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Welcome to Capitalism, Comrades

Written By Brian Hicks

Posted November 30, 2007





"To know the road ahead, ask those coming back"-Chinese Proverb


Now that we’ve had plenty of time to think long and hard about the housing orgy that happened here over the course of the last 6 years, it ought to be pretty easy for us to spot another one from a mile away.

So here’s a story about our new "capitalist" friends in China that may ring a bell or two.

From the News & Observer entitled: Housing market, risk surge in China

"In China, South Korea, India and Singapore, housing prices are soaring amid strong economic growth and surging demand from developers and upwardly mobile families who want to upgrade their homes.

Of all of Asia‘s markets, China‘s is the hottest — although the boom is creating problems there, too. Housing inflation is pricing some people out of the market, and authorities worried about excessive development are raising interest rates and taking other steps to curb lending.

Demand is being driven by consumers such as Li Ruoning, 22, a public relations company employee in Shanghai — just one of millions across Asia whose hearts are set on fulfilling the dream of owning their own home.

"I’m pretty sure that housing prices will not drop, especially with the best locations," she said.

Beijing‘s efforts to rein in soaring prices and investment have had little effect: Housing price inflation in China hit a new monthly high of 9.5 percent in October, with prices in Beijing rising by nearly 18 percent.

"I found prices rose too fast and I didn’t know why," said Sun Chunming, a technician at an online gaming company in Shanghai who bought an apartment in August. "But I was worried if I didn’t buy it now, I might not be able to afford one later."

Yi Xianrong, a prominent economist at the China Academy of Social Sciences, a government think tank, is one of those sounding the alarm.

He contends that China‘s housing loans are riskier than those in the U.S., because he said most loan applicants give false information about their assets and income.

Because China lacks a comprehensive credit data system, borrowers often qualify for loans using false information, Yi says. He thinks the quality of property loans in China might be worse than the risky mortgages that are causing so much trouble in the U.S.

"I estimate that the large majority of mortgage holders would not meet the standards for even subprime loans," Yi said in an interview with the state-run magazine Oriental Outlook."

Hmmm. Now let’s see what we’ve got here.

Mc Mansion hungry population-check

The "If I don’t buy it now I’ll be priced out forever" mentality-check

The housing never declines attitude-check

Huge price surges-check

Lots of risky subprime liar’s loans-check

Looks pretty bubblicious to me.

Welcome to capitalism, comrade.

But hey there’s always big money for the masses in day trading.

North, South, East, and West, the human condition is the same.