Perhaps a little math might shed some light on the fast approaching Asian economic tsunami, $40 Trillion dollars, the answer is $40 Trillion dollars, oops, I forgot to tell you how I arrived at that number...Well, I took the number 100 million units and multiplied it by $400,000.00 (400K per unit)...
Trying to get information out of communist China is very difficult, but, from talking to a few business people, scouring Google and using plain old common sense one can extrapolate what really has happened...Before I reveal how this happened and how it will unwind you must watch this first, then we will attempt to reveal the criminals..
At this time in Communist China there are almost 100 million brand new empty apartments townhouses and condominiums, brand-spanking new cities complete with empty shopping malls empty streets and empty vision..The average prices of these units are in the range $200 Thousand dollars to $400 Thousand dollars each...And if one does a little simple math the value of these units are in the range $20 Trillion to $40 trillion dollars, and here is the biggest problem, the average income of the average Chinese person is well under $4000 Thousand dollars per year.....
There is enough brand new empty apartments townhouses and condos in China to house roughly 400 million people!
The Chinese communist Government did embrace western capitalism but with a twist, the Chinese Governments has expropriated millions of acres of land from the peasants, they stole the land with an iron fist then the Chinese Government sold the land to builders for huge monetary profits,.....Here is how they do it...
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Finally, some local government officials have been politically motivated to create an oversupply of land and overheated real estate activity, thus diminishing the central government’s efforts to institutionalize land management and urban planning.
Compulsory Land Acquisition
The other major source of land revenues for local governments is the leasing of former farmland. Both the Chinese Constitution and the 1999 Land Administration Law (LAL) specify that the state, in the public interest, may lawfully requisition land owned by collectives, thus setting the stage for compulsory land acquisition. The local government is thereby able to acquire land cheaply from farmers and sell it to developers at much higher prices. This is a complicated process because it requires first acquiring the land, then converting it to state ownership, resettling the displaced farmers and providing urban infrastructure before finally leasing the land to developers. The law requires that peasants’ lives should not be adversely affected by land acquisition. However, this requirement is difficult to implement, in part because measures of life changes for peasants are multifaceted; financial compensation is only one of the considerations......(Read more here)
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The builders/cities/districts were mandated by higher powers to build and build they did and they haven`t stopped building since, an uncontrolled wildwest building gong show where everyone along the food chain are playing the game, it`s human nature, allow unregulated capitalism in a corrupt system where poor unconnected people have been kept down forever, town after town urged to create growth, artificial growth and all predicated on positive GDP and this result was destined to happen
The unit costs have risen and risen in price solely by Chinese speculators bidding up prices, flipping properties and engaging in the world`s largest ponzi scheme, a real estate scheme so large when this empty housing bubble bursts it will make the 2008 US housing bubble look like a minor blip, there are huge differences in the about to happen Chinese housing bubble bursting and the US housing bubble that burst in 2008, the difference is....
In the USA the housing bubble was this, people with no money, people with Mcflip jobs, people with jobs that could barely pay for a new car let alone a mortgage on a shiny new home were approved buyers!, Hell, they didn`t even require a down payment, dreamers were buying up US housing and borrowing against the escalating value, these foolish people were under the belief that these prices would rise and continue to rise forever, well, we know what happened, sub-prime loans, shady mortgage brokers and complicit banks that sold these mortgages to unsuspecting investors around the world, triple AAA rated securities that weren`t worth the paper they were written on.....But the about to burst Chinese housing bubble is different, big time different..
What we have in China is a housing bubble, 100 million empty units, the US housing bubble had buyers, the units were occupied, prices rose and rose, the house buyers were borrowing money against their homes to maintain a lifestyle of the rich and now, not so famous, the housing prices rose and rose until the banks decided they needed their money back, but in China, in China the prices are going up and up solely by speculation but...But these new housing units are empty, are you kidding me!!!.... 100 million empty housing units, think about that number, in Canada we have but 40 million people, China has enough empty housing units to house every man woman and child in Canada 10 times over.....
The speculators and the property flippers in China are playing the game with only the bank`s money, the real estate agents the investors the Chinese Government have allowed this game to be played and now bid the price and notional value of this brand new empty housing to nearly $40 trillion dollars, eventually the banks will want and need these on-paper-only dollars back!
Even if one wants to toss out the $40 trillion dollar figure(The speculative figure) and use only the cost of building these units, we are still talking about a minimum of $10 trillion dollars in unsold housing, all of China`s reserves, the US treasuries, the IOUs, even if China demanded payments of all outstanding debts of the speculators and banks and ponied up the money themselves they would still come up $6 trillion dollars shy of even paying for the cost of the housing let alone the other $36 Trillion dollars of on paper wealth, $trillions and Trillions of on paper wealth that has made its way into every bank in the world, $trillions and $trillions in Chinese triple AAA securities, where have we seen this play before? When the Chinese housing bubble bursts the world will shake and shudder and no one will even remember the 2008 hiccup..
How does this affect British Columbia, Pat big mouth Bell has been crowing about all the cheap lumber China has been buying(The wood has been used for forming concrete, not building houses)....Dirt cheap lumber, no value added lumber, a export market that has barely added any employment, also coal exports to China, coal that is used primarily for the manufacture of steel, and, and the Chinese drive a hard bargain, dirt cheap rock-bottom prices, the Chinese get the best prices on the planet with everything they buy.
Christy Clucking Clark`s entire job`s agenda plan was predicated on China not stopping, her plan was built around a housing boom ready to collapse, the BC Liberals were relying on a Chinese building boom from here to eternity but China will stop, they have enough brand new surplus housing to accommodate a staggering 400 million people, that is enough new housing to house 1/3 of the entire populous of China, and don`t those people already have homes?...And do those people have any money, well, at least no money to afford to buy $200 thousand to $400 thousand dollar housing units!....If Chinese peasants buy these housing units the mortgages would have to be multi-generational loans, loans over 100s of years...But, are the banks willing to wait hundreds of years to re-claim $40 trillion dollars?
There is a teeny weeny possibility that China will woo the world to move in, to buy housing in China, to make Communist China the to-go place, a destination nation but I don`t think so, I think corruption and greed has infiltrated the Chinese Governments and the highest authorities in China, a ponzi scheme so large, the best experts in the world are ringing the alarm bell that there will be a Chinese housing collapse, there can be no other possible outcome, there are a few pie-eyed dreamers who say that China will move 400 million farm peasants into these units, that may happen but those people have no money and they spend half their meager earnings on food alone, how on earth could they pay these prices when they make but a few dollars per day!...And how on earth will the banks recover the extra $30 trillion dollars in speculative dollars...Money that builders and investors have created on paper?
Let me be perfectly clear, the day is coming very soon when China will come to a dead stop on building, will China build to the point of 200 million empty apartments?....The time for the complete shutdown will come sooner rather then later, some say the European meltdown will trigger the Chinese housing bubble to explode and the repercussions will make the 2008 economic fraud look like a little case of shop-lifting!...And the most shocking statistics of all.
Over 60% of China`s GDP is in home construction, in an attempt to push growth China has artificially built up housing stock merely to sustain growth, this is not sustainable when nobody can afford the housing units, for now if China stops building homes the domestic market crashes but they can`t build speculative excess forever, this puppy is in a no win situation and i`m not the only one worried, this runaway freightrain will cause devastation either way, if it stops the endless Chinese domestic growth crashes and burns....But monetary collapse is inevitable with continued building, sooner rather than later the banks will want their money back, and just like here in Canada, the building boom and economic rise of China has left 95% of its own populous behind, the rich get richer and the poor stay poor....And it`s not just bloggers who are worried, there are some big names getting worried about China....Here is some more concern from Bloomberg news
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Faber joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China.
China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China
Read more here
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China is not going to tell other exporting countries like Canada that in the near future all and or most activity will come to a shuttering halt, in the meantime Christy Clucking Clark and Stephen Harper have put all their eggs in one basket, hewers of wood and drawers of water, resource extraction and wholesale sellouts while doing nothing for Canadian high-tech and or the domestic Canadian market, the Corporate world and Canadian politicians care only about shareholder profits and winning the next election, none have looked at the big picture or the long term....For when the Chinese housing bubble bursts BC exports to China will collapse, the lucrative BC housing market for Chinese nationals will collapse too, meanwhile Christy Clucking Clark wants to fry our rivers and environment to facilitate cheap resources to China, a market that is on the cusp of collapsing, the Chinese middleclass didn`t rise as planned, the same corporate pigs who fled to China are now fleeing to cheaper labour sources in Vietnam and Korea.....Here are some excerpts from that last Bloomberg link..
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Why Factories Are Leaving China
A labor shortage is trimming margins for exporters, who are moving to Vietnam, India, and elsewhere
So Fan is expanding his factory in Vietnam, where wages are $100 a month, one-third what he pays in China. He plans to shift 85 percent of his production across the border, and by December he'll have 8,000 workers in Vietnam—up from 300 a year ago—and just 5,000 in China, down from 25,000 in 2008.
Over the past two years, millions of jobs have moved to China's interior or elsewhere in Asia as factory owners try to cut costs. In Guangdong, the mainland's top exporting province, wages have almost doubled in the past three years, and more than half the factories can't find enough workers. The number of migrants who traveled to coastal provinces for work fell by 9 percent last year, to 91 million. "This lack of labor will only get worse," says Willy Lin, chairman of the Textile Council of Hong Kong, a trade association.
Factory owners complain that the higher wages are devastating profits, especially as their customers continue to squeeze them for lower prices. "Wal-Mart won't raise what they pay us," says Poh-Heng Toh,
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The BC Liberals have put too many eggs into one Asian basket, the BC Government betrayed you and I, without building value added and secondary manufacturing BC will die... The Campbell/Clark Liberals betrayed everyone, the only difference between Gordon Campbell and Christy Clark is the smell of the masking perfume, more raw logs leaving BC, more coal, sending your children into a mine, every parent`s dream is to have their children work in a mine or move to the frozen north and work with gas, yippee!! The puppet masters who control Christy Clark and the Liberals are prepared to dam every river and destroy super natural British Columbia as they ride the Chinese bubble into the depths of hell, the Chinese building boom will end shortly, it can`t be sustained and to jump in head first on the tail end of a real estate pyramid scheme and there isn`t one BC Media outfit that has the balls or gumption to tell the Straight Goods, or at very least to acknowledge the risk of relying so heavily on China, 100 million empty apartments town-homes and condos in China and growing, a fool and their money..
UPDATED HERE....From Rueters
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In a manner typical of many infrastructure projects in China, Chengdu more than doubled the size of its planned transport hub, borrowed 3 billion yuan ($473 million) from a state bank to finance it, then set out on a blistering construction timeline that saw the finishing touches put on the project two years later.
But instead of getting the accolades they expected for helping to stimulate the economy, Chengdu Communications and many of China’s 10,000 local government financing vehicles (LGFV) have now come under a harsh spotlight for the grim side-effects of the construction binge.
China’s local governments have piled up a mountain of bad debt, some of it to finance bridges to nowhere and other white elephant projects, which now threatens to constrict growth at a time when the global economy is sputtering. It is adding to other systemic risks in China, including a sharp downturn in the property market and a rapid rise in problematic loans.
Local governments had amassed 10.7 trillion yuan in debt at the end of 2010. The government expects 2.5 to 3 trillion yuan of that will turn sour, while Standard and Chartered reckons as much as 8 to 9 trillion yuan will not be repaid -- or about $1.2 trillion to $1.4 trillion.
In other words, the potential debt defaults could be even larger than the $700 billion U.S. bail-out programme during the 2008 crisis.
Reuters reported in mid-year the government was working on a relief plan for local governments, including allowing them to tap the municipal bond market for the first time as an alternative to bank loans, which are becoming harder to get.
The risks of default are rising. Nearly 85 percent of the local government finance vehicle loans in northeast Liaoning province, for instance, missed debt service payments in 2010, an audit report posted on the Liaoning Daily website said.
But in visits and interviews at city-run vehicles around China, officials appeared unworried. They say they were only following Beijing’s directives to keep growth on track, and the central government would surely step in to bail them out.
Perhaps their complacency is justified. Beijing, which holds more than $3 trillion in foreign exchange reserves, certainly has the resources to rescue them, and has done so in the past -- it set up asset management companies to help China’s top banks clean up mountains of bad loans in the late 1990s.
But China is also vulnerable to a global downturn, and would need every piece of its economy performing well to avoid a serious slump. The infrastructure boom insulated the economy from a collapse in exports in 2008. Beijing has less firepower now. Inflation is uncomfortably high, and dumping more money into the economy would only make things worse.
Barclays Capital has predicted a global recession would trigger a “hard landing” in China, with gross domestic product sinking well below the 8 percent mark seen as the minimum for assuring enough job creation to keep up with urban migration.
A severe economic slump would depress land sales, a vital source of funding for local governments, and make their debt load even more precarious.
In Chengdu, Chen leans back on a sofa in his office, smiles and readily concedes Chengdu will have big problems covering the bills for its version of the Waterloo train station.
“We’re still unable to reflect on our accounts the problems that may arise from our investments into Chengdu’s railroads,” Chen said. “What happens next is that we may face some trouble repaying our loans when many of them come due.”
Chengdu Communications had liabilities of 18.9 billion yuan at the end of 2010 against current assets valued at 11.7
Read more: http://www.vancouversun.com/business/China+local+debt+pileup+raising+risk+hard+landing/5526252/story.html#ixzz1aLa8Wpfa
Read that full article at above link, a good read....Maybe someone should inform Christy Clark about China`s money woes!
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The Straight Goods
Cheers Eyes Wide Open
10 comments:
Appreciate your efforts to look outwards. T'is in that direction that the wind does most surely blow.
You nailed the tack that both the harp and crispy are taking.
And your analysis of the empty-house bubble is valid to the point of being scary. A bit too much like staring into the abyss, but that doesn't mean that you're wrong.
On the contrary, you're dead right to warn that there is going to come an end to this ponzi.
Grant, this is one of the very best, and most important articles you've ever written. Congrats!
Now how do we get MSM and the general population to pay attention to the FACTS...not the dreams?
These Judas MFers will literally sell out Canada beneath us.
It's no wonder Mc Cluck can't produce a jobs program here.All she's got is China and I think they already know the facts you laid out here.Great article Grant.
A fine piece of work, Grant.
As for our modern, western media ...
didn't it seem that yesterday's news slipped out - almost by accident - that one Canadian province had re-elected a government which is NOT Liberal, Not Conservative, not Reform or Green or Wild Rose ...
it was an NDP majority government, the 4th in a row for Manitoba.
I found out about it via one of those streaming headline thingies at the bottom of our TV screen. Like when somebody wins a hockey game or something. Otherwise, Big Media seems very reluctant to talk about it.
4th majority NDP government in a row. This year, they increased their seats, even! But finding out didn't come easy. What are they scared of ... People Power?
Has any other party achieved that kind of acceptance?
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Take a look at this.....
http://www.youtube.com/watch?v=XP5gC94lR7Y&
Awesome post Grant!
What is with these stoops like Crusty and Spiteful Steve? I saw all this coming way back in the seventies and raising my boys. I knew that when we had to buy running shoes for $100-200 a pair made by people making 10 cents an hour that it was unsustainable. I knew eventually no one would be making shoes in North America or Europe (or steel, or much of anything) leaving the only people with jobs those making 10 cents an hour - of course they can't buy 200 dollar shoes EVER!
Bring on the revolution before I die cuz I already have a few boxes of ammo with names attached to the effing bullets - and start at the top, cut off and stomp out the rotten evil greedy head and maybe us normal folks can figure out how to live together without despoiling the whole planet to satisfy unnecessary greed.
If I were king of the world, no one would have more than one house until everyone had at least a roof over their heads. The world is so screwed up when there are thousand (or millions) of homeless folks yet even more unsold or foreclosed and uninhabited dwellings in China, Ohio, California, Florida and Canada.
What really sticks in my craw.
There are Chinese going to school, being trained to work in our Canadian mines. And, crash courses for learning to speaking English.
The American company doing the smelter tear down in Kitimat, brought their own workers. The Canadians workers were terribly abused by the Americans. So badly, even though these Canadian citizens were desperate for jobs, some quite.
I don't know if the ship building is still on? However, if BC gets a contract Christy has said, it will be SeaSpan who will get the BC contract. SeaSpan was the Washington Marine Group at on time. I believe that's the outfit Christy's brother was involved with. Another American contract, who will perhaps bring their own ship builders with them.
I don't know how many mines going into Northern BC are American? I have no doubt, they will bring their own miners with them. Seems the Americans get most of the Canadian contracts.
I don't know what the pay structure is for the Chinese miners? They perhaps can be used for cheaper labor. Someone with more expertise than I, can perhaps dig that info out. It niggles in my mind, that I read that somewhere.
It seems the Americans and the Chinese, will be given our Canadian jobs. So much for Christy's job plans.
What a good job you did Grant.
I was stunned and horrified by the video. I know China was taking our timber, needing copper for electrical wiring, plumbing and such for infrastructure. Mines can't produce enough copper fast enough.
I thought all this building in China, was because they need to have more hygiene, such as water, toilets that flush into a sewer system and what not. I was thinking low cost housing, for family's that don't have the basics in their homes.
What in the world happens when these people have to leave, because their dwellings are going to be demolished? Why would they not start with low cost housing first? And then see how many luxury homes were in demand?
Are there enough multi-millionaires in China to buy all of these apartments? I'm boggled. This must be unsustainable even for China. If factories are leaving, China is screwed.
first time on this site. This is a great story
ill keep reading....
btw wonder if Neo-Neon Holdings is the same as neon king I did some work for them 10 or so years ago. Lighting is a big market.
freewilly
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