Now the SCMP discusses the call from the top in China starts battle against property bubbles after Xi and Li blow the horn
A government document circulating on Chinese chat rooms reveals that Xi and Premier Li Keqiang recently took tough stances on the property market frenzy in major cities.Central planning doesn't work.
Xi warned that first and second-tier cities must stay alert to property “bubbles”. More explicitly, Li said he was “worried that housing prices would get out of control” and warned that local officials who couldn’t bring home prices under control would be held accountable.
...The restrictions were rushed out, and the timing was extraordinary since they came during “golden week”, when most public offices and banks were closed, analysts said.
“The synonymous actions of so many cities suggested they were not volunteering, but were the result of high pressure from the very top,” Zhang Dawei, the chief analyst with Centaline Property, said.
According to the memo, provincial and municipal officials from cities with strong property-price gains this year were summoned to Beijing for an urgent meeting on September 30, at which they were lectured about the need to tame housing prices.
China's planners want to increase credit growth and have it flow exactly to where they want it to go, but the market has other ideas. Local governments also recognize the problem, but don't do anything because they're trying to boost GDP. The planners aren't even using market signals. If you end up with a bubble, you either have a broken credit system or there's too much credit/money creation. Instead of dealing with it at the source, they are dealing with the symptoms.
To recap, China turned on the credit firehose to help zombie companies and boost GDP, and it went straight into a housing bubble accelerating so quickly it bears a resemblance to early stage hyperinflation. Now they are trying to pop that bubble. China is a long-term growth story because it abandons planning, not for this stuff.
To make money answer two questions. 1. Will this stop credit growth or redirect it? If the former, get bearish. If the latter, then to question 2. Where does it go? Another bubble is coming because credit is still going to be redirected. If I had to bet I'd put money on A-shares again. I await the buy signal from the People's Daily or Xinhua editorial pages.