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Governor

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Q: Will there be a credit crunch in china?

Have you ever noticed how many people have quite nice cars here? The Chinese teachers I know have land rovers and merecedes yet I guess earn well under 10 000 a month. I have heard foreigners who have got married here, going to look for a mortgage at the bank, and the bank encourages to burrow more than they need. It’s well known that China has a problem with household debt, but that it may not be a problem because China is the only country to have over 7 percent growth(down from 15). That the property bubble, over reliance on construction, may not spell doom because of the unique conditions in which China finds it self. But is this really so? Will China have an almighty crash thatll affect foreigners holdings here and even their employment?

25 weeks 4 days ago in  Money & Banking - China

 
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Dude... if China has a crash so severe it affects the employment of foreign teachers, I don't think China will be a place that any foreigner would want to be in anyway.

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25 weeks 3 days ago
 
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Emperor

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 .... some stats :  

 

Reconciling Chinese Household Debt Statisticshttps://www.baldingsworld.com/2017/08/07/reconciling-chinese-household-debt-statistics/

The BIS lists Chinese household as a percentage of GDP at 44.4%. The SCMP figure appears to be just a little bit above 50% and does not have a This is where the author appears to get the cited statistic and take amazing statistical liberties. The UN data indicates that in 2013 (the last available...

 

... and for comparison:

https://tradingeconomics.com/united-states/households-debt-to-gdp

Households Debt in the United States decreased to 76.40 percent of GDP in the third quarter of 2018 from 76.60 percent of GDP in the second quarter of 2018. Households Debt To GDP in the United States averaged 58.28 percent of GDP from 1952 until 2018, reaching an all time high of 98.60 percent of GDP in the first quarter of 2008 and a record low of 23.80 percent of GDP in the first quarter of 1952.

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25 weeks 4 days ago
 
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Emperor

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I don't know how or if my comment factors in,,,,,  but I've lived in remote 2nd tiers,,,,   seen those giant 'ghost cities' * with my own eyes.  That is a weird thing to see,,,,,,, billions and billions RMB (trillions?) of housing/commercial construction 80% completed then abandoned. Some ren made some serious bank on that....  but ???  who pays for it and how?   like I said,,, it's a weird thing to see in person...

 

*if not really a whole city,, more like a District of a City....

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25 weeks 4 days ago
 
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Minor Official

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First of all on the nice car comment (I am also driving a mercedes ironically).  Don't assume you know the salaries of people here, because you don't.  They will never tell you the truth unless you are family... and even then.  I know teachers in tier 3 cities making over 10,000 yuan a month.  Teachers making 5-10,000 are quite normal.  Then other perks in addition.  

 

In a lot of cases however they are married to spouses who work in other professional sectors.  This is what most teachers don't seem to understand, salaries of 15,000 yuan-50,000 yuan are not that uncommon in other professions as teaching is quite poorly compensated (it's exactly the same in the west).  So if they are married to a spouse making 35,000 yuan.   Things are suddenly different, this describes a lot of teachers driving these cars that I know.

 

In addition if they are married they will likely have their house bought outright for them by their parents.  In a small city where the average salary is 6,000 yuan a month even two  teachers making an average salary of 7,000 yuan each can have 13,000 yuan in disposable income.  That's more than enough to buy a low end BMW/Mercedes/Audi which run in at 270,000 yuan now.

 

Most people I know with foreign cars have bought them outright.  There are a lot of wealthy people in China just as there are a lot of poor people.  As for banks encouraging you to borrow more money, that didn't happen to me at all.  In fact the bank were quite serious in limiting what I could borrow.

 

There is definitely a debt problem in China but banks are not just going to give out money to anyone, if your mortgage is 75% of your salary the banks aren't going to give you the money.

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25 weeks 4 days ago
 
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We are already in a credit crunch. Banks are getting hammered by non performing loans and the govt is cracking down on the shadow banking industry. This is making banks less able/willing to loan to entrepeneurs and more likely to lend to companies with government ties. The teachers you see rolling around in nice cars are either living way above thier means, married to someone rich or the most likely answer is they're house rich. They or thier parents owned a few houses back 10 or 15 years ago when they were dirt cheap. Then the houses went up like 100 times in value or more. Now they're flush with cash. There will be no property collapse in china as they've tightened it down immensely with regulations preventing people from buying houses for the sole purpose of making money off them. They've also raised the down payment amount to around 40% last time i checked. Don't worry about the gdp. It's not a number that has any bearing on your daily existence.

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25 weeks 4 days ago
 
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Dude... if China has a crash so severe it affects the employment of foreign teachers, I don't think China will be a place that any foreigner would want to be in anyway.

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25 weeks 3 days ago
 
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