China must guard against asset bubbles
Posted on Jul-19-2009· by china investor
Last CCTV reported,the price of an apartment in Bei Jing increased by 60% in few months, from 13500 YUAN /square meters to more than 20000 YUAN/square meters, it means 2950 U.S. dollars / square meters, or let’s say 275 U.S. dollars / square feet. In many better community area, it is normal for 30000 YUAN /square meters, or 4412 U.S. dollars / square meter , or 410 U.S. dollars / square feet, I know many villa saled in in Los Angeles, their price is 218 U.S. dollars /Â square feet to 300 U.S. dollars / square feet, I feel very surprised !!And China’s housing is not property rights.Â We know in BeiJing , many middle-class income is 500 U.S. dollars / month, it means a middle-class family muse save all money to paid the loan of house all them life!
At present,Â many factory have not enough order ,and there are still many many migrant workers lost their job in city, the price of real estate is continuning rising, but the price of rental is still drop down. Such a background , the land prices and housing prices climbed crazy, it is new record in china history.Â some senior official in some province said their salary can not support an apartment, some economists say if use their salary they will own a toilet in BeiJing.Â Now the price of real estate is far away with people’s actual purchasing power.People had save all money for an apartment, and their don’t dare to spend money on other consumer goods. CCTV said yesterday, some business owners to closeingÂ factory, investing house, I think it is a big mistake. 30 years, these factory and works is the wealth ofÂ chain reform, if them disapear in the bubble burst, that is the biggest loss for chinese people.
As we all know, Japan’s land and housing prices have been very expensive, but before 1990, suddenly, the house price just keep 20% of one year before, sub-loan crisis in USA, the crisis in theÂ Southeast Asia(1997) , the house price is keep a high level, but when the asset bubble burst , it dragged down the financial system and real economy . The central bank is not the ultimate, the people are. The price of asset can not be divorced from the actual bearing capacity of the people for a long-term,otherwise the reaction will play bad.
In this crisis, china should adjust the structure of economic,we must support medium-sized company, because them solved the most of employment problem. And these company is sensitive for the signal of price, interest rate. China should use more money to support high teconology company, and promote the real domestic demand , not number of GDP, it seems there are some part of money is wasted, CCTV reported yesterday a company get 27,500,000,000 loan from bank, we really need so high a price of house?loose monetary policy requires a risk assessment mechanism to enhance efficiency in the use of funds, and should be solving the employment and enterprise development, otherwise it is difficult and dangerous in long-term eyes. I said Chinaâ€™s gdp growth rate in the first half of the year, not bad, but we need the gdp growth is a long-term growth and people must get the profit from the growth, the budget of people is more important than gdp number.
The implementation of the policy can not be selectively implemented,cctv yesterday reported that some enterprises are long-term accumulation of land, there are a law bind this kind of business action , but no any one execution it, the problem is not only the execution power.
I born in china, I living in china, I loving china, I concerning the situation.