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House prices plunge base does not but there are signs the financial crisis now

Yuan devaluation is most likely the fuse of a financial crisis 。 If foreign exchange markets stable, prices will not collapse, the highest exposure in local government debt. Dynamics of the Chinese economy is rooted in place, 10 years after the glamorous, Real estate development led by the financial support of local economic growth mode is now a dead end, fiscal reform, leaving the Central Government does not have much time. This article has some references.


while China is calling for a "public business, Much innovation "created, but 8, and 9 month official manufacturing purchasing managers ' index PMI continued to flourish under the line, three quarters 6.9% GDP growth appears less convincing. While the downturn in commodity prices, turmoil in global stock markets and currencies, shows various investors are bearish, fears of a systemic, global financial risk sentiment is still spreading. How far is it from the financial crisis in China? Trigger crisis triggered what would it be? Here are real estate investment data from start.


2015 years, China's investment in real estate development grew all the way down, 1-9 months growth has been from the beginning of the 10.4% dropped to 2.6%, for two consecutive months of negative growth. In contrast, 1-8 months China's investment in fixed assets (excluding farmers) growth is still < span style="font-family:''Times New Roman'';" >10.3%, investment in real estate development lower than the growth rate of investment in fixed assets continued to widen, the profit-driven capital is abandoning the once-gold industry. The situation is even worse in some regions of Liaoning, Heilongjiang, Inner Mongolia 1-8 -24.6%, and -22.0% -18.0%, Ningxia, Hunan, Yunnan and other places also were negative, and Zhejiang , Fujian's economy also has fallen to 3% following.


real estate market risk control


, Real estate markets are approaching bubble moments? Bubble requires two basic conditions: first, demand far less supply; the second is price far beyond the affordable level of demand.


housing demand can be observed through the housing area per capita to And more precise data are Premier Wen Jiabao said in the Government work report, "2012 Urban per capita housing area at the end of 32.9 square meters, more than 2007 years 2.8 square ". Assumed increase stability, now urban per capita housing area should also not to Xiaokang standard 35 square meters, and as the gap between rich and poor in China, housing improvement demand still very large number of families. Chinese Government issued five times within six months the real estate policy, attached to cut down the increasing mobility, creating a favourable environment for the demand.


supply, Real estate investment growth decline predicted a contraction of new housing supply in the future. Meanwhile, inventory goes home sales area compared with the monthly growth rate 4 Starting from full member, two or three quarterly growth is fairly stable, namely 13.2% < span style="font-family:''Times New Roman'';" >13.6%, destocking process quickly. If there is no panic selling of second-hand housing, supply tends to decline as a whole.


believed house price-income ratio < span style="font-family:''Times New Roman'';" >3---6 times is reasonable, but in less economically developed countries, due to the expected increase in revenue is also faster, house price-income ratio is acceptable. Issued by the Shanghai Research Institute of the national 35 cities housing price-income ratio charts , 2014 national housing price-income ratio 7.1, outside of North Canton mega-cities such as deep, The ratio further approximate the appropriate interval.


so the theory basis of the housing slump does not exist, That's indeed the case. New from recent home sales prices, 70 in large and medium cities, Most of the city prices rose, up further narrowing in the decline, including Beijing, Shanghai, Shenzhen, prices higher than a year earlier. While many reports suggest prices pick up only first-tier cities, substantial decreases in the price of three or four small cities, but divides the national sales and sales of commercial housing area calculations show that 1-9 month average sales of over 6800 / square meters, 2014 year up 500 Yuan.


default risk


real estate investment demand, the real threat is that the Government debt.


solely on the Central Government, as keqiang, Prime Minister says "The Chinese Government debt risk control." 2015 years 1-9 months central level tax revenue reached 5.2 trillion, while the general public expenditure only 1.8 trillion, conservative estimates earnings for the year also 4 trillion or more. With the Audit Commission published the 2013 years 6 months the Central Government 12 trillion of debt outstanding (including repayment of debt of responsibility, Debt with responsibility for security, possibly bearing some of the responsibilities of the debt), as long as the debt maturity structure, the Central Government's solvency is still abundant.


local governments is another story. 2013 years 6 months data, 18 trillion of debt spread across provincial, municipal, County, Township, where < span style="font-family:''Times New Roman'';" >70% again in the cities and counties. Financing is mainly used in infrastructure and public welfare projects, although the nominal asset, long-term pay off, but projects like highways, affordable housing, income even offset operating costs. The debt to repay it? Local public finance simply fail to arrive, 2013, and 2014 gaps of up to 5 trillion or more. Only one answer: the land sale. Land is the most lucrative resources in the hands of local governments, especially those weak industrial city, County, Township, land is the most important source of income. According to the National Audit Office report, 2012  end 11  provincial, 316  municipal, 1396  of county-level Governments have the responsibility for the debt balance < span style="font-family:''Times New Roman'';" >37% commitment to land revenue to repay. This is just an average, many cities and counties more than 50%. As long as the land revenue to keep up with debt, default risk is not significant.


main source of substantial income from the real estate industry of the land, Land supply for real estate land area accounts for only 1/4, But the price is much higher than industrial lands. 2015 years 6 month, national 105 main monitoring city commercial, residential and industrial land, respectively 6655 / square meters, 5359 / square meters and 752 / square meters. However, suddenly found the land demand for land has plummeted: 1-9 month Real estate development enterprises purchased land area 15890 million square meters, down < span style="font-family:''Times New Roman'';" >33.8%.


accompanied by a decline in real estate investment, Land revenue decreased substantially. A case study of Guangdong Province, the first half of fall in revenue from State-owned land use right transfer 50%, Foshan, Zhuhai, Shantou, Zhongshan city decline to 70% even more. At the county level, local solvency has been greatly weakened, problems, and this is not one or a few, and may be hundreds of counties, the dilemma facing thousands of tens of thousands of villages and towns. When people's eyes more on markets and prices in first-tier cities, China's vast land many small cities, small towns, those with more than 100% rate of debt accumulation of huge financial risks, could erupt at any time.


because of local debt in the Bank loans, Issuance of bonds and trust accounts for as much as 75%, If the State no longer provide credit to local governments endorsed debt default occurs, its scope and time window set, will impact on the financial system and social stability is difficult to measure.


local economy loses momentum


why local governments help themselves? People who blow bubbles and don't want to be the person of deflating. "Small profits but quick turnover" is not the law of land transactions and land is the source of debt and loan collateral, hands lose value amounts to local government hanged. Relaxed point of view, the price must also be strong, because once the land is in decline, the new lower prices for housing, to inventory will align drive the housing stock and housing prices fall, today, when panic moments, there may be herd spark selling spree. Much of the plunge in the housing market than the stock market to the terrorist, and equity financing is less than market value 10% compared to real estate industry leverage up to 3-5 and poor liquidity of real estate have more than doubled, collapse of large developers and homebuyers mortgages will lead to banks and private credit market crisis and economic turmoil caused by upstream and downstream industry chain entities.


strictly control land supply and keeping prices stable Maintain balance in housing, it is expedient. Land acquisition based on the sale price of the same caliber and size, we can calculate the average purchase price of the land, from 2 month minimum 2519 / Square meters, rising to 8 month 3094 / square meters, higher than the same period of 2739 / square meters. Clearly, the demand did not bring land prices back down, but slightly increased.


However, expediency is not a long-term solution. Local government debt risk solutions ultimately depends on economic development and income growth. Land transfer income to gross income, net income after deduction of cost expenditures accounted for gross income 20% according to law for urban development, agriculture and rural areas, low-income housing projects in three aspects, which formed the current GDP also provide growth impetus in the medium and long term. Therefore, industrial overcapacity, severe decline in investment in "phase shift", restrictions on the supply of land, land transfer decreases, making the stretched local governments lost control hand. 1-9 month State-owned land use right transfer income for 2.0 trillion, down nearly 1.1 trillion, fell by a staggering 34.7%.


transformation of government economic growth lies in the demand structure in China But income growth has slowed, two or three quarter nominal growth at just over 9% , is the lowest value since the reform of urban-rural integration survey. Revenues decline and home prices did not fall under the expected dual role, the consumer will be more low, hindering investment demand to the consumption demand of the process.


guard against foreign exchange risk is the key


can observe the cloud has a bright, The day when economic growth back on track depends on maintaining stability of Yuan. China's foreign exchange reserves after having experienced five across, 9 month has dropped to 5.3 trillions of dollars, especially 8 month 7 month drop 939 billion dollars, currency earthquake is raised. It is undeniable that out quite a large proportion of the outflow should be hot. Since the 2005 years 7 months since the revaluation, Wave after wave of capital betting on Yuan appreciation in the stock and housing markets is an unknowable number of accumulated in the black hole, slid in anticipation of hot money will speed up the withdrawal, there could trigger a price collapse, Pandora's box opens.


cannot underestimate the Chinese Government controls on currency markets at any time 。 Recently, the number of measures taken by the Central Bank and the State administration of foreign, 9 months reserves drop out, Offshore markets stabilise. And, in theory, China has maintained a large trade surplus, there is no depreciated basis. The Chinese Government has the ability to inhibit market panic, keep the exchange rate stable, secure adequate inventory for the real estate industry, eliminating foam time.


above, Yuan devaluation may become triggers of the financial crisis. If foreign exchange markets stable, prices will not collapse, the highest exposure in local government debt. Dynamics of the Chinese economy is rooted in place, 10 years after the glamorous, Real estate development led by the financial support of local economic growth mode is now a dead end, fiscal reform, leaving the Central Government does not have much time.