China Crisis Watch (11)

by Getty Images via DaylifeA banking crisis with Chinese characteristics is looming as the financial authorities try to revive a melding real estate industry. The successful efforts of the central government to cool down the sizzling real estate industry is now putting both local governments and banks at stake.
According to the New York Times, banks might be in big trouble by next spring, unless action is being taken.

For that reason, the Chinese government announced a series of measures late Wednesday night to support real estate prices. The central bank told commercial banks to reduce mortgage rates and down payments for borrowers seeking their first mortgage. The finance ministry reduced the stamp tax on real estate purchases, effective Nov. 1, but only for first-time home buyers acquiring an apartment of less than 90 square meters, or 969 square feet.

More measures are expected, as the industry and its bank relations tend to deteriorate in the short run. Collapsing banks have always been an unthinkable feature in China, and increasingly European and American authorities have started to appreciate that the state takes this ultimate risk.
China's mortgage systems has been rather simple, compared to the US ones, and already for years home-owners in China face strict limitation in terms of the down payment they have to cough up and the amount of money they can lend.
The current crisis in China's real estate is triggered off by the policies of the central government, against the interest of both developers and the local governments backing them. Reversing those hated restraints will prove to be much easier than it was to impose them.

Links
AFP: Southern China to shed millions of jobs as economic crisis bites
New York Times: In China, Steps to Ease Mortgages as Real Estate Loses Its Sizzle
New York Times: Real Estate Crisis Threatens China Banks
Sun Bin: China amid the global economic turmoil
Business Week: China's Great Railway Expansion
Bloomberg: China Urged to Fight Crisis By Asia, Europe Leaders
China Briefing: Conflicting Global Economic Signals as Europe Applauds More Chinese Imports

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Amy Sommers
by Fons1 via FlickrAt the China Speakers Bureau we have leading authorities who can brief you one China's real estate, like Shanghai-based Amy Sommers. On Monday we will have a podcast with Amy Sommer on real estate and all the other elements of the economic crisis in China.

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