Home » Analysis: China’s real estate crisis surpasses the Japanese bubble period | Mainland Real Estate | Evergrande | Chinese Economy

Analysis: China’s real estate crisis surpasses the Japanese bubble period | Mainland Real Estate | Evergrande | Chinese Economy

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[Epoch Times September 28, 2021](Epoch Times reporter Liu Yi comprehensive report) Chinese real estate has recently attracted more and more attention from market participants. Some Japanese media believe that China’s current real estate bubble has surpassed that of Japan during the bubble period. Landing is not easy. If the authorities respond inadvertently, China’s economy may enter a downturn.

An analytical article published on the Nikkei Chinese website on September 27 said that the ratio of China’s private debt balance to gross domestic product (GDP) reached 220%, exceeding Japan’s peak of 218% after the bubble burst. From the perspective of the proportion of real estate loans in the overall loan balance, China is currently close to 30%, which is also higher than the bubble period of approximately 21% to 22% in Japan.

In 1990, the housing price in Tokyo during the bubble period of Japan was 18 times the per capita annual income. According to the statistics of the Financial Research Institute, the housing price in Shenzhen, Guangdong Province was about 57 times the per capita annual income, and in Beijing was about 55 times. Shanghai is 46 times and Guangzhou is 40 times, showing that ordinary people can no longer afford housing prices in China’s big cities.

The report said that during Japan’s economic bubble, funds flowed not only to real estate but also to the stock market. As of the end of 1989, in the 10 years since the Nikkei Stock Average reached a new high, the Nikkei Stock Average had risen 5.9 times. At present, the level of China’s Shanghai Stock Index is only about 1.5 times that of 10 years ago, showing that funds are concentrated in real estate.

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The article believes that even if the Chinese Communist Party tries to prevent the sudden collapse of real estate companies, it will be difficult to eliminate the uncertainty of the real estate boom, because the signal of the collapse of China’s bubble economy has appeared.

Around 1987, Japan’s real estate yield began to exceed the real economy industry, and countless hot money entered the speculation. The high profits of real estate have even allowed Toyota Motor, Fuji Heavy Industries, Hitachi Electric and other Japanese leaders in the real economy to enter the real estate industry on a large scale. In the face of the real estate bubble, the Japanese government forcefully raised interest rates and tightened monetary policy. House prices plunged 65% in three months. The Japanese real estate market began to collapse, and the huge real estate bubble began to burst in Tokyo.

The Japanese real estate bubble burst in 1991, and the Japanese economy experienced a major setback. Since then, it has entered the Heisei Great Depression.

China’s real estate bubble has also grown bigger and bigger in recent years. At the Boao Real Estate Forum 2019 from August 6 to 9, 2019, Orient Securities Chief Economist Shao Yu said: China’s current real estate market value is 65 trillion US dollars, which is equivalent to At 450 trillion yuan. The mainland’s annual GDP is 90 trillion, so the current market value of mainland real estate is equivalent to 5 times the GDP. The total market value of Chinese houses is equivalent to the sum of the United States + European Union + Japan.

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Commentator Wen Xiaogang said that mainland real estate companies developed by borrowing and accumulated huge debts during the development process. With the Chinese Communist Party restricting the financing of real estate companies in August last year, the funds of real estate companies have decreased. At the same time, the mainland’s economy has declined and the real estate market It has also declined. Real estate companies’ hopes of repayment by selling houses have failed. Real estate companies with huge debts have tight liquidity and are facing the danger of breaking the capital chain. Evergrande’s liquidity crisis is a typical example.

In recent weeks, Evergrande’s financial crisis has aroused global attention. The market is worried that the failure of Evergrande may shake China’s financial system and may even pose systemic risks to other markets.

Zhang Jiadun, a well-known American expert on China issues, a doctor of law, and author of “The Coming Collapse of China” recently wrote an article in “The Hill” that Evergrande Group is the world’s debtor. The largest real estate company will have to pay interest on many bonds maturing in the future, which will become a key test. The CCP does not have enough resources to rescue Evergrande, because as far as Chinese economic entities are concerned, they do not have enough cash due to the impact of debt and the epidemic. Sooner or later, China’s debt crisis will bring down China’s economy.

Editor in charge: Lin Congwen#

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