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Old 07-08-2015, 07:22 PM
 
Location: Guangzhou, China
9,792 posts, read 13,404,156 times
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Quote:
Originally Posted by Dd714 View Post
Long overdue. Anyone that has visited China in the last few years and seen blocks of empty office buildings can see the amount of overbuilding that has occurred.
China's boom ended about 4 or 5 years ago.
There are about a dozen skyscrapers going up around my building right now, but there are also a bunch of new malls and apartment buildings that are finished and sitting there with only a handful of businesses open. A nearby luxury complex that is selling at 60k RMB per sq/m sold four of its available 500 units; another selling at 45k sq/m only sold about a dozen. Right next to me are some luxury townhouses that are selling at or around 20m RMB each, and they have all been vacant for over a year, with some of them showing it from the outside.

Availability has outpaced demand, and part of the problem is that the developers poured more money into the projects than people are willing to pay. It's the same problem that you ran into during the US real estate/credit boom; people were building $750k-1m houses in secondary- or third-tier areas in LA, and houses that were an hour out were going for $500k. How many people can actually afford a $500k-1m house? Now, you're looking at 3,000,000 RMB, $500k USD, for a 75 sq/m apartment in most of urban Guangzhou, in a city where the average person makes about 4,750 RMB/mo - about $760 USD. That's not sustainable. If you go out to Panyu or Baiyun, which is a ways out, you are looking around half as much, but that's still huge money to pay for someone who only makes so much in a month.

Renting a 40 sq/m shop in the area near me costs about 150,000 RMB/mo, about $24k USD. It's near impossible for most businesses to turn over that much money in a month, so businesses are constantly opening and folding. Because in China most businesses sign a 2-5 year lease on a shop, the original lessee is on the hook for it; nearly all of them want to recoup their losses, so in addition to the rent on the place, they will charge however many months of back rent plus an arbitrary number so they at least made something. I've been looking at a few shops in the area to open up a bar and restaurant, but these schmucks are charging four months of their back rent plus an extra million for the title transfer (which only costs a few thousand RMB to obtain in the first place), so their businesses sit vacant for months on end. There's a huge mall that opened a year ago near me, and there are only about a half dozen shops in it that are occupied. The prices for renting are still exorbitant, and you also have people who rented shops but then ran out of funding and are similarly trying to flip them and make a Mao off it in the process.

I don't think that the consequences will be as severe for China as they were in the US, because China's manufacturing and industrial markets are still quite strong and they still supply most of the world's consumer goods. The US had already shipped away a huge chunk of its manufacturing sector by the time that the '08 crisis hit. There is still plenty of real value and real wealth in China, for sure, but this is indeed an overdue market correction. The good thing about China's protectionist economy is that it has more or less made it so that the ripples will be much lower for overseas stock markets; also, the Chinese government has more control over its markets and its population than the US or EU, so if properly managed, they can probably do more to reign it in - halting IPO's, preventing investors from cashing out, etc.

My opinion on the last decade and a half of growth in China and its wealth boom has always been that it is simply doing what it must for the nation to grow. It has allowed measures of capitalism and free markets to a point where it has modernized infrastructure, created a middle class, and made it a lot of money. As soon as these things no longer suit its needs, it has the ability to mitigate them. I am interested to see how the Chinese government reacts to and enshrines the situation in the next few months.
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Old 07-08-2015, 09:18 PM
 
1,789 posts, read 1,458,279 times
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Quote:
Originally Posted by X14Freak View Post
The index there was up by over 100%, I would say a correction was long overdue and probably necessary.
I believe that the S&P and Nasdaq are both up close to 100% without any major correction.
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Old 07-08-2015, 09:38 PM
 
1,789 posts, read 1,458,279 times
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Quote:
Originally Posted by botticelli View Post
What do you think of this? Just an over-due market correct, or a prelude of something more serious?
Hard to know. China has a lot more control over what can happen to a point. They can roll out some crazy rules crazy fast (as witnessed the past week) but they can't control what the Chinese people think. Right now they are all thinking sell, sell, sell.

There are so many phantom companies and cooked books over there its hard to ever really know what the fundamentals say. Playing fundamentals in China is a fools game.

Besides, like I said right now the movement is running on a death spiral of margin calls and pure psychology. You never know when something is gonna stampede the herd from BTFD to panic selling everything. Likewise you never know how much legs its got once it moves down.

Its gonna be hard to stop the downward thrust until they get outstanding margin reduced some more.
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Old 07-09-2015, 12:25 PM
 
1,379 posts, read 1,821,262 times
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Quote:
Originally Posted by justanokie View Post
I believe that the S&P and Nasdaq are both up close to 100% without any major correction.
Not over one year. The last time the Nasdaq was up by close to 100% over one year was during the dot com bubble.
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Old 07-10-2015, 03:43 PM
 
4,710 posts, read 3,639,604 times
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Here's something for you all to learn a bit about China and how it is still very different from the western model. A great read.

China stock meltdown: Why its actual economy will be just fine.
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Old 07-11-2015, 07:18 AM
 
9 posts, read 6,338 times
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What happened in the US a few times before and in Greece will not happen in China in the near future. Chinese government controls the economy and financial markets with a more visible hand, and the government have the most money after the US. They can do a lot of things with big amount of renminbi and foreign reserve they have.
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Old 07-11-2015, 07:27 AM
 
4,710 posts, read 3,639,604 times
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Quote:
Originally Posted by probcazaonlav View Post
What happened in the US a few times before and in Greece will not happen in China in the near future. Chinese government controls the economy and financial markets with a more visible hand, and the government have the most money after the US. They can do a lot of things with big amount of renminbi and foreign reserve they have.
Correct. I may despise the Chinese for being barbaric and eat dogs like a bunch of uncouth peasants, but I would never bet against the Chinese government or the Chinese economy, which is still very much under its control. The leaders of China are very smart, and they have to, given the huge pool of still very uneducated and ignorant unwashed masses they have to govern and shepard. It's been this way for centuries.
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Old 07-11-2015, 07:34 AM
 
9 posts, read 6,338 times
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It is much better than it used to be, where bad economic policies lead to famine and uprisings.

But as in the western world, it is now the rich people who are benefiting the most, with the poorer not so much, many still making less than 15 ,10 or even 5USD per working day.
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Old 07-14-2015, 04:04 AM
 
931 posts, read 616,850 times
Reputation: 1488
It just rebound actually.
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Old 07-14-2015, 04:22 AM
 
Location: Singapore
653 posts, read 543,388 times
Reputation: 289
i don't think it is that big of a deal; I do not believe that the stock market in Shenzhen and Shanghai are an actual reflection of the actual economic conditions of China.
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