From: Rajan
Decision time for China
Jonathan Fenby
TIGER HEAD, SNAKE TAILS
China today, how it got there and where it is heading
418pp. Simon and Schuster. £20.
978 1 84737 393 9
Dwarfing even the $2 trillion borrowed for the Railway Ministry’s high-speed networks since 2008, and the thousands of kilometres of 4–6 lane toll roads with barely a vehicle on them, China’s building binge is the most striking example of what Prime Minister Wen Jiabao famously, but impotently, denounced in 2007 as the country’s “unbalanced, unstable, uncoordinated and unsustainable” model of economic development. Now, with house prices and sales sagging in response to government restrictions aimed at deflating history’s biggest ever property bubble, and with local governments as deep in bad debt as the developers, I asked the businessman what was to prevent the bubble actually bursting, in a spectacular financial explosion?
His answer was that it wouldn’t happen. A lot of these empty apartments, he said, had been bought by Chinese families as investments, and they would patiently hang on to these speculative purchases because interest on savings was derisory. Secondly, although some developers would go to the wall, the bubble would simply not be allowed to burst for fear of public anger as well as economic chaos. China had massive reserves if need arose, he said, and would not hesitate to bundle nonperforming loans off into a state “bad bank”. Its plans to build 36 million “affordable” homes by 2015 would also help to offset faltering private sector demand. When in a hole, in other words, the Party keeps digging.
... deleted
No comments:
Post a Comment