The Chinese economic model – built on debt and secrecy – has found a new outlet store: Australia.
You know, I kinda like China’s gumption. Through an era where the anglo way was the only way as far as economic development was concerned, China remained sceptical.
And while they were being lectured by the West about free-trade and capital flows, I think they saw it for the smoke screen that it was.
“It was low tariffs and free flows of capital that made you rich, was it? It wasn’t slavery, military conquest and the covert over-throw of democratically elected opponents then… No? Really?”
And so they have steadily developed their own way of doing things.
What that way exactly is, is a bit of a mystery. So much so that you wonder if even anyone in China really knows what’s going on.
And China has long since passed the point where most ‘free’ economies would have collapsed in on themselves.
Like Japan. Japan got too high on the debt-juice, and is still wrestling with the hangover twenty years later.
But it hasn’t quite played out that way in China. And partly that’s because the Chinese authorities still have some control over everything.
So say developers borrow too much to build a bunch of buildings nobody wants. In Australia that could bring the banking system to its knees. But not in China. You just order the local governments to buy up the buildings, and the banks to go easy on the debt repayment schedules.
And so the Chinese economy looks kind of bananas, but then it’s doing it own thing so who knows how it’s going to play out.
And if the truth be told, even the Australian economy, with a monetary system disconnected from anything real and sky-rocking household debt looks pretty bananas too.
But that’s the modern world. Everything is bananas. What’s a monkey to do?
But then things got a little weird over the weekend, with two data-publishers in China ‘going dark’.
Reuters was running the story:
At least two major Chinese private providers of home price data have stopped publishing the figures, at a time when economists are split whether the red-hot property market will remain a driver of the economy in 2017.
The China Index Academy, a unit of U.S.-listed Fang Holdings, has stopped distributing monthly housing price index data for 100 cities that it usually issued at the start of the month.
The academy told Reuters on Friday it had suspended distribution indefinitely, without giving a reason for the suspension.
“I don't know who exactly is making the order, and it's not mandatory,” said a source with knowledge of the matter, who declined to be identified as the topic is a sensitive one.
E-house China, another influential private real estate consultancy, has also indefinitely suspended its monthly housing price index for 288 cities.
“Judged by current conditions, we won't publish it in the future… Housing prices are an extremely sensitive matter right now,” a source with knowledge of the matter said on condition of anonymity.
The Chinese property bubble has been drawing ohhhs and ahhhs from the kiddies for ages, so now what? The Chinese government bans the data because it doesn’t like what the data is saying?
“I fixed it. I’m a fixer.”
So normally this would be a “not my circus, not my monkeys” type thing, but I think Australia could well be inside the fallout zone.
And the thing I keep thinking about is all these Chinese developers, who have developed their business model under the firm and protective hand of the Chinese state, coming and setting up shop here.
I mean, you look at the coming apartment glut, which is as obvious as the nose on my face, and you think, what are these developers thinking?
And maybe they’re not thinking. Maybe they just don’t even care about supply and demand projections.
Maybe they just happily build, safe in the knowledge that someone will buy it. If it isn’t the public, then the state will always step in.
Chinese developers have totally changed our urban landscape, and they’re still coming. From the AFR:
Chinese developers roared back into Melbourne in the final five months of 2016, snapping up three-quarters of development sites as they shrugged off concerns about apartment oversupply, tougher planning rules and higher property taxes.
Real estate agent CBRE said 75 per cent of the 45 Melbourne development sites they transacted between August and December were sold to mainland Chinese buyers.
“We’ve sold more properties to Chinese buyers in the past five months than in any other five-month period since 2009,” said CBRE national director Mark Wizel…
But I do worry that Australian cities have become an outlet store for the Chinese development model. Chinese money is funding Chinese developers to build apartments to sell to Chinese buyers.
Who the hell signed up for that?
And how far can we trust a state that is willing to flip the switch on it’s own data providers? And how closely do we want to be tied to an economic model that’s only sustainable so long as everyone is kept in the dark?
These are big questions. Huge.
Why are we still not talking about it?
What do you think China’s up to?