Chapter 43 5. Will there be a capital crisis in China?

On December 20, 2008, the General Office of the State Council issued "Several Opinions on Promoting the Healthy Development of the Real Estate Market". In the document, it was first proposed to support the reasonable financing needs of real estate development companies, hoping to ease the tension in the capital chain of developers .In addition, the central bank's policy clearly stipulates that since October 27, 2008, the minimum down payment ratio for housing purchases has been adjusted to 20%.These policies will undoubtedly increase the pressure on banks and other financial systems, so what does Professor Lang think of these policies?

● It is the state that advances funds to build housing, rather than requiring banks to grant more lenient credit. ●The result of our promotion of zero down payment or 20% down payment is that we immediately push the bank to the front line. ●To prevent the real estate development from collapsing completely. The problems in the real estate market in 2009 were different from those in 2008. The biggest problem in 2008 was the indiscriminate flow of funds, which caused the phenomenon of skyrocketing housing prices. The most frightening thing was that the entire real estate market was frozen in 2009.This is my judgment on the real estate market in 2009, what do you say?

And the countries with similar problems are not only us, but also Russia.Russia also encountered the same crisis at the end of 2008. What did the Russian government do?First, the state pays to buy these houses and rent them out to the common people. Why?The Russian government said so, "In order to prevent real estate development from collapsing completely", these are the original words of the Russian government.Second, the tax incentives that Russian residents enjoy when buying a house can be doubled. The money you buy a house can be exempted from personal income tax, and the upper limit can be as high as 10,000 US dollars.From this point of view, I think our government is not paying enough attention to this crisis. I did not expect this crisis to come so quickly.You look at Russia, its real estate market is not as hot as ours, they have already encountered major problems, and the Russian government's approach is to directly participate.

Of course, I mean that this is what Russia does. I don't mean that we are going to do the same thing, and our government doesn't have the financial resources, and it is impossible to advance funds to build housing.However, I hope that our government will pay attention and stop focusing on whether housing prices are falling.On the question of whether housing prices are rising, I think this problem seems to be a small problem at present. What is more frightening?It is the result of the tight capital chain of real estate developers, which will freeze the entire real estate market since 2009.The result of the freezing of the real estate market, coupled with the continued collapse of manufacturing companies, will further affect the next step of the banking system's security.

Many real estate properties in Shenzhen are promoted with zero down payment.Even our government allows 20% down payment.I understand the promotion of real estate itself.But for this kind of policy, I also hope that through my book, we can propose a new concept to our real estate developers, our banks, and even our government, that is, whether it is zero down payment or 20% down payment, these are all Subprime loans, why zero down payment?Why do you only pay 20% because you have no money?Because you have no money.So it reminds me of how the financial crisis in the United States came about. The real cause of the international financial crisis is the excessive greed of international financial capital headed by Wall Street.In the past, people who bought houses in the United States had outstanding credit, and I think they were all a group of people with fiduciary responsibilities.These people bought a house and created a prosperous American economic market: After he bought a house, for example, he had a house purchase loan of 10,000 US dollars. After the bank got it, he sold it to a securities company. The loan is cut into 10 bonds, each with a face value of $1,000, and the bonds are sold.In this method, the bond is sold to investors, and the bank gets back $10,000, and then lends you money to buy a house.Therefore, the entire financial chain in the United States will not go wrong, because this person's credit is excellent and he has a fiduciary responsibility.What is the fiduciary responsibility of buyers?That is, if you can’t pay it back, don’t borrow it.In the United States, this was not a problem in the past. The buyer has a fiduciary responsibility and has good credit. He borrows money from the bank to buy a house. After the purchase, the bank sells the bond to the investor.Then the bank takes back the investor's money to make up for the loss of funds, and then lends the same money to the second person to buy a house.

The real problem with subprime loans is that international financial capital and its pawns have hired a group of people with bad credit and lack of fiduciary responsibility to buy houses.What is a lack of fiduciary duty?That is, he knew that he could not pay back the money, but he still borrowed money to buy a house.So through many fraudulent behaviors at that time, these people were allowed to obtain loans legally.In the end, the subprime mortgage crisis broke out. How much money is there in subprime mortgage bonds? More than 1 trillion U.S. dollars, and this more than 1 trillion U.S. dollars has caused such a terrible financial crisis, you can think about how big the impact is.Therefore, under the situation that our real estate market is completely stagnant, if we promote the result of zero down payment or 20% down payment, it will immediately push the banks to the front line of fire, which may cause another disaster of China's subprime mortgage crisis start.

If the subprime mortgage crisis broke out in China, the impact would be too great, and I can't even imagine it.So I suggest that the government, at this moment, take money out of its own pocket to help real estate developers and home buyers, instead of going through the operation of banks, otherwise the banks will be immediately involved in the financial crisis. It will produce our own financial crisis in China. Let me give you an example.When the financial crisis broke out in the United States, for example, Citibank bought a lot of these subprime mortgage bonds, buying about 306 billion U.S. dollars, of which 20 billion U.S. dollars were lost. How can the U.S. government rescue Citibank?Is it possible to find another bank to help it?No, but directly took out 20 billion US dollars from the pocket to help Citibank. The US government said that this money will be given to you, brothers, hold it, and don't go bankrupt.What is its purpose in doing this?This purpose is to bypass financial institutions, not to allow financial institutions to bear more risks, and the government directly takes money to help these banks, including Citibank.And that's why at this moment, I propose Russia's policy of state-funded housing construction instead of asking banks to give looser loans.Because the result of banks granting looser loans will make banks involved in the crisis faster, and China's subprime mortgage crisis will break out.

I am very worried about our real estate market.My concerns are different from those of our general media and the government. I will summarize everyone's concerns, that is, the continued decline in housing prices may cause supply cuts.Moreover, a large number of manufacturing companies have closed down, workers have lost their jobs, and they may not be able to repay their mortgages, and their supply may be cut off, which will affect economic development.What am I worried about?What worries me is that the entire real estate market has been frozen since 2009.To put it in the most extreme situation, no new buildings will be built. The result of this will widely affect related industries, including steel, cement, profiles, etc., and this will cause a lot of unemployment.At this moment, the government thinks that money should be directly used to help the people. I appeal to the government not to allow a 20% down payment, and at the same time not to allow a zero down payment.Because a down payment of less than 20% will obviously cause a sub-finance crisis in China in the future, which we must guard against.