China's Mortgage Quality Worse Than US

[wayneL]

Holy Crap!

http://www.reuters.com/article/ousiv/idUSHKG13669020070812?rpc=401&

HONG KONG (Reuters) - The quality of Chinese home loans is worse than in the United States, where a subprime mortgage crisis is causing turmoil in global financial markets, according to a prominent academic quoted in a Hong Kong newspaper on Sunday.

Yi Xianrong, a banking and finance expert at the Chinese Academy of Social Sciences, said Chinese banks had been lax as they built up 3 trillion yuan ($396.2 billion) of mortgage lending.

Defaults in the U.S. subprime mortgage market now total about $200 billion, on some $1 trillion of loans, according to Credit Suisse.

"The quality of housing loans are much worse than the subprime loans in the United States," Yi was quoted as saying by the South China Morning Post.

"At least there has been a credit check system (in the United States) but in China anyone can borrow money to buy a house."

China's property market has been booming thanks to a hunger among a fast-growing middle class for new apartments, but the government has been wary of rampant speculation in major cities, particularly Shanghai.

Fearing a dangerous bubble could be forming, authorities have tried several measures to try to cool the market, including interest rate rises, rules to curb foreign investment in property, and steps to encourage construction of cheaper homes.

Global financial markets are jittery, and credit has dried up, because it is difficult to say to what extent a U.S. housing downturn will hurt funds holding securitized mortgages held in collateralized debt obligations (CDOs).

However, securitizing mortgages is new to China and not as widespread, although banks and consumer sentiment would still be hurt by a housing downturn and mortgage defaults.

 

[ducati916]

China and Chinese banks, as I have been blogging on for about 6 months are absolutely corrupt and close to bankruptcy.

Anyone who buys into the China fantasy will get their lunch handed to them at some point.

jog on
d998

 

[ta2693]

I don't think we need to worry about China's mortgage market .
The house hunting crazy in China will not ease in near future.
In China, if you want to marry, you have to have your own living place No matter how expensive it is. Otherwise the lady will not even think about marrying you. There are still a lot of potential demands there. As a country with 1.4 billion population, most of them crowed in eastern China, the supply of land is limited compared to US. I do not think it is a bubble. the real demand is there.
30% of the real estate price is used to pay government officers' bribe and secret commission. 30% is land price. if the land price which is controlled by local government could go down or the chinese government is less corrupted, the demand of real estate would be more furious. There would be more need of Australian commodity and energy.
As far as Us mortage market as concern, "housing is only about 5 percent of the economy. Subprime is even a smaller. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages. Housing sales and starts are now about what they were in 2002 which is far from depression. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand."

 

[ta2693]

China and Chinese banks, as I have been blogging on for about 6 months are absolutely corrupt and close to bankruptcy.

Anyone who buys into the China fantasy will get their lunch handed to them at some point.

jog on
d998

Chinese banks is Corrupted, I agree with you.
But there is no evidence the Chinese bank is close to bankruptcy.
The credibility of Chinese bank is very high, they never default their debts and they got the support of Chinese government. Chinese always think bank is the safest place to deposit their saving.

 

[CanOz]

I don't think we need to worry about China's mortgage market .
The house hunting crazy in China will not ease in near future.
In China, if you want to marry, you have to have your own living place No matter how expensive it is. Otherwise the lady will not even think about marrying you. There are still a lot of potential demands there. As a country with 1.4 billion population, most of them crowed in eastern China, the supply of land is limited compared to US. I do not think it is a bubble. the real demand is there.
30% of the real estate price is used to pay government officers' bribe and secret commission. 30% is land price. if the land price which is controlled by local government could go down or the chinese government is less corrupted, the demand of real estate would be more furious. There would be more need of Australian commodity and energy.
As far as Us mortage market as concern, "housing is only about 5 percent of the economy. Subprime is even a smaller. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages. Housing sales and starts are now about what they were in 2002 which is far from depression. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand."

We should add that the Chinese seem pretty good at paying mortgages, its a matter of face here, IMO.

In the US, don't forget about the MBS and the hedge funds, this is not just about a few Amercican home owners not paying their mortgage, its about the unwinding of bad debt used to finance the purchase of leveraged assets. When some want their money, there will simply not be enough to go around, thats why the panic creates an unsatiable demand for liquidity.

Cheers,

 

[saichuen]

I may be wrong here but isn't the problem with China is that it is saving too much in general (hence a huge trade surplus) while the United States, on the other hand is spending a little too much (hence a huge trade deficit).

If this is true, isn't it a good thing that the Chinese are spending now and hence increasing demands domestically?

Hmmm...

 

[ducati916]

Chinese banks is Corrupted, I agree with you.
But there is no evidence the Chinese bank is close to bankruptcy.
The credibility of Chinese bank is very high, they never default their debts and they got the support of Chinese government. Chinese always think bank is the safest place to deposit their saving.

I disagree, Chinese banks are junk credits.

The recent IPO's of the Chinese banks required recapitalization of their Balance Sheets from the government prior to being floated.

This was necessary as the NPL component was threatening bankruptcy due to the leverage above prudent levels of their reserves [capital base]

NPL's are again on the rise, now that they are "public" are you sure that the government will step in again?

jog on
d998

 

[ideaforlife]

Duca,

It's true Chinese banks are full of junk loans, but for corporate users, not personal users. CHinese banks have traditionally more lenient in giving loans to corporates than individuals.

As a few people have pointed out, first it's a matter of "face" to pay up mortgage or not; second Chinese have saved too much rather than spending too much.

On the other hand, as the financial system is still centrally controlled, Chinese government has constantly input billions billions of dollars into the major state-owned banks. Chinese government wouldn't let the banking system collapse - not forever, but at least another 10-15 years.

 

[ducati916]

Duca,

It's true Chinese banks are full of junk loans, but for corporate users, not personal users. CHinese banks have traditionally more lenient in giving loans to corporates than individuals.

As a few people have pointed out, first it's a matter of "face" to pay up mortgage or not; second Chinese have saved too much rather than spending too much.

On the other hand, as the financial system is still centrally controlled, Chinese government has constantly input billions billions of dollars into the major state-owned banks. Chinese government wouldn't let the banking system collapse - not forever, but at least another 10-15 years.

So, that the Banks are full of Corporate *junk* somehow makes you feel better about the situation?

If a bank defaults, due to the fractional reserve method, all of those honest common holders will also be wiped out.

The common man *may* have saved too much, however, lending, to whatever purpose [US consumer being one] with high levels of lending to internal infrastructure and industrial uses that have not, and seemingly cannot earn the cost of capital, places the system at risk.

How will the government prop-up or save a failing bank?
*Print more money [adding to an already soaring inflation]
*Selling foreign reserves
*Selling assets
*Other

jog on
d998

 

[Uncle Festivus]

So, that the Banks are full of Corporate *junk* somehow makes you feel better about the situation?

If a bank defaults, due to the fractional reserve method, all of those honest common holders will also be wiped out.

The common man *may* have saved too much, however, lending, to whatever purpose [US consumer being one] with high levels of lending to internal infrastructure and industrial uses that have not, and seemingly cannot earn the cost of capital, places the system at risk.

How will the government prop-up or save a failing bank?
*Print more money [adding to an already soaring inflation]
*Selling foreign reserves
*Selling assets
*Other

jog on
d998

Ducati,
A serious question, how are you preparing to preserve your wealth for the future, what is the best way for us mortals?
UF

 

[ducati916]

Ducati,
A serious question, how are you preparing to preserve your wealth for the future, what is the best way for us mortals?
UF

What has that to do with Chinese banks or mortgage quality?
Absolutely nothing, thus completely off topic.

 

[Uncle Festivus]

What has that to do with Chinese banks or mortgage quality?
Absolutely nothing, thus completely off topic.

Thank you. I'll try and catch you on a 'good' day. Deep breathing & meditation helps.