China’s frothy property market falters in June
|July 14, 2010||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
China’s frothy property market falters in June
Wealth concentration in China exceeds US
China is the country with the largest income disparity in the world. While the mainstream press does not much worry about that, they do worry about their economy dragging the world back down. We trim, blend, and append three 2010 stories from: (1) Global Times, June 9, on concentration; (2) Bloomberg, July 6, on land market by Susan Li and Jacob Greber; and (3) BBC, July 12, on land prices.
by Global Times, by Susan Li & Jacob Greber, and
- Wealth concentration in China exceeds US
China’s wealth concentration has by far exceeded that of the US with 1% of the wealthiest Chinese families being accountable for 41.4% of the country’s entire wealth. China is also one of the countries with the largest income disparity in the world, , the latest report from the World Bank stated.
In the US, the wealthiest 5% people hold 60% of the wealth of the country, but the middle-class families enjoy the largest part of the incomes.
China’s Gini Index, a gauge of income gap, has reached 0.47 (and rising) in 2009 from the 0.28 30 years ago. 0.4 percent is considered a ‘warning line’. Exceeding this mark signifies that the biggest pieces of the wealth cake are being taken by the minority. If the Gini index points below 0.2, income distribution is highly balanced, between 0.2 and 0.3 is a relatively balanced distribution, 0.4 and 0.5 means that the distribution is being largely spread and if it reaches 0.5, then, distribution is highly unbalanced.
The Gini Index of Europe and Japan are mostly between 0.24 and 0.36. While China’s index reached 0.47 in 2009, ranking in the 36th place among 135 countries.
Now, the incomes of the residents in urban areas are 3.3 times those in the rural areas, the highest wages are 15 times those of minimum wages. Senior managers in listed firms see their wages 18 times than of workers in the first line. The salaries of senior managers in State-owned enterprises (SOEs) are 128 times than average
The wages among different industries have large gaps. The employees of the State-owned industries like power, telecom, oil, finance, insurance, water, gas and tobacco make up less than 8 percent of the total in the whole country, but their wages account for 55%.
This distribution relies on the government’s polices favorable to people in those jobs.
JJS: The most crucial of those favors is to let insiders keep ground rents.
- China Property Market Beginning Collapse That May Hit Banks
Chinas property market is beginning a collapse that will hit the nations banking system, said Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund.
Rogoffs concern echoes that of investors, who sent Chinas benchmark stock index to its worst loss in more than a year last week. Chinas data have been a focus because the nation has led the global recovery from the worst postwar recession.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9% annual pace in the first quarter, the most since 2007. Measures have included raising minimum mortgage rates and down payment ratios for some home purchases. Officials may also start a trial property tax.
Rogoffs view clashes with that of Stephen Roach, chairman of Morgan Stanley Asia Ltd., who said last month the property boom isnt a bubble. While portions of the market such as high-end apartments are overheating, residential demand will remain robust as rural Chinese migrate to cities.
Agricultural Bank of China Ltd., which is in the midst of a $20.1 billion initial public offering in Shanghai and Hong Kong, told investors yesterday that real-estate loans are among the biggest risks facing the industry.
- China’s frothy property market falters in June
China’s frothy property market may have peaked after a government clampdown on speculators. Property prices across 70 cities fell 0.1% in June compared with May — the first monthly fall since 2009 February.
Despite the monthly fall in June, property prices across China still remained 11.4% higher than a year ago.
In general government economic policy has penalized Chinese households, who have large savings, and subsidized Chinese industry and property speculators, who are major borrowers.
New government rules included higher down payments on house purchases, stricter lending rules for property developers, and limits on the ability of investors to buy more than one home.
JJS: Whether China does increase its public recovery of ground rents and thus avoid runaway speculation that ends in recession and thus effect a soft-landing or not, why do some say the only good economy is a growing economy? And what do we want to grow? Wealth gap? Workweek? Pollution? Or quality of life? Chinese and people anywhere could make the economy be the servant and themselves the master by diminishing taxes and subsidies and instead recovering and sharing the worth of Earth. Its called geonomics and it awaits your usage.
Editor Jeffery J. Smith runs the Forum on Geonomics.
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