“I think Chinese property is the Titanic about to crash into the iceberg right in front of it,” Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, China Business News reported. __ NZHerald
China’s economy may appear robust from outside, but according to Zhang Laiming, vice-minister of the Development Research Center of the State Council (DRC), and Li Jianwei, Research Department of Social Development, the DRC:
There are problems that cause decreasing investment intention in the real economy, such as the weakening domestic demand, declining overseas demand, rising production cost, high tax, and a low income from investment.
The real estate bubble has consumed a great deal of resources, which push up finance and production costs and weaken household consumption and enterprise competitiveness.
Many business people would rather speculate than do real business but, since real business is the foundation of the economy, the country needs a management mechanism to stop the economic bubble for sustainable, healthy economic development. __Research Report
No. 28, 2014
Bubbles within bubbles now on the way:
… the National Development and Reform Commission [is] planning to allow some local governments to issue bonds directly.[!]
The bond-issuing programme will be slow to roll out. Initially, only 10 local governments will be allowed in on the experiment and the amounts will be restricted… it does not augur well for the property market, at least in the short term. Housing inventory is at a 14-month high; liquidity has dried up, especially for smaller developers. Home-price rises in major cities have slowed or even reversed. Coupled with the frantic pace with which many developers have issued a record amount of debt since last year, many analysts have warned of a bubble bursting.
… The commission – the mainland’s top economic planning agency – which announced the bond initiative, has vowed to stay focused on reforms despite some signs that the central government’s enthusiasm for bringing about painful change may be ebbing as the mainland economy stumbles. Lenders, for example, have been instructed to speed up issuing mortgage approvals as a measure to slow down property market reverses…
If you thought the massive local government debt was out of control before, just wait until corrupt local kingpins have the power to issue their own debt, without having to resort to the shadow banking system.
According to a report on Bloomberg yesterday: “China’s biggest banks are poised to report the highest proportion of bad debts since 2009 after late payments on loans surged to a five-year high.” But that’s not half the trouble: China’s shadow banking system is estimated to account for 70 to 100 per cent of the country’s GDP. It is an impenetrable fog of dodgy deals and toxic debt, the complexity of which nobody can fully grasp.
On top of this, Morgan Stanley argues that China’s corporate debt is equal to the whole country’s national income, and China’s consumers are in more debt than ever. In fact, when you add it up, since 2008 China’s public and private debt has ballooned from 135 per cent of GDP to more than 200 per cent today…
More on China’s ghost economy:
Hangzhou government will hide the cooling trend in the real estate market. Any price decline more than 15% below the list price will not be entered into the online registry. Developers are not forbidden from cutting prices and no sales will be stopped, though at least one developer expressed concern that advance sales permits may not be issued if the price cuts are deemed too large. _ICS quoted in ZeroHedge
Meanwhile inside Potemkin Putin’s Russia, capital flight and brain drain continue —
and threaten to worsen as a result of Putin’s grand Ukrainian adventure.
“For any country, international contacts are a lifeblood of stimulation, fresh ideas, and opportunities,” he said. “So many will try to leave simply to avoid such isolation and the harm it does to creativity and opportunity.”
Andrei Kortunov, General Director of the Russian International Affairs Council (RIAC), predicts that in the near future the outflow of talented and creative people might be the case because of the political situation in the country and economic challenges.
“Historically, brain drain is accompanied by capital outflow from a country,” he said. And in this situation there will be two major factors that fuel this trend. If Russia’s economy has stagnated, with Europe and the U.S. gradually getting out of the economic crisis, it will increase ‘brain drain’. Political factors will also play a role: An ideological rejection of Western values will frighten liberal, more educated and creative people.” _
If the Ukrainian crisis ends up isolating Russia in the world, it may lead some of Russia’s best and brightest to pursue opportunities abroad. Can Russia deal with this challenge? __ http://www.russia-direct.org/content/reversing-russian-brain-drain
Putin might be celebrated as the one who brought back Crimea, but he also alienated Russia from the West. Russian elites and the middle class do not vacation in Abkhazia or Crimea, but in Turkey, Spain and Italy. They do not send their children to universities in China or North Korea, but in the US and Europe. They prefer to drive German cars and are crazy about Italian fashion. _Source
As Putin increases Russian isolation from the more modern world, Russia stands to lose ever more of its best science graduates and professionals, the life’s blood of Russia’s future.
The Russian central bank last month said $63.7 billion left Russia in the first quarter, equal to all capital lost in 2013. The World Bank estimates this year’s total could reach $150 billion. U.S. automakers GM and Ford, which were doing well in Russia’s underserved auto market, decided this year to slow down or stop some production lines “because of political risk,” Cohen said. Companies leave because of corruption, but the worsening economy is another factor. “The economy is projected to slow down or go into recession. “Consumer income is dropping; consumer credit is dropping. So people will be buying less, including American cars,” he said.
… Russian officials may be thinking they can operate without being part of the global economy, but “it feels like going back, after 30 years, to where we were in the Soviet Union,” she said. “People always hope for the best. I don’t hope for the best anymore. It’s not like tomorrow the curtain will fall, but the sooner we leave the better.“ _Tech Startups Abandon Moscow (h/t NBF)
Brain drain, capital flight, growing problems with alcoholism, diseases of tobacco abuse,
infectious diseases, violent crime, a hostile environment for business, and horrific rates of suicide — all combine with low birthrates, high death rates, high abortion rates, and a drain of young fertile Russian women seeking better lives overseas. Ethnic Russians inside Siberia are either fleeing or dying off. Russia’s poor demographic future seems on a greased slide to oblivion.
It is important to look at China and Russia together, since their outlooks will interact
strongly for many years into the future. Both countries are still trying to emerge from
serious problems dating back to their communist pasts, with no guarantee that either will be able to avoid serious schisms in the not-so-distant future. And western mainstream press coverage of both countries views the two dictatorships through rose-tinted glasses, leaving most westerners largely in the dark on what is happening inside two of the countries with the most influence over the future of the globe.
Not that the US or Europe are doing so hot themselves. The US struggles under the worst US president in history with record numbers of able workers unable to find jobs, while Europe is trying to survive suicidal energy and immigration policies.
There is not a country in the world that can afford to cripple itself by adopting green energy and climate policies — and yet that is exactly what incompetent leaders in the US and Europe are attempting to force onto their citizens. This intentional hobbling of entire economies by ideologically bound leaders and bureaucratic systems allows despotic nations such as China and Russia to limp ahead with global programs of international disruption and the propagation of tyranny, such as we see with Russia/China friends such as Syria, Iran, North Korea, Venezuela, and any number of other criminal regimes and state terrorism promoters.
Putin desperately needs higher oil prices, to fund his adventures overseas and his promises of higher pay and benefits made to Russians and Crimeans alike. Russia’s growth has slowed, the government has promised to spend $48 billion building up Crimea, and foreign capital is leaving the country. With 70 percent of Russia’s exports and17 percent of the economy dependent on oil, an aggressive U.S. energy policy could have been a powerful weapon.
Instead of declaring a full-out program to boost domestic energy, we will now spend our great energy bounty to drive carbon emissions lower. Americans are being told this is an urgent need – with President Obama speciously linking carbon emissions with weather disasters and respiratory ailments. This program will be another unpopular, divisive quest by Mr. Obama to secure his legacy; instead it may become an anvil around the country’s neck.