Jul 22

Unity is strength – Shenzhen home-buyers try group buying

Written by: Buxi | Filed under:News | Tags:, ,
11 Comments » newest 2008-12-09 14:01:19

There is probably only one other issue capable of challenging the Olympics for national attention in China right now: the collapse of the housing market in China, led by Shenzhen. Home prices in Shenzhen grew very rapidly in recent years (on the order of 50%-100% ), and now appear to be falling just as quickly.

But for some people, it might not be falling fast enough. Two years ago, Zou Tao organized a campaign to fight rising prices in Shenzhen called “Not Buy House” (explanation courtesy of ESWN). The government gave Zou Tao a firm “suggestion” that such mass campaigns were not welcome. Now, he’s back. Courtesy of Southern Metropolis, an article on his new campaign (连接):

Zou Tao organized a “Not Buy House” campaign two years ago. He is now initiating a new campaign: “Housing For Ten Thousand – Group Buying Activity”. He has already established a web platform at www.zoutao.com, and online voting and registration is currently on-going. Zou Tao says that he is doing this voluntarily without any compensation. His goal is to use a group-buying model to push down housing prices, and let those without homes find a place to live.

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Jun 28

The Chinese debate – Part 2: Democracy and the economy

Written by: Buxi | Filed under:Letters | Tags:,
103 Comments » newest 2008-07-02 21:34:59

Thanks to one our visitors (Traveler, Youzi, 游子), a debate about fundamental issues that divide many Chinese has been brought to our blog (see comment in earlier thread).   In this post, I want to express my opinions on the economy, democracy, and the Chinese government.

I also want to send a few sentences to Mr. Wahaha: please do not so easily “represent” the Chinese or the Chinese government. I don’t know if you’re an oversea student or overseas Chinese, but regardless of China is strong or small, it doesn’t have anything to do with you having greater face and authority in the face of Westerners. Furthermore, China’s economic growth is the result of hard work by Chinese citizens, and not the government’s charity; our lives are improving, because these are the returns from our own work, not because of a government or certain political party has bestowed them on us.

Now, we get to a topic that has nothing to do with Western media and being overseas.  Now we get to a topic that has to do only with being “left” or “right”, being a supporter or opponent of the current Chinese government.  This topic should be kept separate from the topic above.

Let me start by sending a few sentences to you, Traveler: please do not so easily assume that we hope for a strong China because we need “face”.  I will not speak for Wahaha, but many of us are extremely successful, and do not need to borrow face from anyone.  We can silence ourselves on China tomorrow, and we will not suffer for it.  We can cut ourselves off from China tomorrow, and no one in the United States will force us back.  Here’s a bit of advice for you if you ever come to the West, and are embarrassed by an association with the Chinese: if nothing else, we can always pretend to be Japanese.  No one in the West could possibly know the difference

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Jun 24

Prices in the Mao era – a peasant’s view

Written by: Buxi | Filed under:Analysis | Tags:, , ,
15 Comments » newest 2008-06-27 15:54:49

The vast majority of Chinese favor and support the “opening up and reform” period started in 1978. But many are also very nostalgic for the Mao era, a time when equality was guaranteed, a time when socialism in China was far more than just a hypothetical. One simple example is translated below.

This article has been spread around numerous Chinese forums, actual origin not clear. (原贴)

I was born in 1954, in a village in Shandong province. I have a sister, and our parents are also peasant farmers. I want to start by talking about the prices of agricultural goods, starting with wheat as an example. From 1970 – 1980, the market price for wheat was: 0.35 RMB/shijin (ed: 0.5 kg), later growing to 0.35 RMB/shijing. The cost of things didn’t really change, it was very stable during this period. So the problem I want to discuss is, when a farmer sells a half kilogram of wheat on the market, what can he do with that money?
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Jun 13

So China is responsible for the sub-prime loan crisis as well?

Written by: DJ | Filed under:Analysis, News | Tags:, ,
38 Comments » newest 2008-06-26 07:24:29

[Update inserted at the end]

The U.S. Fed chairman Bernanke gave some amazing recycled remarks to the International Monetary Conference on June 3, 2008. In that speech, he offered some gems of wisdom such as:

In the financial sphere, the three longer-term developments I have identified are linked by the fact that a substantial increase in the net supply of saving in emerging market economies contributed to both the U.S. housing boom and the broader credit boom. The sources of this increase in net saving included rapid growth in high-saving East Asian countries and, outside of China, reduced investment rates in that region; large buildups in foreign exchange reserves in a number of emerging markets; and the enormous increases in the revenues received by exporters of oil and other commodities. The pressure of these net savings flows led to lower long-term real interest rates around the world, stimulated asset prices (including house prices), and pushed current accounts toward deficit in the industrial countries–notably the United States–that received these flows. … The housing boom came to an end because rising prices made housing increasingly unaffordable. The end of rapid house price increases in turn undermined a basic premise of many adjustable-rate subprime loans–that home price appreciation alone would always generate enough equity to permit the borrower to refinance and thereby avoid ever having to pay the fully-indexed interest rate. When that premise was shown to be false and defaults on subprime mortgages rose sharply, investors quickly backpedaled from mortgage-related securities. The reduced availability of mortgage credit caused housing to weaken further.

As Mike Whitney so nicely summarized for Bernanke: “It’s all China’s fault. Really.”

Whew. That’s a pretty long-winded way of saying the Chinese are to blame for everything that’s gone wrong in the markets for the last 10 months.

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Jun 03

Today’s Xinhua article brings to our attention that China’s forex reserves have ballooned to $1.76 trillion as of the end of April. To put this number in perspective: it is about 15% of the US annual economic output.

Before people get carried away, allow me to explain what the forex reserves is not: it is definitely not the government’s money, so there is no sense in talking about the government spending it. It is also not some kind of surplus money sitting around with no purpose. The forex reserves is part of the collateral that backs RMB-denominated debt obligations of China, and that includes all Chinese money and government bonds.

According to this Xinhua article, which quotes AFP, which got its information from a “Chinese media source” (got it?), China’s forex reserves increased by $74.5 billion in the month of April, or $100 million per hour. (The article and all the English ones that copy it say $10 million, but they all did their math wrong!)

China’s (mainland) forex reserves is followed in size by Japan’s at $1 trillion, Russia’s at $548 billion, India’s at $316 billion, and Taiwan’s at $287 billion. Of course, only Japan is part of the G7 in this group, so it is an exercise for the reader to figure out how much the remaining 6 of the G7 have.

A large forex reserve gives currency stability and can be a defense of a country’s credit-worthiness. On the other hand, its rapid increase adds to the inflationary pressure in China. Besides trade surplus and foreign investments, nobody has a good idea for where all this extra money is coming from — from Chinese expats, perhaps? I know many of them have sent money back as the RMB rises something like 8% a year against the USD. (On a side note, isn’t it interesting that the shrill rhetoric of Congress to make China revalue the RMB or face punitive tariffs has all but vanished…)

Something to ponder, where is this all headed?