Lang Xianping Explains China's Banking Crisis to a TV Audience

Here is a video from Guangdong TV (广东卫视). On the show is Chinese economist Lang Xianping explaining to the Guangdong audience why home prices in China will tumble. Even if you don't understand Chinese, it is worth watching for a bit of a cultural experience.

Most American financial shows will spend a few minutes with a guest, and mainstream news sources give at best a minute or two of coverage to these types of financial issues. Meanwhile, in China this was a 10 PM prime-time program on Guangdong TV Monday night, a 45 minute discussion of China's housing and financial situation that doesn't sugar coat anything.

1:00 The show starts with the host telling the story of a friend. His girlfriend's mother said the only requirement (for marriage) was to buy a house in Shanghai. It ends with his friend singing a contract in the morning and the home in Hangzhou falling 12% in the afternoon.

6:30 Lang Xianping comes on and discusses the Hangzhou price cuts. (Covered here)

9:00 He shows the price rises for the first two months of 2014, for Beijing, Shanghai, Guangzhou and Shenzhen. He mentions that as soon as the government announced its housing policy last year,
The policies addressed five areas. First, local governments should make controlling home prices an annual objective and establish a system to assess officials’ performance in stabilizing prices.

Second, government at all levels should restrain home-buying for speculation and investment. Third, the supply of housing and land should be increased. Fourth, the planning and building of affordable housing should be sped up.

Finally, the monitoring on developers and real estate agencies should be enhanced.
home prices immediately shot up.

9:30 He discusses plunging sales: down 48.72% in Beijing, down 18.51% in Shanghai, down 3.71% in Guangzhou and down 44.72% in Shenzhen.

10:00 He says real estate is not the driver of home prices, it is banks. November 25, it was reported that out of 32 cities investigated, the banks in 17 of them had stopped issuing mortgages. And this was to first home buyers, not people buying second homes. He asks, how can they stop lending for first mortgages? These are the safest loans banks make.....this is really strange....it's not reasonable with money supply growing so fast

13:00 He gives the chart of an unnamed bank. It shows a rising ratio of interbank lending from 19% to 80% of loans in 2012, rising to 82% in 2013 according to an insider at this bank. He explains how banks receive high interest rates for interbank lending these days, and even though they can get high rates from mortgages, the money comes back in 30 years, maybe.

15:30 He explains the impact of Yu E Bao and higher interest rates. On ICBC's 6 trillion in demand deposits, it paid 40 billion yuan of interest. If they had to pay 5% on deposits, they would have to pay an extra 268.8 billion in interest. ICBC's profits were only 238.7 billion.

16:40 He shows the decline in loans from traditional banking from 92% of loans in 2002 to 51% in 2013 due to the rise of WMPs. (Actually, it is under 50% in 2013 if all sources of lending are considered). Interest on these loans are 8%, above the mortgage rates for home buyers.

18:00 He discusses the situation in Hangzhou again and then says, this is not a real estate crisis. This is a banking crisis.

19:00 Media start asking questions. The first reporter asks, you and Andy Xie have been predicting this for 6 or 7 years. He says local government's have a debt crisis, how can banks not have a crisis?

21:00 The next reporter asks, if Yu E Bao is causing the end of mortgage lending, why did SHIBOR fall from 8% to 2.2% recently? Hasn't the central bank and government worked on this problem? He says you have to separate these issues. Yu E Bao is a test of traditional banks, to see if they can survive higher interest rates.

23:00 He says the banks switching from mortgages to interbank lending is a failure of risk management.

24:00 A reporter asks if people should buy homes or invest in WMPs. He says he doesn't give any advice, such as whether you should get married or get divorced. Buy or don't buy, understand that WMP risk is rapidly increasing.

26:00 Another analysts comes on who says home prices will fall.

36:00 They discuss the yuan falling. If it isn't the central bank's action that lowered the yuan exchange rate, the economy is in trouble and therefore real estate will be in trouble.


  1. Thanks for the video breakdown in English, very interesting.

    I regularly share your links & insight on Twitter, I don't suppose you have an account (Twitter is blocked in China)?

  2. Thanks for the links. I don't use Twitter at the moment.