Posted on 08/21/2012 2:48:32 PM PDT by bruinbirdman
China risks a repeat of Japan’s boom-bust disaster 20 years ago as exorbitant property prices combine with a demographic tipping point, a top Japanese official has warned.
“China is now entering the 'danger zone’,” said Kiyohiko Nishimura, the Bank of Japan’s deputy-governor and an expert on asset booms.
The surge in Chinese home prices and loan growth over the past five years has surpassed extremes seen in Japan before the Nikkei bubble popped in 1990. Construction reached 12pc of GDP in China last year; it peaked in Japan at 10pc.
Nishimura said credit and housing booms can remain “benign” so long as the workforce is young and growing. They turn “malign” once the ratio of working age people to dependents rolls over as it did in Japan.
China’s ratio will peak at around 2.7 over the next couple of years as the aging crunch arrives. It will then go into a sharp descent, compounded by the delayed effects of the one-child policy.
“Not every bubble-bust episode leads to a financial crisis. However, if a demographic change, a property price bubble and a steep increase in loans coincide, then a financial crisis seems more likely,” he said in Sydney at a conference on asset booms.
Japanese stocks have fallen by 75pc and Tokyo land prices by 80pc since the economy first began to slide into a deflationary trap two decades ago, although real per capita income has held up well. Any such fate for China – a much poorer country today than Japan in 1990 – has shattering implications.
Such a warning from a Japanese official may ruffle feathers in Beijing. The Communist authorities have studied Japan’s Lost Decade closely and are convinced they can avoid the same errors.
The Pacific rivals are embroiled in a bitter dispute
(Excerpt) Read more at telegraph.co.uk ...
Can’t be true, Thomas Friedman says they’re our future Overlords!
well, if china needs dough, they will call our loan, and we can probably refinance for pennies on the dollar... oh wait, our dollars are already worth pennies ...
NOvember cannot get here too soon.
go obama go.
let’s fill the white house with someone new.
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That’s a mighty fine looking property there, but a bit of a fixer upper.
The population of China will drop by half, twice by 2100, that’s just math. It may be even more sharp than that. While there are a substantial number of Chinese, we need to make sure they get locked into a bloody war of attrition with the Muzzies in their western territories.
I watched the Nikkei-225 fall from about 39,000 to it's current level of about 8,800 in 20 years.
I don't think the drop will be that dramatic for China.
I wonder how much they want for those bricks, cause, I need a new smoker.
U.S. bonds are not “callable,” just like the loan you took to buy that car.
Five years and counting...
But they can be sold. And if Chinese bond investors aren’t quick enough to sell during the collapse ahead, they’ll get “haircuts” instead of cars.
The Han mobs cleaned up the Uighur problem in Xinjiang pretty fast, and the Chinese government cleaned up the information scene quickly afterward.
If the collapse happens, the least of my worries is a Chinese investor. I didn’t make them buy the bond, and they can’t “call” it.
There may be plenty of money in treasuries for the government soon. The Open Markets Committee majority is considering buying more relative to mortgage-backed securities.
And what does that have to do with the price of tea in China? [pun intended]
An inflated dollar could drive the price of tea from China up.
And the value of Treasury securities worth less. But that wasn’t my point.
China cannot call loans; just like a bank cannot call a mortgage loan as long as it is being paid on line.
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