China Set to Cut Lending 70%

[Guest Tony n Terrific]

China is trying to avoid the nightmare we have here.

 

http://www.bloomberg.com/apps/news?pid=206...id=aejruZsrmfj0

[Tony_onrock]

China is trying to avoid the nightmare we have here.

 

http://www.bloomberg.com/apps/news?pid=206...id=aejruZsrmfj0

The problem is not too much liquidity. The problem is where the money went. Most of the money were lent to state owned large enterprises that the banks felt to be safe in a uncertain economy. They have the state backing and will not be allowed to go bankrupt. But SMEs, mostly, if not all, privately owned and accounts for more than 60% of the employment as well as real output are still left stranded, without the badly needed bank credit. The state owned companies do not have real use for the money, infrustructure does not generate profits and banks forced them to accept the loans and start to charge them interests. So they naturally go into stock and real property market for speculation. One example is the rising land price. It has rebounded to the late 2007 level. Private developers who bought land that time are still holding off development, cause development means losing money. Yet, you see land prices are getting there again, more than the housing unit price on the market, after it is finished. This is something that the government can do something about. They own the borrowers! I hate these officials blaming every one but the real cause of the problem. It is they who prompted and supported all this speculation because they get almost half of the revenue from land sale.

[GZBILL]

China is trying to avoid the nightmare we have here.

 

http://www.bloomberg.com/apps/news?pid=206...id=aejruZsrmfj0

The problem is not too much liquidity. The problem is where the money went. Most of the money were lent to state owned large enterprises that the banks felt to be safe in a uncertain economy. They have the state backing and will not be allowed to go bankrupt. But SMEs, mostly, if not all, privately owned and accounts for more than 60% of the employment as well as real output are still left stranded, without the badly needed bank credit. The state owned companies do not have real use for the money, infrustructure does not generate profits and banks forced them to accept the loans and start to charge them interests. So they naturally go into stock and real property market for speculation. One example is the rising land price. It has rebounded to the late 2007 level. Private developers who bought land that time are still holding off development, cause development means losing money. Yet, you see land prices are getting there again, more than the housing unit price on the market, after it is finished. This is something that the government can do something about. They own the borrowers! I hate these officials blaming every one but the real cause of the problem. It is they who prompted and supported all this speculation because they get almost half of the revenue from land sale.

 

The issue is much -- much -- more complex than that.

 

Actual land prices, which factor heavily into the cost of buying a unit, are really not that bad considering their is no real estate taxes every year are there are in the US.