 5 to 7 percent, he added.
The ratio of special-mention loans, debts that could potentially turn sour, among the five largest joint stock banks rose to 1.03 percent in 2012 from 2011’s 0.93 percent.
Chinese banks follow the international five-category system that classifies loans as “pass”, “special-mention”, “substandard”, “doubtful” and “loss”, in line with their inherent risks. The last three groups are regarded as non-performing loans.
And here’s another reason why China finds itself in a dead end dilemma with no way out: on one hand it does not want any more housing inflation for obvious bubble reasons. On the other, any collapse in housing prices will crash its banking sector. What to do?
“The economic uncertainties and tightened rules on the real estate market would pose a tougher test for commercial lenders this year,” added Raymond Yung, PwC’s financial services leader for China.
“If property prices show big declines, bank lending would be in jeopardy….It’s time for Chinese banks to strengthen their management of collecting repayments, and writing off more soured loans more positively.”
Only they can’t, because that process would require the full disclosure of just how bad the true delinquent loan state of the commercial banking sector is. And since this is China, where economic data is always misreported by orders of magnitude, one truly is scared to look beneath the surface, and where such an event can be delayed (not avoided), only as long as new loan creation is soaring and is sufficiently high to offset the conversion of performing loans into NPLs.
Which, perhaps explains, why April new credit soared to the highest in two years. And this in turn, will be curbed too, once inflation – that ultimate arbiter of reality – comes roaring back.
In the meantime, and as always, we take delight in all amusing gold “smashes”, “crashes”, or whatever else they are called, as we continue to recall just what asset the Chinese bought with both hands and feet in all markets – physical and paper – in 2011, when China’s inflation went off the charts. Because it wasn’t the USD, and because we know that this time will not be different.
devlin
September 22, 2013 6:31 am
Excellent news for RealEstate
Nonanonymous
October 3, 2013 6:10 am
Urvashi, you may pay a premium because you’re a paid commenter, not unlike the ACA Navigators that have been commenting on new stories about it.
Obamacare is going to get defunded because it’s an unmitigated disaster.
Unlike our free from government interference markets… Nope..no centrally planned grifting going on is dis’ here US ” done freed” market..none at all.
Gillem Tulloch:
Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming
I had heard about this a few years ago, but I didn’t believe it. This is really bizarre.
Now that its been on 60 minutes, its real. From seedy underworld blogging to truth, all thanks to our bullshit media. Wish old Leslie would point that camera on the fed or metal etfs, etc.
Bubble? What bubble??? Eat shit. (j/k)
[img[/img]
[img[/img]
Looks like a Toll Brothers community.
If trouble comes in threes, then what’ll be the next global market to melt down after the U.S. and Europe? Some are looking nervously at China.
China has been nothing short of a financial miracle. In just 30 years, this state-controlled economy became the world’s second largest, deftly managed by government policies and decrees.
One sector the authorities concentrated on was real estate and construction. But that may have created the largest housing bubble in human history. If you go to China, it’s easy to see why there’s all the talk of a bubble. We discovered that the most populated nation on earth is building houses, districts and cities with no one in them.
Lesley Stahl: So this is Zhengzhou. And we are on the major highway, or the major road. And it’s rush hour.
Gillem Tulloch: Yeah –
Lesley Stahl: And it’s almost empty.
Gillem Tulloch is a Hong Kong based financial analyst who was one of the first to draw attention to the housing bubble in China. He’s showing us around the new eastern district of Zhengzhou, in one of the most populated provinces in China – not that you’d know it. We found what they call a “ghost city” of new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles, and miles, and miles, and miles of empty apartments.
Lesley Stahl: Why are they empty? I’ve heard that they have actually been sold.
Gillem Tulloch: They’ve all been sold. They’ve all been sold.
Lesley Stahl: They’ve all been sold? They’re owned.
Gillem Tulloch: Absolutely.
Owned by people in China’s emerging middle class, who now have enough money to invest but few ways to do it. They’re not allowed to invest abroad, banks offer paltry returns, and the stock market is a rollercoaster. But 15 years ago, the government changed its policy and allowed people to buy their own homes and the flood gates opened.
Gillem Tulloch: So what they do is they invest in property because property prices have always gone up by more than inflation.
Lesley Stahl: And they believe it will always go up?
Gillem Tulloch: Yeah, just like they believed in the U.S.
Actually, property values have doubled and tripled and more — so people in the middle class have sunk every last penny into buying five, even 10 apartments, fueling a building bonanza unprecedented in human history. No nation has ever built so much so fast.
Lesley Stahl: How important is real estate to the Chinese economy? Is it central?
Gillem Tulloch: Yes. It’s the main driver of growth and has been for the last few years. Some estimates have it as high as 20 or 30 percent of the whole economy.
Lesley Stahl: But they’re not just building housing. They’re building cities.
Gillem Tulloch: Yes. That’s right.
Lesley Stahl: Giant cities being built with people not coming to live here.
Gillem Tulloch: Yes. I think they’re building somewhere between 12 and 24 new cities every single year.
Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming.
I read somewhere that the Chinese build those cities / suburban communities WITHOUT supporting infrastructure … like, you know, .. sewer lines.
lol
Within a decade those pretty little cities will become one massive 30 blocks of squalor. Admin’s dream.
When Nature takes over unmaintained manmade structures.
[img[/img]
We’ve got lots of people here who could fill up those places. I’m thinking about 800,000 lawyers, the banking class, the entire Obama administration, Congress, the homeless, telemarketers….
in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing.
Absolutely Insane.
“Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming.”
Sorry Leslie…”Our G’mnt” just printed eight TRILLION on god knows what to prop up and create the next bubble!!
Is this any worse than multi trillion dollar faked up ‘wars’ in the Middle East? Iraq? Afghanistan?
How about multi-billion dollar weapons systems that the military doesn’t want that cost many billions but cannot be cancelled for political reasons?
Or maybe printing $85+ billion per month forever and blowing it into the big financial bubble we are building here?
At least, these buildings will be there if needed. Japan was offered one when Fukushima was thought to require the evacuation of Tokyo, or so I read.
Now turn to the Us. Millions of homes standing empty due to foreclosure, and millions more in the process. Malls that are becoming empty shells. Cities sliding into ruin. (Detroit, Chicago, NYC, LA, etc.). 18,000 miles of soup lines. Factories closing.
Where is the difference? After all this is the ‘Bash China’ decade by order of your masters. You will hear no positive info about China from the MSM. Better keep in mind that most of your ‘stuff’ comes from China or the parts that it is made from.
And I only watched this commercial riddled video to the second commercial. That is all America is anymore. Commercial propaganda.
Credit Shock Dead Ahead: China Money Formation Soars To 2-Year High As Delinquent Loans Surge By 29%
Submitted by Tyler Durden on 05/10/2013 08:33 -0400
A month ago we pointed out that even as the Chinese credit bubble – at a record 240% of GDP on a consolidated basis – is now clearly out of control, the far more disturbing aspect of China’s credit-fueled economy is the ever declining boost to economic growth as a result of every incremental dollar created. Indeed, as the economic response to “credit shock” becomes lower and lower, even as the inflationary impact lingers, the PBOC is caught between a stagnating rock and an inflationary hard place. Nonetheless, there are few options and with the shark-like need to continue growing, or at least moving, in order to prevent collapse, China did precisely what we expected it to do: boost credit growth even more despite the obvious tapering economic impact of such money creation. Sure enough, overnight China reported that its M2 growth accelerated in April from 15.7% in March, to 16.1% on a Y/Y basis: the fastest pace of credit creation in two years. Yes, the PBOC may not be creating money, but the Chinese pseudo-sovereign commercial banks, sure are, and at a pace that puts the rest of the world to shame.
From SocGen:
China’s M2 growth accelerated unexpectedly from 15.7% yoy in March to 16.1% yoy in April (Cons. 15.5%; SG 15.2%), the fastest pace in two years. Although a base effect was partly responsible, it is also the case that credit conditions continued to be very accommodative. The bigger than anticipated new bank lending figure – CNY 792.9bn or 26.9% yoy – is one piece of proof. Although the flow of total social financing normalised lower from CNY 2.5tn in March to CNY 1.7tn, the stock growth sped up further to 22.3% yoy from 21.6% yoy.
And there are those who wonder why food prices soared in April despite the obviously contractionary tumble in the PPI…
Furthermore, as we pointed out two days ago when we looked at the glaringly obvious export data manipulation, the idle-money inflationary pressures in China are likely far, far worse than what is reported, and with the SHCOMP unable to absorb excess liquidity due to its shallow nature (unlike the S&P or the Nikkei225), and with the government establishing new and improved housing market curbs with every passing day, all this soaring hot money is about to spill over into the economy, and which point it will not be the USD that Chinese consumers flocks to in order to preserve their wealth (hint: see 2011 when China had its last episode of outright spiking inflation).
But, as usually happens, that’s just half of story.
Since in China, unlike the G-0 world, loan creation is still mediated by commercial banks (at least as long as the PBOC continues to sit on the sidelines), and not sourced directly by the monetary authority which can absorb virtually infinite bad loans before faith in the currency is shaken, the problem of bad loans is starting to become quite tangible. As China Daily reports, citing PwC research, the total mount of overdue loans among China’s top 10 listed banks exploded by 29% in one year, rising to $79.3 billion at the end of 2012 compared to 2011.
Bad loans are weighing heavily on China’s top commercial banks this year, and are likely to hit profitability and asset quality, a report released by PwC claimed on Thursday.
The study revealed that total overdue loans among the country’s top 10 listed banks had increased to 486.5 billion yuan ($79.3 billion) by the end of last year, up 29 percent from 2011.
The average overdue loan ratio rose to 1.21 percent from 1.06 percent, “a considerable deterioration”, said Jimmy Leung, PwC’s banking and capital markets leader for China.
In some regions, the ratio reached 5 to 7 percent, he added.
The ratio of special-mention loans, debts that could potentially turn sour, among the five largest joint stock banks rose to 1.03 percent in 2012 from 2011’s 0.93 percent.
Chinese banks follow the international five-category system that classifies loans as “pass”, “special-mention”, “substandard”, “doubtful” and “loss”, in line with their inherent risks. The last three groups are regarded as non-performing loans.
And here’s another reason why China finds itself in a dead end dilemma with no way out: on one hand it does not want any more housing inflation for obvious bubble reasons. On the other, any collapse in housing prices will crash its banking sector. What to do?
“The economic uncertainties and tightened rules on the real estate market would pose a tougher test for commercial lenders this year,” added Raymond Yung, PwC’s financial services leader for China.
“If property prices show big declines, bank lending would be in jeopardy….It’s time for Chinese banks to strengthen their management of collecting repayments, and writing off more soured loans more positively.”
Only they can’t, because that process would require the full disclosure of just how bad the true delinquent loan state of the commercial banking sector is. And since this is China, where economic data is always misreported by orders of magnitude, one truly is scared to look beneath the surface, and where such an event can be delayed (not avoided), only as long as new loan creation is soaring and is sufficiently high to offset the conversion of performing loans into NPLs.
Which, perhaps explains, why April new credit soared to the highest in two years. And this in turn, will be curbed too, once inflation – that ultimate arbiter of reality – comes roaring back.
In the meantime, and as always, we take delight in all amusing gold “smashes”, “crashes”, or whatever else they are called, as we continue to recall just what asset the Chinese bought with both hands and feet in all markets – physical and paper – in 2011, when China’s inflation went off the charts. Because it wasn’t the USD, and because we know that this time will not be different.
Excellent news for RealEstate
Urvashi, you may pay a premium because you’re a paid commenter, not unlike the ACA Navigators that have been commenting on new stories about it.
Obamacare is going to get defunded because it’s an unmitigated disaster.
S Consulting Services Pvt Ltd
Unlike our free from government interference markets… Nope..no centrally planned grifting going on is dis’ here US ” done freed” market..none at all.
Gillem Tulloch:
Unlike our market driven economy, in China it’s the government that has spent some $2 trillion to get these cities built – as a way of keeping the economy growing. The assumption is “if you build it, they’ll come.” But no one’s coming