Posted on 08/12/2007 1:12:18 AM PDT by TigerLikesRooster
China's mortgage quality worse than US - academic
HONG KONG, Aug 12 (Reuters) - The quality of Chinese home loans is worse than in the United States, where a subprime mortgage crisis is causing turmoil in global financial markets, according to a prominent academic quoted in a Hong Kong newspaper on Sunday.
Yi Xianrong, a banking and finance expert at the Chinese Academy of Social Sciences, said Chinese banks had been lax as they built up 3 trillion yuan ($396.2 billion) of mortgage lending.
Defaults in the U.S. subprime mortgage market now total about $200 billion, on some $1 trillion of loans, according to Credit Suisse.
"The quality of housing loans are much worse than the subprime loans in the United States," Yi was quoted as saying by the South China Morning Post.
"At least there has been a credit check system (in the United States) but in China anyone can borrow money to buy a house."
China's property market has been booming thanks to a hunger among a fast-growing middle class for new apartments, but the government has been wary of rampant speculation in major cities, particularly Shanghai.
Fearing a dangerous bubble could be forming, authorities have tried several measures to try to cool the market, including interest rate rises, rules to curb foreign investment in property, and steps to encourage construction of cheaper homes.
Global financial markets are jittery, and credit has dried up, because it is difficult to say to what extent a U.S. housing downturn will hurt funds holding securitised mortgages held in collateralised debt obligations (CDOs).
However, securitising mortgages is new to China and not as widespread, although banks and consumer sentiment would still be hurt by a housing downturn and mortgage defaults. ($1=7.572 Yuan)
Ping!~
Wait until the building boom for the ‘08 olympics is finished.
How long before this guy is executed?
They would be better off letting the logistics curve take over, or they could require lenders to do credit checks as was mentioned.
There actually is no real estate bubble forming in China. Specifically, there are real estate bubbles forming in specific regional sectors, e.g. Shanghai, but not on the national level. More specifically, the mortgage issue in China is not much of an issue at all. Almost all U.S. homeowners borrow money to buy their homes. In contrast, the majority of Chinese homeowners do not even have a mortgage as over half of homes are bought with household savings, so no debt.
The same claim some Americans are making to deny the problem. It does not matter whether bubble concentrated on small regions. What matters is the amount of money that went into speculative investment. The bubble forms on prized real estate located at economically strategic locations, which mostly make up small fraction of geographical area of a country. However, amount of money poured into such an area could be a significant portion of a country's available money.
It is especially bad if leveraged financing is done.
What really matters is the amount of panic that can be generated. It's panic that causes crashes to be worse than reality calls for.
Mao ripped out the property corners. Have they been replaced? If not, the country is either still communist or an emerging third world country and a real estate market collapse would have no effect at all.
There are people who believe that as long as our perception can be manipulated, we can indefinitely sustain the current status quo in the financial market. This is basically advocating outright propaganda to distort the truth.
People panic when some car is about to slam them at 100mph, or teetering on the edge of cliff. It is a response to imminent danger. On the boom cycle, people are urged to brush aside potential dangers, and merrily buying up securities of dubious kind. At some point, people develop second thoughts. They suspect valuation fraud and try to pull out. Then they are urged to hold onto their junks, because they should not be irrational.
Those who should know better pushed valuation fraud to keep financial market afloat, but insist on denying the duped customer to pull out. They do not even have the orderly retreat strategy. Their game plan is to dupe the sheep as long as possible, until they cannot do it anymore. Then they will turn around and say that they should be responsible for their decisions, and those who made bad decision should pay.
This valuation fraud game has been going on too long, to the point that I hear even financial professionals are feeling anxiety.
That is a description of a third-world country. Perhaps they are not totally communist.
Good response. Question - is the bond market still a safe place?
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