China’s Impending Financial Collapse and What It Means for British Columbia
It is a task, indeed, to have an entire economy based on illusory success and feigned robust growth.
This is what China has been fomenting for at least a decade. The slow but steady creep of empty cities and tens of millions of vacant condos–many millions brand new, is on the verge of sinking what was not long ago foretold as the future world economic powerhouse.
Well that was then, and this now.
There is not a snowball’s chance on a BBQ pit that this will turn around for them. It’s too far gone.
So what does that mean for us in this province? For one, Premier Clark’s endless nonsense about doing business with China “as we’ve done for years” isn’t simply her being, once again, completely out of touch with an issue she’s about to fumble. It demonstrates a significant disconnect with reality and an inability to read the economic indicators, which should be begging restraint from such wild-eyed swagger.
The real estate market here has softened considerably to the extent that Chinese buyers are mostly interested in lower starting prices (read: less exorbitant) in West Vancouver and Richmond rather than the Vancouver westside market, which we allowed them to previously destroy. Listings in even low-premium homes in Vancouver are sitting dormant for months on end–a condition not seen for a decade. Prices are dropping like stones regardless of the whores, excuse me, realtors that are telling you otherwise. The great wave they are expecting this weekend and next (to coincide with national holidays in China) will yield little if anything, unless you’re talking about commercial real estate, to which they will commit a measured run, as it’s all that’s left.
The public markets are not immune from this phenomenon either. In point of fact, they’re substantially worse off. The uneven bond markets and volatile stock plays are turning erstwhile buoyant predictions into dire warnings–at least to those that will listen.
Confidence in the United States leadership is absolutely shattered. They are led by a fool as President who spent two years between 2006-2008 campaigning against the very people on Wall Street, to whom–as a result of his own folly, he is now indebted. Goldman Sachs might as well consider the White House as a satellite branch.
He would be the one, Mr. Obama boldly exclaimed, to wipe the grime of corruption from America’s balance sheet, but instead, he is tinkering on punishing those who overwhelmingly pay the most taxes anyway, with more, and digging in for an economic re-election platform which must speak loudly to his base: Hate the rich.
But what now that they’re the only ones left to really bail out the US of A?
Messers Buffet and Soros are farcical caricatures when they demand the President tax the rich–they both have separate tax cases in which they are battling the very government to which they provide cobblestone advice. Mr. Soros, in particular, is also battling a ten year old insider trading case, with millions in tax on the line there too.
The Chinese are scanning all this with one eye while the other spies Europe, whose Euro currency has proven a complete bust and where bailouts are being handed out faster than President Obama can do identically with firms he swore to battle, but who are now his political backers, as a reward for his tacit approval of their all-inclusive, comprehensive trough snorting.
And while the Chinese are watching their own Yuan fall apart (only a Communist country can pretend to survive buying back their own debt) and the other hitherto reliable markets crumble into a sea of red ink, the money that was once available to buy our resources and invest in our markets is very quickly dissipating.
Leaving even the most HONEST, seasoned of analysts and observers asking a question they’ve dreaded from as far back as when their MBAs really meant something: Now what?
I would say that I am reading the entrails the same way and am concerned about the future of BC.
But, what do I know? According to Michael Campbell (on one of his CKNW broadcasts) if one does not have a degree in economics, then one is not really qualified to have a good opinion about it.
(I wonder how his pal Ozzie is doing in his court case up in Willies Puddle? Probably doesn’t have a degree in economics)
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I have a degree in economics and one in political science a diploma in emerging global markets and another degree I’m completing in law (after a twenty plus year layoff) . So I guess I’m disqualified too!
I should have gotten a better education by spending one term at each of the University of Edinburgh, the Sorbonne and SFU, instead of wallpapering my office with accomplishments and completions at the schools I did attend.. Stupid me!
Cause with a little botox, derma-filler and super-gel bra I could be premier today.
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With a declaration of “I’ll do it”, you could be Premier in 2013. Watching you bury CC in a debate, although I’m sure she’d find “scheduling conflicts” to avoid this at any cost.
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NOW WHAT? I’d suggest a good place to start would be “Human Action” by Ludwig Von Mises, combined with a strong dose of Hayek.
If you have not yet taken the time to acquaint yourself with actual message Ron Paul has been sending, rather than the “interpretations” in the msm, now might be a good time.
Further suggested reading: deepcapture.com.
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Okay, thanks. I’ve read ‘Human Action’ and found it interesting although unrealistic in parts. The rest I will look up.
Thanks again.
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“combined with a strong dose of Hayek.”
Salma?
Put me down for some of that.
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You know, I thought of that when I was reading the original comment.
Count me in for some of that, too!!!
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I can’t be overdrawn. I still have cheques.
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You’re right Alex, we’re “on a hellbound train” to quote and old song, and no one seems to know where the brakes are. Surely our addled head so called “Premier” must have someone who knows what’s going on but, alas, we just get more of bare breasts and hot air. What a joke this government is. Hang on everone because the economic crash coming will jar your teeth out!
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Look, if you think that the Chinese economy is going to falter I think you have a good point, though the timing may be delayed by some years, but Vancouver real estate sales aren’t cratering, at least according to the daily sales data I track. Comparing to past years, sales are not horrible — not great either — with the exception of new homes on the west side, to which none of a stock of 70 sold in September (the first since at least 1994).
The “now what” question is much more suited to how Vancouver has managed to find itself so addicted to real estate investment for its GDP growth, and what the City should be targeting instead in terms of long-term and productive economic growth. Selling real estate to foreigners (and worse its residents) at exorbitant prices is not a long-term viable economy and Vancouver shouldn’t be surprised if a significant downdraft forms if China does burst its investment bubble.
Already there are cracks showing: in-migration to the province is down, following trends seen in late 1996 when a construction boom turned to bust quickly and went from bad to worse in 1997 due to an investment bust in certain Asian economies. Out migration to mostly Alberta followed and with it skyrocketing for-sale inventory of real estate and higher unemployment. This was at a time when prices were high, but nowhere near as high in real terms as they are today.
If you really want to fix BC’s economy, quench real estate bubbles and concentrate on doing productive stuff, or be prepared for our industries to always trade at a discount vis-a-vis our peers. All you have to do is talk to a few businesspeople about the difficulty in recruiting people from outside Vancouver due to the unreasonably high cost of ownership in the city. Vancouver may be desirable but apparently it’s not desirable enough for many.
How to burst a bubble is another question altogether, but nobody said beating an addiction was going to be easy or popular. For the half of the City’s residents who rent, either out of need or being loath to load themselves with long-term debt to own, it’s odd that high land prices aren’t getting more press.
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In the bracket between $2-5M, which is where the offshore Asian market predominantly landed it’s all dropped off–period.
I don’t need to track any figures. I can name you at least a dozen homes on the westside in that bracket that are sitting idle. At least eight months on the market and no real offers. All those would have been gone in a week when they where playing Monopoly with our neighborhoods.
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Well if you don’t need figures, fine, but the market says sales are still strong, maybe they’re all selling for $1.88MM. Just telling you what the numbers say, is all.
Don’t get me wrong, I think there needs to be some serious introspection going on about how to use palatial lots west of Cambie. Building large single-family homes in a city that is increasing density does a disservice to her citizens.
The question is, then, AGT, what do you propose we should consider doing about it? I don’t think there are too many easy answers but a little bit of brainstorming never hurt anyone!
Thx for the interesting read.
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I didn’t write that I don’t need figures. I wrote that I care not to track them as you do, because I’m watching the market very carefully and the trend is clearly downward. You are regurgitating industry-manipulated numbers.
Another example: Yesterday I drove past a home that was on the market ten months ago for $4.5M. It’s been sitting idle for almost a year. Today, it’s on the market for $3.75M and not a single offer or biter.
The market is on it’s way down. Realtors are like prostitutes. Business is never bad.
It’s always a good opportunity to get screwed.
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Thanks for addressing the Truth that None Dare Name, Alex — they way China’s success is built on sand.
I would add to your analysis the looming internal crises brought on by the one-child rule, grotesque economic inequality and the move from the country to the factory cities, which is apparently the largest mass-migration in human history.
And then there’s imperialist overreach. The way that China has been buying up Africa must count as the most underreported international story of the last 10 years.
We all know how this one goes; the locals eventually get fed up with the foreign overlords. Said overlords demand that their repressive puppet governments crack down. When this proves ineffective, in come the military “advisors”.
Yes, China is buying up and exploiting Africa wholesale. And meanwhile, the Canadian Africa-charity industry insists we keep on pouring in more aid money. And like the naive boy scouts that we are, we do.
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I would strongly suggest that our size 40d Christy, should run out to the nearest canoe store and buy a paddle. As it look like she is going to be up Shit Creek, and be totally screwed, but at least she will have a Paddle.But that would show some foresight. Cheers Bruce.
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Indeed.
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Very thought-invoking commentary Alex; especially on the Chinese phenomenon. As one pundit recently noted; China is not as frightful as they make it sound, it is a country of peasants, always has been, always will be, unless they see democracy at long last, but it is not looking too promising on that. Their one-child policy has proven disastrous, for the possibility of an economy with a consumer and a supplier. Idle men must be put in uniform because there is nothing to do without marriageable women in the picture, and a standing army of millions in a world where revolution is spreading like wild-fire must frighten the status quo.
And here in Vancouver the vast realty holdings of Chinese investors has been the cause, or so the rumour goes, of a mayor and council going so far as to change the numerical designations of properties in order to fulfill the superstitious fantasies of ethnic investors and their sought after Sino-Canadian buyers. It is said to be going so far as to change the addresses of heritage buildings that have had the same address for a 100 years. Wonder if that is for votes or for sharing in the increased property profits this brings about?
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Very good question.
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I’m amazed that Vancouver hadn’t caught on to the address change thing sooner. For those who are unaware, to the Chinese, the number 8 means good luck & is very desirable, whereas the number 4 equates to death & is not desirable.
I’m told that about 15 years ago in Toronto it used to cost you $25 to change your address, say from 234 Elm St. to 238 Elm St. With the increase in the Chinese population the fee went up to $1,000.
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Yes, that’s true.
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Stop knocking the Chinese. They are trafficing lots of good prostitutes into Vancouver. Just look at http://www.erslist.com
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Oh, how I hate that…
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Good post Alex.
The guy who should be put out to pasture is Buffett. He keeps on talking about his secretary paying more taxes than him but when you take a close look it’s only because of the way his company is structured. Not to mention maybe he should be paying his secretary more.
Rumour is he made like a bandit recently on B of A thanks to his connections to the White House.
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Thanks.
It’s no rumor.
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Alex, its interesting that as of Sat morning you had 82 “responses” to your article on Christys Clevage and only 14 on the economic collapse of China (read the World).
Unfortunately economics aint sexy. I bet if you had of put a picture of a scantily clad asian girl in front of the article you’d have 120 responses.
The economy and politics everywhere have slid inexorably to the bottom of the barrel.
Apparently the lowest common denominator rules the roost in BC civic and provincial politics.
The general public doest want “real news” because it involves thought.
Dont believe me? Go to the nearest magazine rack at any large chain store and see how many news magazines you can buy. ( and I’m not talking Time, Newsweek or MacLean’s mags because they have sadly turned into the “Readers Digest” )
The majority of magazines for sale are for “Beauty”, “Fitness”, “Home Renos”, blah, blah ,blah. Give the people what they want….pathetic
I have to hunt high and low for “The Economist” .
Sanity is drowning in a sea of sloth and stupidity.
When China’s economy has a major crap and their streets are full of angry, hungry young men, the rest of the World will take notice. The only way the Chinese government can avoid another revolution will be to either engage in a civil bloodbath or create an “enemy” (Taiwan?) to blame/attack and get the jingoistic fever raised to an extremely dangerous pitch.
Interesting times…………
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Interesting indeed. Although, I hadn’t approved any of the ones awaiting moderation.
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Great post Alex, for Christy to play the Asian card in the bottom of the 9th with no one in the bull pen is political suicide. Anyone who has spent even a few hours a month scanning the China real estate situation on the net can see it’s been a house of cards going back a year. Jim Chanos has been shorting the China construction market for at least as long and has been reaping huge profits.They all laughed at him while going on shows like Charlie Rose and Bloomberg warning people. He even mentioned in one interview the fallout effecting Vancouver real estate.
I also heard that the last 6 months or so the massive increase in offshore Chinese coming here with $10 million in the suitcase, plus seeking mortgages while claiming incomes of $7,000 cause the homeland can’t know of any more. Tell me the last gasp of dirty money is not flooding out of there like rats on a sinking ship.
One comment on the Christy DD fiasco, when she first flashed the glimpse of cleavage on the night she told us via Global there would be no election, could you not feel there was some distraction techinique involved there ? She’s showing us she is nothing but Sarah Palin North and you know how that has ended. I love cleavage but as that link stated, “if you want to be taken seriously, cover it up”.
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Precisely. I saw the clip and had phone calls immediately from two VERY prominent press members that were rightfully appalled. Christy can’t help herself. It’s all she’s got.
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Vancouver Real Estate = Drug Money
Right on the money AGT. What next, China is putting in place an ultra conservative nationalist that is part of the Maoist Cult. Has introduced new 4th core interest beefing up its deep water navy and force projection capabilities.
They have embarked on an anti corruption campaign and beefed up media monitoring and censorship. The media police / thought police has expanded from 60,000 to nearly 250,000 members not to forget to mention automation improvements in the deep dive IPS / IDS traffic monitoring and shaping capabilities.
What you need to know Kissinger and the foreign policy that the West has followed regarding China, is this, completely totally wrong. China is motivated by three things, Greed, Revenge and Pride. That is it.
Build you foreign policy around that and you will get it right.
British Colombia should not be doing business in China, our market is in South and Central America. Our sizes, our language our values our market. To put it into perspective, four Blind Chinese elephants want to know what British Colombia business is. So they all start putting their foot down, trying to feel what British Colombia business is. And at the end all the Blind Chinese elephants agree, British Colombia business is flat.
ICAC first. Until we can deal with corruption in our own market importing more of it from foreign jurisdictions is just stupid. Honest, trust builds an economy. Give that back to British Colombia and we will do very well.
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I found this to be an interesting read, thought I’d share..
http://www.nytimes.com/2011/10/10/business/global/households-pay-a-price-for-chinas-growth.html?pagewanted=1&_r=1&seid=auto&smid=tw-nytimes
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I walked by the Avedon condo in South Granville during the day yesterday. It was obvious that several units in that building (now a couple years old) were empty. Every empty unit represents a price increase for those who want to live in Vancouver.
What I worry about is that if China’s economic bubble collapses, it will be the “little people” here in Vancouver, who scraped together enough to buy an overpriced one bedroom condo, that will get burned by plummeting prices. The rich “Canadians” who reside in Mainland China will just walk away from their property here never to be seen again, leaving us to pick up the pieces.
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Very good observations.
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