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The China Bubble
A New Test for China’s Crackdown on Finance
China’s recent efforts to curb speculation in its property market have brought scores of angry homebuyers onto the streets of Shanghai, the Wall Street Journal reports:

In response to skyrocketing home prices, governments in China’s big cities have set limits on the buying of multiple homes and higher down-payment ratios, which has left many unable to sell their homes and others worried they won’t be able to buy in before prices rise further.

Protests over the new rules started in early May. In the latest and largest breakout, hundreds of people marched down a busy Shanghai shopping street this weekend. […]

Shanghai’s government had no official response to Saturday’s protest. In ​a statement released​ late​ Monday, ​a local housing bureau​ ​suggested a softening of policies applied to developers and buyers, though it stopped short of explicitly saying commercially-zoned units could be permitted for use as residences.

Middle-class homeowners marching in the streets is never a good thing. Now, in an attempt to cool the outcry, the Shanghai city government is blaming property developers for “distorting the policy” while making a limited concession to allow buyers of dual-use homes to move in. Whether that half measure will suffice to placate the protesters remains to be seen.

The Shanghai situation illustrates a familiar Chinese pattern: every time China tries to curb the asset bubbles in its economy, the political pushback dulls the reform push. When resistance to fiscal reforms arises, China responds by kicking the can down the road, softening reform measures or easing credit controls. But this just incentivizes more resistance while the overall health of the economy suffers.

It is far from clear what the outcome of all this will be, or when the bill will come due. But so long as Beijing is torn between implementing painful reforms and upholding a risky status quo, the government will be preoccupied by serious internal stresses.

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  • Isaiah6020

    Can’t wait what our favorite Chinese bots dhako and jinping xi will say about that. Come on fellas, what you got for me?

  • FriendlyGoat

    “Middle-class homeowners marching in the streets is never a good thing.”

    Indeed. A variation of that resulted in the election of Donald Trump in the USA.

  • KremlinKryptonite

    Everyone familiar with the situation knows that property is one of the few [seemingly] secure stores of value, and even investment. The so called stock market is not mature, mostly populated by inexperienced individuals, and so heavily regulated that it’s laughable.

    Many Chinese became overnight millionaires through no fault of their own. A fairly junky apartment in Beijing, Shanghai, Shenzhen, Guangzhou in say 2000 became a million dollar asset by 2010. What do you do when you wake up a millionaire? Go buy a nice car of course. Many of them don’t even drive their luxury cars. Just keep them as a symbol. Indeed, the Chinese have their own equivalent term representing what we call Beverly hillbilly.

  • So long as America alone keeps pumping us $900million – $1 billion every day then the building and investment and speculation doesn’t end. It is regrettable for the regular people who put their life savings into it though.

    • Isaiah6020

      Wait, so we are not only selling you over-priced debt, we are also enabling speculative bubbles and social unrest. Dude, even I wouldn’t go that far, but hey… I’ll take it.

      • You don’t cause the social problems. Truck loads of American dollars coming in every day without fail helps alleviate the problems though. And then we turn around and use some of the surplus to buy more dollar assets making dollars more expensive and American exports even less competitive;)

        • Unelected Leader

          You’re most likely a colonel in the so called 50 Cent brigade, so it really pains me to agree with you. America has let MNCs take it for quite a ride in china and elsewhere. The good news is that it doesn’t have to be this way, and at least Trump has injected smart trade policy and other notions back into the conversation after nearly 35 years of brainwashing by internationalists with no regard for Americans.

          • Not a colonel. I’d be plugged into the White House and the Pentagon if I was a colonel. You’re right that America could change it but that’s very unlikely. Trump was easy to bribe. Some trademark cases settled in his favor and some kind words over CAKE at Mar-a-Lago and voila. And when he does not deliver then he will be voted out of office and another standard “internationalist” AKA pro china president will be elected like Obama and Clinton 🙂

          • Isaiah6020

            A foreign bot with a touch of TDS. That’s pretty awesome.
            I can’t wait to get paid this week in King Dollar.

          • Angel Martin

            Hey Xi, buddy !

            I hope you got your house in Vancouver all set.

            Because when 9 trillion in “Madoff-style” WMPs blows up, the bankers and you regime insiders who don’t get out in time are going to end up like that donkey that “investors” fed to the tigers.

          • Vancouver? Yuck. No thanks. And everyone has risk in markets. The risk taken on by your FED and Treasury after 2009 dwarfs $9trillion. At least in china its mostly individuals and not huge funds. Chinese have huge private savings and Americans have huge private debt.

        • Isaiah6020

          And I repeat, if you want to sell us stuff cheap and buy our rich debt, you are more than welcome to do so.

          • And I repeat: we appreciate your support, thank you! We hope the dollar could double in value by tomorrow and then you would not export anything at all, and we win both ways because we export more and the dollar assets we already have are worth more

          • Isaiah6020

            Yuan is pegged to the dollar. It looks like both of us want strong dollar.

          • Isaiah6020

            Yuan is pegged to the dollar. You should have a conversation of PBOC about that, since your ideas seem to be different from the official policy of the Chinese government.

          • You have very outdated information. The peg ended in 2005! Don’t you remember August, 2015, the single largest devaluation of the rmb while usd has been gaining since 2014.

          • Isaiah6020

            Of course I remember it. That was when the amount of money leaving China was so great, China had to devalue. Kind of sad that it had to come to that.

          • Unelected Leader

            Well hundreds of billions leave America every year, too, so let’s not forget that we have the same problem. The difference is that the Chinese take steps to remain in surplus and competitive.

          • Isaiah6020

            It is impossible to be the world’s reserve currency and not have a current account deficit.

          • Unelected Leader

            I’m sorry but that’s just not the case. The dollar was the world reserve currency for decades before the US entered this sad period of consistently large trade deficits in the 70s.

          • Isaiah6020

            I mean, I hear what you are saying. But after WW2, as many countries especially in Asia started to modernize, US market became a way out of poverty. People all over the world seem to be content to give us stuff for a few keystrokes on a computer saying we own you something IN OUR OWN CURRENCY. This has been correctly called “an exorbitant privilege of the dollar” by a bunch of economists. Petrodollars is another example of that.
            I understand you live in South Korea and while I have nothing but respect for the country, I still would rather live in the US and get paid in US dollars.

          • Unelected Leader

            I don’t live in Korea. You’re thinking of the KremlinKryptonite guy. I’ve been out that way before though briefly. If you have a high paying, non-tradable, specialty job like lawyer or doctor then you’re doing well. Most don’t. Most work in tradable sectors that are vulnerable to outsourcing, and when they are outsourced the resultant unemployment depresses wages across virtually all sectors – tradable and non-tradable – besides a very select few.

            The dollar starting to really supplant the pound in the early 20s and of course by the 40s there was no going back. But the US enjoyed its last surplus year in 1975. Now, that is 42 years ago, and it’s also about 50 years after the USD starting supplanting the pound.

          • Yeah right you know that now because I taught you lol.

          • Isaiah6020

            It’s cute that you think that. You are way better than Dhako.

          • I think Dhako is an Indian faking to be Chinese.

          • Isaiah6020

            On the Internet nobody knows if you are a dog.

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