China home prices soar

[Tony_onrock]

Stone: I get asked the same questions by some of our investors as well. How can they afford to pay for these apartments given the income level? How do they qualify for the bank loan?

Here is how they do it:

After they decide to buy and agreed on a price, etc. a young couple would first come up with the down payment. The guy asks his mom and dad, the girl ask her mom and dad (other than in Shanghai, typically) to pool together the down payment, at least the bulk of it and they themselves put some money in too. Then they go to the personnel department and ask for a income verification letter to be chopped. They take this letter, the draft of which is typically prepared by the agent or at least a draft reviewed by the agent, to the bank and get a loan. How the hell they pay the monthly mortgage is another matter. It is typically a struggle.

We don't have development projects in Beijing. So I don't have a breakdown of investment purchase versus self use. Nor did I have numbers on the average income. There were rumors at one point in time that we were going to trata title sell one of our properties, between 2nd and 3rd ring at 38,000 /sm with GFA ranging from 180 to 300 sm. I got a call from my cousin asking to reserve one for her and calls from the lending bank to reserve one for them. I know my cousin's income, but not how much these state owned bank employees make. I guess their salary would be around 200K per year with a year end bonus (cash and gift cards, etc of a little over a million RMB). In Beijing there are more than a few douzen (thousands?) government employees/public servants and they would treat it as a real insult if you ask them if they make more than 200k RMB a year. The factory workers and the office front desk ladies don't buy.

 

You should know better than that. No government employee legally earns 200k per year. Cabinet level officials (i.e. ministers) have a net salary of about 6 - 7k.

 

When you say state-owned bank it can be confusing because in one way or another the government owns every bank in China with the exception of those like HSBC, perhaps. If you mean employees of the traditional Big Four, there is no way anybody except for, perhaps, the very senior management to legally earn 200k per year. It would be a miracle if a branch manager or even an area branch manager took home 7k per month.

 

The typical bonus for any of these people is a 13th month salary.

 

I can echo Bill's point as the government workers in China are low-paid when compared with those who work in the private sector. They often receive a few other benefits though like housing and a lifetime pension.

 

You forgot to mention graft.

 

They do have a great pension program. Although free housing was supposed to be eliminated, they do get a thousand or two as a housing allowance (included in salary figures, above). The real benefit comes when they are sold properties at far below market value. A rather large group of individuals at one particular state-owned bank has been offered 70 m2 units inside the 3rd Ring at 2,500 RMB per m2. This is not uncommon.

Bill, what is exactly the legally earned amount? Every year the government officcials, from fire to sanitation to neighborhood committee groups, to ¡£¡£¡£come over for a gift, typically a transit card or something. The amount is not big, say a few hundered RMB or for guys in charge a few thousands. How many businesses operate in that particular district? We had an operation and did not provide the gift cards in one particular district (police). We got a letter to shut down.

I have a friend who invested 300,000 Rmb for a postion in government (he was switched from a chu zhang in light industrial to safty inspection) and recovered his investment within four month. I got into a fight with him when he threatened to shut down the junior high that I went to for safty reasons (failer to pay). Why do you think Chinese mines have some many accidents? He told me that if he try to enforce the safty regulations, he would lose his job. The mine owner pay directly to Beijing! Give me an example of any government employee that do not receive gift cards or some other benefits. Look at the number of people who apply for the exam to become public servants and one would understand why.

Foreign funds like us are hard to compete. How much do bank employees really earn? Not that much, if you check the published stats. A typical loan, in harder time, require a payment of brokerage fee ranging from 0.8 to as high as 3% points. The broker, of course is not a bank employee but has good relationship with the one approving or disapproving the loan. The commission is shared with the bank employee£¬ who in turn, to avoid being thrown into jail, shares with the remainder of the bank employees, his boss and others in the office. It is an open secret. The only reason the head of the insurance guy who just been sentenced to 17 years got caught is because he did not learn a good lesson in sharing. Even with that, he was charged with mis-use of funds and taking a bribe of 2 mm RMB. The 9 mm RMB commission he received was not treated as a bribe. All these were in the Government newspaper. If you do DD in M&A on targets, you will understand how much off balance sheet payments are made by local companies.

[Tony_onrock]

Well, I was surprised at one official in Shanghai, the former deputy district head. He did not take much bribes. This guy fell in love with a business woman, tried to get a divorce but failed. On his last trip to Paris he refused to come back with the others. The government went into a thorough investigation to see if the reason behind it was corruption. To their surprise, they did not find any evidence that he took bribes. What they found was this woman. She was rich. They agreed to elope to France and after he refused to come back, she changed her mind. She was scared that they may have a hard time living in France, with language and other problems. He came back after the party secretary personally called him and assured him there is no problem with his return. Now he is back, happily divorced and happily married again to that woman. Only difference, he no longer is a government official. What does it show? At least there is one government official in China that does not take bribes. Please, please, show me one more and I will have a lot more confidence in the future of the Chinese government.

[a2784]

Stone: I get asked the same questions by some of our investors as well. How can they afford to pay for these apartments given the income level? How do they qualify for the bank loan?

Here is how they do it:

After they decide to buy and agreed on a price, etc. a young couple would first come up with the down payment. The guy asks his mom and dad, the girl ask her mom and dad (other than in Shanghai, typically) to pool together the down payment, at least the bulk of it and they themselves put some money in too. Then they go to the personnel department and ask for a income verification letter to be chopped. They take this letter, the draft of which is typically prepared by the agent or at least a draft reviewed by the agent, to the bank and get a loan. How the hell they pay the monthly mortgage is another matter. It is typically a struggle.

We don't have development projects in Beijing. So I don't have a breakdown of investment purchase versus self use. Nor did I have numbers on the average income. There were rumors at one point in time that we were going to trata title sell one of our properties, between 2nd and 3rd ring at 38,000 /sm with GFA ranging from 180 to 300 sm. I got a call from my cousin asking to reserve one for her and calls from the lending bank to reserve one for them. I know my cousin's income, but not how much these state owned bank employees make. I guess their salary would be around 200K per year with a year end bonus (cash and gift cards, etc of a little over a million RMB). In Beijing there are more than a few douzen (thousands?) government employees/public servants and they would treat it as a real insult if you ask them if they make more than 200k RMB a year. The factory workers and the office front desk ladies don't buy.

 

You should know better than that. No government employee legally earns 200k per year. Cabinet level officials (i.e. ministers) have a net salary of about 6 - 7k.

 

When you say state-owned bank it can be confusing because in one way or another the government owns every bank in China with the exception of those like HSBC, perhaps. If you mean employees of the traditional Big Four, there is no way anybody except for, perhaps, the very senior management to legally earn 200k per year. It would be a miracle if a branch manager or even an area branch manager took home 7k per month.

 

The typical bonus for any of these people is a 13th month salary.

 

I can echo Bill's point as the government workers in China are low-paid when compared with those who work in the private sector. They often receive a few other benefits though like housing and a lifetime pension.

 

You forgot to mention graft.

 

They do have a great pension program. Although free housing was supposed to be eliminated, they do get a thousand or two as a housing allowance (included in salary figures, above). The real benefit comes when they are sold properties at far below market value. A rather large group of individuals at one particular state-owned bank has been offered 70 m2 units inside the 3rd Ring at 2,500 RMB per m2. This is not uncommon.

Bill, what is exactly the legally earned amount? Every year the government officcials, from fire to sanitation to neighborhood committee groups, to ¡£¡£¡£come over for a gift, typically a transit card or something. The amount is not big, say a few hundered RMB or for guys in charge a few thousands. How many businesses operate in that particular district? We had an operation and did not provide the gift cards in one particular district (police). We got a letter to shut down.

I have a friend who invested 300,000 Rmb for a postion in government (he was switched from a chu zhang in light industrial to safty inspection) and recovered his investment within four month. I got into a fight with him when he threatened to shut down the junior high that I went to for safty reasons (failer to pay). Why do you think Chinese mines have some many accidents? He told me that if he try to enforce the safty regulations, he would lose his job. The mine owner pay directly to Beijing! Give me an example of any government employee that do not receive gift cards or some other benefits. Look at the number of people who apply for the exam to become public servants and one would understand why.

Foreign funds like us are hard to compete. How much do bank employees really earn? Not that much, if you check the published stats. A typical loan, in harder time, require a payment of brokerage fee ranging from 0.8 to as high as 3% points. The broker, of course is not a bank employee but has good relationship with the one approving or disapproving the loan. The commission is shared with the bank employee£¬ who in turn, to avoid being thrown into jail, shares with the remainder of the bank employees, his boss and others in the office. It is an open secret. The only reason the head of the insurance guy who just been sentenced to 17 years got caught is because he did not learn a good lesson in sharing. Even with that, he was charged with mis-use of funds and taking a bribe of 2 mm RMB. The 9 mm RMB commission he received was not treated as a bribe. All these were in the Government newspaper. If you do DD in M&A on targets, you will understand how much off balance sheet payments are made by local companies.

I understood Bill's point to be what you just made for him. Their offical salary is ~5-7K/month. The rest is from corruption.

[Tony_onrock]

P.S. ever looked at why some shopping malls are more sucessful than others? Acceptance of gift cards! The octopus in Hong Kong is the perfect solution, I believe for China. If a government employee can buy basically everything with a gift card for their daily expenses, other than housing, they don't need to take any bribes!

[GDBILL]

P.S. ever looked at why some shopping malls are more sucessful than others? Acceptance of gift cards! The octopus in Hong Kong is the perfect solution, I believe for China. If a government employee can buy basically everything with a gift card for their daily expenses, other than housing, they don't need to take any bribes!

 

 

The Octopus is not a gift card and there is a maximum balance that the card can hold. You cannot, for example, put HK$50k onto the card.

 

Also, there are provinces / cities in China that have banned gift cards. In Guangzhou, for example, gift cards have been banned for the past several years. Cash only for bribes!

[GDBILL]

Stone: I get asked the same questions by some of our investors as well. How can they afford to pay for these apartments given the income level? How do they qualify for the bank loan?

Here is how they do it:

After they decide to buy and agreed on a price, etc. a young couple would first come up with the down payment. The guy asks his mom and dad, the girl ask her mom and dad (other than in Shanghai, typically) to pool together the down payment, at least the bulk of it and they themselves put some money in too. Then they go to the personnel department and ask for a income verification letter to be chopped. They take this letter, the draft of which is typically prepared by the agent or at least a draft reviewed by the agent, to the bank and get a loan. How the hell they pay the monthly mortgage is another matter. It is typically a struggle.

We don't have development projects in Beijing. So I don't have a breakdown of investment purchase versus self use. Nor did I have numbers on the average income. There were rumors at one point in time that we were going to trata title sell one of our properties, between 2nd and 3rd ring at 38,000 /sm with GFA ranging from 180 to 300 sm. I got a call from my cousin asking to reserve one for her and calls from the lending bank to reserve one for them. I know my cousin's income, but not how much these state owned bank employees make. I guess their salary would be around 200K per year with a year end bonus (cash and gift cards, etc of a little over a million RMB). In Beijing there are more than a few douzen (thousands?) government employees/public servants and they would treat it as a real insult if you ask them if they make more than 200k RMB a year. The factory workers and the office front desk ladies don't buy.

 

You should know better than that. No government employee legally earns 200k per year. Cabinet level officials (i.e. ministers) have a net salary of about 6 - 7k.

 

When you say state-owned bank it can be confusing because in one way or another the government owns every bank in China with the exception of those like HSBC, perhaps. If you mean employees of the traditional Big Four, there is no way anybody except for, perhaps, the very senior management to legally earn 200k per year. It would be a miracle if a branch manager or even an area branch manager took home 7k per month.

 

The typical bonus for any of these people is a 13th month salary.

 

I can echo Bill's point as the government workers in China are low-paid when compared with those who work in the private sector. They often receive a few other benefits though like housing and a lifetime pension.

 

You forgot to mention graft.

 

They do have a great pension program. Although free housing was supposed to be eliminated, they do get a thousand or two as a housing allowance (included in salary figures, above). The real benefit comes when they are sold properties at far below market value. A rather large group of individuals at one particular state-owned bank has been offered 70 m2 units inside the 3rd Ring at 2,500 RMB per m2. This is not uncommon.

Bill, what is exactly the legally earned amount? Every year the government officcials, from fire to sanitation to neighborhood committee groups, to ¡£¡£¡£come over for a gift, typically a transit card or something. The amount is not big, say a few hundered RMB or for guys in charge a few thousands. How many businesses operate in that particular district? We had an operation and did not provide the gift cards in one particular district (police). We got a letter to shut down.

I have a friend who invested 300,000 Rmb for a postion in government (he was switched from a chu zhang in light industrial to safty inspection) and recovered his investment within four month. I got into a fight with him when he threatened to shut down the junior high that I went to for safty reasons (failer to pay). Why do you think Chinese mines have some many accidents? He told me that if he try to enforce the safty regulations, he would lose his job. The mine owner pay directly to Beijing! Give me an example of any government employee that do not receive gift cards or some other benefits. Look at the number of people who apply for the exam to become public servants and one would understand why.

Foreign funds like us are hard to compete. How much do bank employees really earn? Not that much, if you check the published stats. A typical loan, in harder time, require a payment of brokerage fee ranging from 0.8 to as high as 3% points. The broker, of course is not a bank employee but has good relationship with the one approving or disapproving the loan. The commission is shared with the bank employee£¬ who in turn, to avoid being thrown into jail, shares with the remainder of the bank employees, his boss and others in the office. It is an open secret. The only reason the head of the insurance guy who just been sentenced to 17 years got caught is because he did not learn a good lesson in sharing. Even with that, he was charged with mis-use of funds and taking a bribe of 2 mm RMB. The 9 mm RMB commission he received was not treated as a bribe. All these were in the Government newspaper. If you do DD in M&A on targets, you will understand how much off balance sheet payments are made by local companies.

 

Fear mongering is really passe, Tony.

 

Compared to the many millions of government employees -- both direct and indirect -- the percentage of them that can get 110,000 RMB per year in graft and corruption is extremely minimal. Your suggestion would place graft / corruption as the #1 domestic product and the main driver behind the economic engine.

 

The vast majority of Chinese civil servants make do with what they earn legally.