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China Property Market Beginning Collapse - May Hit Banks, Rogoff Says
5 July 2010
“You’re starting to see that collapse in property and it’s going to hit the banking system,” said Rogoff.
China’s property market is beginning a “collapse” that will hit the nation’s banking system, said Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund.
As China’s economy develops, “especially at the speed it’s growing, it’s going to have bumps,” said Rogoff, speaking in an interview with Bloomberg Television in Hong Kong. He also said that while recoveries across the global economy are “very slow,” the danger of a return to recession isn’t “elevated.”
Rogoff’s concern echoes that of investors, who sent China’s benchmark stock index to its worst loss in more than a year last week. China’s data have been a focus because the nation has led the global recovery from the worst postwar recession.
The Shanghai Composite Index tumbled 6.7 percent last week, and dropped 0.8 percent yesterday to close at 2,363.95. In the U.S., the world’s largest economy, the benchmark Standard & Poor’s 500 index capped a ninth day of declines in 10 sessions on July 2 after a government report showed fewer private-sector American jobs were created in June than forecast.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 percent 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, according to state media.
Sales Dive
The efforts have contributed to a slump in real-estate sales, while prices continue to climb. The value of property sales dropped 25 percent in May from the previous month. The increase in prices, at an annual 12.4 percent in May according to a government survey of 70 cities, was down from a 12.8 percent advance in April.
“You’re starting to see that collapse in property and it’s going to hit the banking system,” said Rogoff, 57, who also serves on the Group of 30, a panel of central bankers, finance officials and academics led by former Federal Reserve Chairman Paul Volcker. “They have a lot of tools and some very competent management, but it’s not easy.”
Premier Wen Jiabao’s government has been trying to cool the economy to alleviate the threat of asset-price bubbles. The central bank has told lenders to set aside more money as reserves, and targeted a 22 percent cut in credit growth at banks this year, to 7.5 trillion yuan ($1.1 trillion).
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5 July 2010
“You’re starting to see that collapse in property and it’s going to hit the banking system,” said Rogoff.
China’s property market is beginning a “collapse” that will hit the nation’s banking system, said Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund.
As China’s economy develops, “especially at the speed it’s growing, it’s going to have bumps,” said Rogoff, speaking in an interview with Bloomberg Television in Hong Kong. He also said that while recoveries across the global economy are “very slow,” the danger of a return to recession isn’t “elevated.”
Rogoff’s concern echoes that of investors, who sent China’s benchmark stock index to its worst loss in more than a year last week. China’s data have been a focus because the nation has led the global recovery from the worst postwar recession.
The Shanghai Composite Index tumbled 6.7 percent last week, and dropped 0.8 percent yesterday to close at 2,363.95. In the U.S., the world’s largest economy, the benchmark Standard & Poor’s 500 index capped a ninth day of declines in 10 sessions on July 2 after a government report showed fewer private-sector American jobs were created in June than forecast.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 percent 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, according to state media.
Sales Dive
The efforts have contributed to a slump in real-estate sales, while prices continue to climb. The value of property sales dropped 25 percent in May from the previous month. The increase in prices, at an annual 12.4 percent in May according to a government survey of 70 cities, was down from a 12.8 percent advance in April.
“You’re starting to see that collapse in property and it’s going to hit the banking system,” said Rogoff, 57, who also serves on the Group of 30, a panel of central bankers, finance officials and academics led by former Federal Reserve Chairman Paul Volcker. “They have a lot of tools and some very competent management, but it’s not easy.”
Premier Wen Jiabao’s government has been trying to cool the economy to alleviate the threat of asset-price bubbles. The central bank has told lenders to set aside more money as reserves, and targeted a 22 percent cut in credit growth at banks this year, to 7.5 trillion yuan ($1.1 trillion).
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