US Politics Mega-thread - Page 9992

On March 02 2018 02:03 Gorsameth wrote:
People have predicated the economic collapse of China for years, at some point they are bound to be right.

On March 01 2018 23:16 {CC}StealthBlue wrote:
Example 3,328 on how Capitalism is not sustainable in the Healthcare field.



Source

On March 02 2018 02:09 {CC}StealthBlue wrote:
More like the building bubble, hence the empty cities they have to keep building as the Government subsidies companies etc and if they stop kaboom trillions are lost.

On March 02 2018 02:23 Velr wrote:
Can't China at this point just sell like half of the US (and London+tons of other places)? If anyone still wants it...

On March 02 2018 02:11 ticklishmusic wrote:
Considering Xi just became president-for-life, the China situation could get interesting.

While the world has been keeping a close eye on rising levels of corporate debt, China's household debt has quietly surged, according to new research -- and Chinese regulators are concerned that some households are over-leveraged.

January loan figures reveal that households accounted for close to one-third of RMB bank loans issued. Most of the consumer loans are mortgage loans, which face risks as housing prices continue to rise, creating an asset price bubble that may, in time, burst, leading to economic stagnation and instability.

Rising mortgage lending

While household debt stood at 53.2% of GDP by October 2017, according to data from the Southwestern University of Finance and Economics (but still behind that of the U.S. and Japan at 79.5% and 62.5% respectively), the rate of growth is strong, rising more than 80 percentage points from January of the same year. The household debt-to-disposable income ratio is catching up to developed country levels, having reached 68.3% by the end of 2016.


Many of these loans are associated with mortgages, which has become an increasing burden to home buyers due to rising home prices and lending rates. In many large cities, the home price to income ratio is high, while income gains remain more modest. Increasingly, home buyers in these locations find themselves overextended financially. The housing market, particularly in major urban areas, has continued to heat up in recent years due to rapid urbanization and low interest rates, and as prices have risen, buyers have clamored to purchase property before the next price increase.

Purchase restrictions have limited effect

Local governments have attempted to cool the housing sector, placing restrictions on home purchases. A number of cities imposed curbs on home re-sales, second home purchases and sales to non-local residents last year, which reduced home prices somewhat. This year, home purchase policies in a few cities have become more flexible, with different policies for different housing targeting desirable home buyers. For example, Nanjing in eastern China loosened purchase restrictions for high-end professionals. Purchase restrictions, however, continue to offset home price increases to some extent.

Restrictions on mortgage lending met with mixed success last year. As some cities increased the loan-to-value ratios for mortgage loans, available funding for mortgages declined. However, consumers found a way around this. Some consumer loans classified as non-mortgage debt were likely used for home purchases, while loans for real estate purchases were also illicitly obtained from the shadow banking sector. To the latter point, microloans, unsecured short-term loans, were used by households for mortgage deposits. Regulators are now cracking down on these practices.

Dangers of deflating bubble

Highly-leveraged households are vulnerable to a potential shock from a deflating property market bubble. Declining home prices result in a reduction of household wealth and shrink the ability of indebted households to sell their homes during a downturn. And once real estate prices decline, banks greatly reduce mortgage lending, which results in a liquidity crunch. The dangers brought about by the presence of a potential real estate bubble are real. Home prices continued to rise on average across China in January, although there was some softening in major cities.

Although it's unlikely that local governments will allow home prices to decline rapidly if the bubble bursts, even small home price declines will have a negative impact on China’s household wealth. This is because most household wealth is held in the form of real estate, due to the absence of other investment outlets -- and this presents a major challenge to financial and social stability.

Economic implications of debt

Increasing household debt also has implications for the greater economy. China has, for several decades, relied on household savings held in bank accounts to fund business investment. More recently, limits to returns on investment have been compensated for by household consumption, which some analysts argue is a positive development. However, household indebtedness swings the pendulum in the opposite direction, with many households increasingly using their savings as well as bank loans to purchase homes. Even though household savings remain high relative to that of other nations, this is something to keep an eye on.

Because China’s government can limit declines in asset prices and inject funds into banks and ailing entities, a financial crisis fuelled by debt defaults is not a pressing concern. Economic stagnation is the more likely outcome, as high levels of indebtedness reduce the potential for real growth to occur.

At this moment, household debt is not at an alarming level, but if it continues to grow at the same pace, consumer debt could reach levels experienced during the 2008 U.S. financial crisis within five years -- and this will pose a very real threat to China's overall economic health.

On March 02 2018 02:52 Plansix wrote:
It will take like a decade to rebuild our steel industry. I am sure who loses their jobs due to the great Trump Steel shortage or whatever this mess will be called are real patriots and will be willing to wait.

On March 02 2018 02:55 Gorsameth wrote:
Not to mention those who lose their jobs in the industries that are systematically destroyed by the rest of the world as retaliation.