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Posts: 863

Shifu

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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?

3 years 6 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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3 years 5 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.

dokken:

You make a good point However It’s an emerging market, so comparing it to a developed economy may not be fully revelant. Whats caused concern has been the dramatic rise is household debt in China. It’s risen from 34% to above 50 in four years. This has been coupled with reduced consumer spending. This didn’t occur in with the rise in household debt across developed countries. 

I don’t want a credit crunch to happen in china, but my question is for expats who are in china currently, if they see evidence of too much been given by banks too easily, and if they think this foreshadows a crash which will cause a global meltdown? A global meltdown affects everybody, so I’m not sure what your smiley face is about at the end there?

3 years 6 days ago
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icnif77:

My smiling face is observing the trade war ... at the moment!

 

China isn't emerging market with limited strenght like Brazil or Malaysia. Forget about economical cliches ... China is the world's economic powerhouse.

3 years 6 days ago
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ambivalentmace:

The powerhouse was created in 1992, one day you are sleeping in a building with no property rights and the next day the property is yours and you have a free gift of real estate equity to print money, borrow, develope, etc.

 

No one has ever done this in the history of the world on such a large scale so quickly, so all economic numbers pro or con are just conjecture  based on no precedence.

 

I would be curious about what household debt is with housing taken out of the numbers as a comparison. My limited observation is new workers salaries are never going to be able to afford buying,living, and working in tier 1 cities. Perhaps they can all ride trains from tier 2 homes to work everyday.

3 years 6 days ago
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3 years 6 days ago
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dokken:

China is not an emerging economy? markets particulary in the east of china are not anywhere near mature or liberalized. china itself has admitted it's a developing country. its an economic giant that is also true, both things are true

3 years 5 days ago
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dokken:

i meant west

3 years 5 days ago
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3 years 6 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....

ambivalentmace:

I always wondered if they expect a "grand solar minimum" and the extra concrete lego building are for the people in the north to migrate south in the next ice age. Long term planning from the great 5000 year civilization.

3 years 6 days ago
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Stiggs:

I went out exploring on my bike once and found one of those ghost districts. Or maybe it was just unfinished and people are there now, I don't know.

 

Talk about eerie though... there were streets,communities full of apartments, empty shops etc and it was completely deserted. The silence was what struck me the most. No traffic noise, no people, just silence.

 

It reminded me of a twilight zone episode or one of those post apocalyptic movies and riding around there was one of those awesome experiences you could probably only have in China.

 

 

3 years 5 days ago
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diverdude1:

Twilight Zone really sums it up,,,  same feeling I got.... or like we said in the 80's.....   'trip city!'

3 years 5 days ago
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3 years 6 days ago
 
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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.

dokken:

i was referring to mid to high end mercedes. yes that is true i know some teachers get 15k and above, and more money for home tutoring. i guess their salary not assume. yes some will have big earning spouses, rich parents ect. chinese are better at saving money. nonetheless i dont think this will account for all nice cars i see. china is a developing country. there should not be more nice cars per percentage of population than a developed country. makes sense no? there should be a finite level of money. there must be easy access to credit. im speculating of course, but unless you ask people how they afforded their cars, it isn't really possible to know  

3 years 5 days ago
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StMattTD:

I don't see that many people driving high end mercedes.  It's mostly the C series / 3-5 series BMW / audi a4-a6.  All between 300,000-500,000.  Not that many people own 7 series+ or sports models.  Certainly have not seen any teachers drive those.
 
If I were really estimating the population that have these cars (BMW/Merc/Audi) it would be 5-10% in a city.  The top 10% of city dwellers aren't going to be poor.  They're probably going to be making a lot more than average joe ESL expat.  50k/month+.
  
It probably just seems like a lot of people because there are so many people in China and you're living in a city where there is much less poverty than the countryside.  For every person driving one of these you can see 9 Chinese cars and a few rustbuckets.
 
Here's the thing, if you have an existing loan on car.  They won't approve you for a mortgage.  I know quite a few people owning such cars... 15-20?  about 80% of them own the car debt free.  I'm sure there are some young people who buy them on credit (if they don't have a mortgage) but I don't think they're going to account for anywhere near the majority. 
 
I of course am also just speculating from my time driving on the road.  I'm sure you could stand at a junction all day and get an accurate representation but the bottom line is let's say that 10% of people own these cars in x city.  The top 5-10% in a city (the top 50% of China is the top 2.5-5% of the whole country.  These are not poor people.

3 years 5 days ago
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Posts: 10

Governor

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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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3 years 5 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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3 years 5 days ago
 
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Answer of the DayMORE >>
A: They're saying you should be in China already because entering China i
A:They're saying you should be in China already because entering China is pretty much impossible at the moment due to covid restrictions. This means schools can only recruit from people already in the country. Also, unless you have dual citizenship you probably wouldn't meet the visa requirements to teach (teach English that is, maybe you could teach other subjects, I don't know) in China. They have a native speaker requirement that means only people from certain countries will be accepted. The second point will probably get this post downvoted, any time you mention the native speaker requirement it brings out one or two angry thumbs - they don't seem to understand nobody on this forum makes the rules..... Anyway, my advice to you would be to look elsewhere. Between China's tough visa requirements and their even tougher covid measures it's pretty much impossible to go there now to teach. The good news is that other countries are dropping their covid restrictions and opening up again so there are probably still opportunities available to you. Good luck. -- Stiggs