THE PAINFUL CHINESE
BURN BUBBLE
Almost every Sunday lunchtime, Ellie and I go to this lovely
Chinese restaurant in Norwich for some Dim Sum. If you haven’t tried it, try
it. It’s great. Now my parents have known the owners for years and they started
off as a really small restaurant and have now grown into a rather large outfit.
The same goes for a lot of the other notable Chinese cuisines around here. But
one thing I've noticed is that over the last 5 -15 years, there’s been a large
influx of Chinese families moving over here. But there’s a stark difference
between these families compared to the Polish and other nationals that have
migrated over here. The Chinese families
tend to be rather wealthy. I’m aware that my findings may be influenced by
my social group and contacts, but this apparently isn't just localised to
little old Norfolk. I've slowly been spreading my feelers out across the UK for
months now and it’s the same story. When comparing the wealth of immigrant
families, the Chinese sector grossly outweighs the other nationalities in terms
of wealth.
But why?
More light was shed on this when I had a rather candid drink
with my friend. He’s Chinese, his family moved over here in the last 20 years
and they are very wealthy. He said that in China the Government are extremely
strict with all sorts of freedoms we take for granted such as heavily filtered
internet etc but also with investments. Chinese
citizens are banned from investing overseas and are only allowed to invest
in a small selection of products which their Government sees fit. (And I thought the FSA was bad!). But 15
years ago, their Government allowed the public to invest in property.
As a result there is
a property bubble which is grossly
bigger than our Western Housing Bubble which popped in 2007/8. This new
investing freedom opened the flood gates for the rising middle class and they
began investing with 3 generations worth
of family savings. This effectively started China’s historic growth out of
poverty and so they wanted more growth. The Government then shamelessly
promoted to their public that everyone should buy a house or 10 and that
property prices always rise! (We've heard
this one before). As a result, the average
middle class family now owns between 5-10 apartments! It’s now got to the
point that they’re building 16 cities
(the size of Birmingham) a year!
Not only that, they’re building 82 new airports by 2015 and over 20 of them will be BIGGER than Heathrow. This has created dozens of ghost cities and
districts. There are at least 3 districts (the size of East Anglia) whereby
every town and city within it whereby every building has been bought, but are
empty. 71 million empty uninhabited
homes to be precise…(that’s the same as having the UK, France and Italy
completely uninhabited).
The top 10 cities with the worst price bubbles in the world
are in China and the average house price in Shanghai is more than 55 times the
average wage. I met an IFA the other day who said that ‘this whole Chinese
property bubble is a myth’….just look at the stats!
However they've hit a temporary road bump. Though the 2008
crisis only slowed their property bubble ever slightly, it evidently gave their
Government a reality check and so in 2011 they forced a
1-investment-house-only-policy. Similar to their 1 child policy. This then
reduced the amount of money going into their bubble, house prices plunged and
it affected their work force of 50
million construction workers first. They were simply not getting paid, so
lots of them walked away. This has left dozens of cities being half built and
developers bankrupt. But it wasn't enough to pop this ‘hyper bubble’.
Unfortunately they are still inflating it and are continuing to build the world’s tallest building, 4 space ports and
a 860 mile long aqueduct. The aqueduct alone is costing them $62 Billion. I’m
afraid that the whole of their middle class and a big chunk of their upper class
will be completely wiped out when it finally does ‘POP’. I feel especially
sorry for their middle class who will lose 3 generations worth of family
savings and more…
However there is a Silver lining which may save some
families. In 2011 the Chinese Government added a new product to their public
investment basket – Silver bullion. Not only that, they’re encouraging citizens
to buy as much as they can, and boy they’re buying a lot of it…
