Yesterday’s South China Morning Post discusses more measures taken by he financial authorities to address the overheating problem. Readers of my blog probably know that I don’t expect these latest measures to have much impact.
All the problems of overheating, speculation, inflation, etc. are, in my opinion, caused by the currency regime, and until that is addressed, there isn’t much the authorities can do to address the problem. All they can do is temporarily move the underlying problem from someplace we can see it to some place we haven’t yet seen it.
Here is what the South China Morning Post has to say:
Financial authorities on Friday unveiled a series of measures to tighten property lending in its latest attempt to cool the country’s overheating real estate market and curb mortgage lending risks.
The central bank and China Banking Regulatory Commission said in a joint statement that authorities would ban banks from lending to developers found to have been hoarding land. The changes were expected to take immediate effect. Down-payment requirements for second homes were raised to 40 per cent from 30 per cent, and requirements for commercial properties such as offices and shopping malls were increased to 50 per cent from 40 per cent, the statement said.
Mortgage rates for such purchases had to be no less than 1.1 times benchmark rates, it said. “Recently, property prices had gone up quite fast, which is obviously irrational,” the statement said. “Once prices tumble, bad loans at commercial banks would surge.” The statement said it would still encourage people to buy their first homes. Down-payments for buying homes smaller than 90 square metres (1,000 square feet) would remain unchanged at 20 per cent, while for larger homes, the rate would be kept at 30 per cent.
It is the second time since last year that the government has guided commercial banks to raise the down-payment requirements for home purchases.
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
Subscribe to this Site
Comments for "More measures on real estate...
January, 2008
.