Lang Xianping: Control Inflation and Reform to Reduce Home Prices

Lang Xianping goes through the economic statistics, pointing out such facts as the U.S. manufacturing PMI is well ahead of China's. Why is China's manufacturing sector in recession? Lang says its due to higher exchange rates, higher wage costs, higher inflation, trade wars, etc. Manufacturers abandon their core business and speculate in housing, driving up home prices. In order to reduce home prices then, the government must tackle inflation and improve the business environment.


郎咸平：房价上涨一发不可收拾 一招就可“釜底抽薪”

Following the April 25, 2014 directed the commercial banks to reduce deposit reserve rate, the central bank on June 9 and enable the "quasi-directional drop" While this policy weights again, and put a lot of money to the market. According to the Central Bank document, only "consistent with prudent business requirements, and the 'agriculture' and small micro-enterprise loans up to a certain percentage of commercial banks, in order to cut the RMB deposit reserve ratio by 0.5 percent," that the government is to encourage financial institutions to fund allocation to private enterprises and rural areas, which is a guide to the transfer of funds back to the real sector. I think, to save the Chinese real economy is a necessary precondition for stable economic development. About Chinese manufacturing recession, massive outflow of funds, universal speculation and other social hot issues, I launched in April 2014 latest masterpiece, "" New Deal "could change China", the made-depth interpretation. The following is an excerpt text books to readers.

According to further research, I believe that prices itself is a fever phenomenon, but it is not by a single factor composed of several surface. After several years of observation of the Chinese property market, I summed up, summed up the "volcano theory" - inflation and soaring housing prices led to the decline of manufacturing.

Let me talk about inflation. In recent years we have serious inflation, so that in November 2013 the CCTV interview, the phrase "I'm sorry the Chinese renminbi," a hit. The fact is, official data showed that in 2007, 2008, 2010 as well as 2011, we are all in full-year CPI minus 5% of the cordon. In this case, the dollar has shrunk, not worth the money problems will appear.

Our people are hard to save his money down, how to make it add value to the purchasing power to keep it? First, the high inflation rate in the year, the money in the bank will encounter "negative interest rates." I'll give you to provide a set of data, in 2011, when the central bank to tighten monetary policy in our total to improve the four-year time deposit interest rates, it increased from 2.75% to 3.5%. However, our 2011 national monthly CPI inflation, there would be no lower than 4.1%, the maximum time even to 6.5%. From the figure we can see that in 2011 the national monthly CPI inflation is higher than the one-year deposit rate all month. In this case, what people do? Because of the limited investment channels, only stocks, buy gold, or buy a house.

We look at the second reason is also very important, the manufacturing crisis. I'll give you a set of macro data provided, May 2012 to May 2013 China manufacturing PMI index has been hovering around 50 Coorong line, the maximum only in March 2013 climbed to 50.9. Why should I choose this time? Since starting in 2012, had deep economic crisis in the United States has begun the manufacturing sector, to achieve the overall economic recovery. With our PMI best looking in March 2013, for example, this month the global manufacturing PMI was 51.2, the United States this month's PMI reached 54.6 (Markit company survey results). This shows that, in March 2013, when a thriving global manufacturing, we, as "a big manufacturing country," the United States can not keep up the pace of development, and even keep up with the global average.

Manufacturing PMI viewed from this perspective, I can assure you that our industry is experiencing a recession in such a process. What caused such a result? First, heavy duty; Second, the cost of capital is too high; Third, labor costs continue to rise; Fourth, exchange rate rising; Fifth, international trade war, and so on. To sum up is that we invest in manufacturing overall rapid deterioration of the business environment, a significant decline in profits. For manufacturing entrepreneurs, is to do business at a loss. In order to ensure their property does not shrink, they will withdraw the money from the industry in years, to buy a house.

Thus, the money from the people, the money from the manufacturing entrepreneurs, all merged into a surge of heat, forming a fiery magma. As more and more magma, volcanic eruption finally, our prices will go up out of control. This is why China's housing prices and the world are not the same, and why high taxes on high prices no inhibition. 32 market regulation simply take a big rock, suppress crater, has no effect on the cooling magma is only a deceiving behavior. China's response to the problem of high prices, only to curb inflation, improve the business environment, in order to achieve drastic.

Lang Xianping Explains Why Financial Market Reforms Won't Lift the Market

This week Lang Xianping discusses China's latest financial reforms as relates to the financial markets, specifically the stock and futures markets. He shows that contrary to the popular assumption that increased foreign investment will boost the market, history shows that at best there will be no effect or a negative one depending on how the futures market reform plays out.

At 8:00 he shows the various global stock markets and how they have performed relative to August 2007: India has done the best, up 67.21%, Germany is up 28.76%, the U.S. is up 22.92%.

8:51 China...down 60% from the peak and no recovery. Now there is a bold experiment, strong medicine: introduce foreign investors to lift the market. Will this work? Lang Xianping says he has no forecast, he doesn't forecast stock or real estate markets....but he can give some evidence. We can look at what happened in other areas that introduced similar policies.

9:40 First look at Taiwan. He has a chart of the Taiwanese stock market (top in blue) with the proportion of foreign ownership below. Foreign ownership has rise from 12% up to 33% recently. He says this doesn't mean the foreign ownership boosted the market: foreigners bought into the market because the stock market went higher.

10:40 Next is Thailand, which reformed in 1988. Foreign ownership went from 15% to 60% as Thailand's stock market boomed. In 1997, the Asian crisis hit and foreigners sold out. Recently foreign ownership was 33%. So he says, around 30%, foreign ownership may not affect the market, based on it having apparently no effect on Thailand or Taiwan.

12:20 Next is Korea, with opened up its stock market in 1998. At that time the South Korean market was doing very well. Foreign ownership climbed to 40% by 2004, but since then has fallen to 32%.

13:00 So we can learn two important things. First, foreigners do not come in to help you lift the stock market, rather foreigners come in once the market is doing well. Second, thirty-something percent is a magic number. Foreign ownership in China will also not exceed this level.

Now, with the market this rotten, are foreigners going to come and trade Chinese stocks? Will they suddenly show up and invest lots of money? They have to trust the market, have to give them a guarantee. Only if they think they can make money will they enter the market.

14:00 We've reformed the stock market for many years, several big problems haven't been fixed. For example, class actions (none). So many fraudulent companies, why can't they be delisted? Misappropriation of funds, solved or not? Preferred stock? IPO process, has it been improved? If you have no way to protect domestic investors, then you cannot protect foreign investors. How can you expect them to come to China? So first we must complete the basic work, not place this hope on foreign investors. If we first protect our domestic investors, foreign investors receive the benefit as well, then maybe they will come invest. Otherwise you are trying to catch fish in the trees.

15:00 Aside from the stock market, the new reforms will allow foreigners to trade futures, especially financial futures. Financial futures are more than 80% of the market. Now here's a really interesting statistic. Are you preparing to open the market today or 10 years from now? Look at this chart: Taiwan, Hong Kong, South Korea and Japan. The blue bar is the preparation time for opening the market, in years. Taiwan was the longest, at 13 years. Japan the shortest at 0 years. Taiwan needed a long time because they wanted to deeply interact with foreign markets. After understanding the rules of the game, decide on sound regulations. So it took more than 10 years. Hong Kong took less time. South Korea opened its futures market in 1997, and only took 2 years to prepare. Japan didn't even wait, just opened the market. Can you guess the result? The longer they took to open the futures market, the smaller the volatility in the stock market. And less time spent preparing, the volatility is extremely high. ou know why? Because you don't have sound regulatory policies.

16:40 In 2003, South Korea's futures market volume stood at 42% of global volume. Equity futtures stood at 74% of global volume. This small of a country has such a large share of the global market, why? Because the market volatility is too large. There are no regulatory controls for this type of volatility.

17:10 Japan in 1998 opens up. What's the result? January 1990 Japan's stock market collapses. Goldman Sachs used Nikkei futures to bet on collapse. In the end, they won. Japan's stock market tumbled 63%. Japanese people suffered losses of 50%. Volatility was too great.

17:40 If you allow foreigners into the futures market, what do you think the result will be? If you want a stable situation, you need a long time, do a lot of preparation, to have low volatility. So if you are wondering why the stock market hasn't gone up much after the announcement of the reforms, you can see there are a lot of problems.

Question time and a discussion follows.

Lang Xianping Explains Renminbi Devaluation to Studio Audience

From April 14, 2014.



At the beginning the host cracks some jokes about what is money? For women it includes credit cards...

2:00 He asks what is the world's most stable currency? Some people shout out U.S. dollars, he says it is definitely not U.S. dollars. It is in fact Yap Island, where they use stones for money. The largest is 8 tons. That is stable money. On Yap island, you don't need to buy fixed assets, your money is a fixed asset. It's also very hard for their corrupt politicians to move their money overseas. He goes on to crack some more currency jokes on hyperinflation and a case in Zaire where the money from before 1997 could still be used, but the former dictator Mobutu's head needed to be cut off. [I tried looking that up but didn't find anything. Although searching for head cut off came up with lots of examples.......]

5:00 The most moving (as in emotionally) currency is renminbi. It valuable. The best thing is to earn renminbi in China and spend it in America. This is because Americans are very poor, so you can buy things cheaply there. [He is referencing the fact that America has a lower cost of living.] He says his girlfriend told him to stop playing the forex market. A brand name handbag in China is 10,000 yuan, in America it is 7,000 yuan, every time we buy one, we make 3,000 yuan.

6:00 Enter Lang Xianping.

7:00 At 2013 Year End the world's 8 biggest banks all forecast a rising yuan. Including Barclays, Nomura, Credit Suisse, HSBC, Morgan Stanley, Goldman Sachs and UBS. They forecast it would rise to 6 to 1 U.S. dollar. In Q1, the yuan depreciated 2.64%.

He says he doesn't look at the yuan, he looks at the results of the games that China, the U.S. and E.U. play. A new "Three Kingdoms." The U.S. is the economic leader. Europe and China are under U.S. pressure fighting for survival.

8:50 He shows the exchange rate with a red line showing the banks' forecast. The bounce in Q1 reversed the gains from 2013. Why? He says this is the inevitable result of the struggle between the "Three Kingdoms."

9:50 The new "Three Kingdoms" map.

In 2005, renminbi began appreciating. America wanted renminbi to go from 8.27 to 4.10. A rise of 100%. At the end of 2013, renminbi was 6.1, appreciation of 36%, far from 100%. Why didn't American continue to pressure China? It's because China's prices have risen as well. Renminbi has no more room to go up. He uses the Big Mac Index to illustrate. In 2005, a Big Mac was $1.27 in China. Today it is $2.74. Doesn't this mean the dollar depreciated? It depreciated 115%? Or renminbi doubled? So by the Big Mac Index, America's goal has been accomplished.

11：40 After this pressure what happens? Point two is most important. “Three Kingdoms” games officially start. The American economy is the first to pick up. In 2013, U.S. GDP growth in Q1-Q4 is 1.3%, 1.6%, 2%, 2.6%。 Accelerating growth. Unemployment falls to post-crisis low of 6.7%. Investment increased 2.3% in 2013, and this year forecasts are for growth of between 4.9% and 7.3%. Finally, America's stock market explodes higher. Last year the S&P 500 gained 31.8%.

If you see these indicators, what will you do? Sell your currency for dollars and invest in U.S. stocks. This causes the currency to depreciate. South Africa, Turkey, Brazil, Russia, their currencies devalued greatly. The whole world depreciated. So renminbi falls 2.64%, you think it is strange? Euro depreciates, you think it strange? It's not strange because the U.S. economy is rebounding it will lead the dollar to rebound.

14:00 Now today we most want to pay attention to the Europe and China. In 2012, Europe GDP growth is -0.6%. Last year, -0.4%. In February of this year, the unemployment rate is still at historic highs, 11.9%. What will Europe do? Print money. Europe's inflation rate is only 0.5%, their target is 2%. So they have plenty of room to print. This causes the euro to depreciate.

China? It's economy also has great problems. This year, 11 provinces including Sichuan and Henan will invest 1.6 billion yuan. In a few years, 15 provinces will invest 18 billion yuan. Invest in energy, transportation, water, environmental protection, etc. Why invest? To stimulate growth. Now if these 15 provinces will in future invest 18 billion yuan, where will this money come from? Printing money! So both China and Europe are printing money. But China is in worse shape because we have 4 big credit problems.

1. Private companies can't access capital (broke their capital chains)
2. Real estate, coal and mining company trust crisis
3. Local government might have a debt crisis

All these three borrow whose money? Banks.

4. So the 4th crisis is a banking crisis. If the 4 big banks default, what will the government do? Print money! Of course renminbi will depreciate.

16:50 Then how will we invest? U.S. dollars? Gold? Euros? First gold. The most recent 11 investment bank forecasts for gold in 2014. The lowest is $1050, the highest is $1300. Average of $1204 per ounce. This is their forecast, not mine.

17:50 Now dollars. The forecast is for it to continue rising. The dollar moves inversely to gold. If the dollar rises, there's a 70% chance that gold will fall. This is the current status quo.

18:30 Euros. Average forecast is for the euro to fall to $1.295 versus the dollar. It will depreciate 5.8%. This is the investment banks' forecast.

19：00 Renminbi. The forecasters all got it wrong. Turns out no one dared make another forecast. Why don't they dare forecast? Because the more they see, the more they do not understand. If you only look at renminbi, it should rise. Then why did it suddenly drop?

19:30 This is what I say. Only from a global macroeconomic perspective can you fully understand the yuan's current situation. I don't want to give too many people's opinion. So in the end, I put a big red question mark, because all the big banks say they cannot forecast the yuan exchange rate.

20:00 Question time. First one is about yen depreciating 30% in 2013 and the stock market rising. If renminbi depreciates, how do we protect our assets?

Lang Xianping answers: China's situation is very complex. Of course, exports will be helped. But the profits of publicly listed companies cannot be solved by depreciation. And the small depreciation of 2.64% has little effect, doesn't help the economy's problems. As for stocks, there are also economic reforms that need to be successful. So these are not easily solved by the exchange rate.

Next question is about how the central bank controls the exchange rate.

Lang Xianping: For the past 8 years, renminbi went up, the best investment strategy was to buy renminbi, stick it in real estate, WMPs or trusts and then exchange it back to dollars. But the situation has changed.

Next question is about depreciation helping exporters and the economy to grow at 7.5%.

Lang Xianping: Cannot rely on consumers, consumption is depressed. Investment is paid for with money printing. Then there's exports, which is helped by depreciation.

A final question on profiting from depreciation doesn't help the economy.

In the discussion afterward, the host brings up that for 9 years, everyone expected appreciation and planned for it; when renminbi falls, no one is prepared. Also how the yen fell 30% and America didn't do much, but renminbi falls 2.64% and America is very concerned.

Is the exchange rate a political or economic problem? Lang Xianping says every exchange rate it a political question, not only an economic one.

An audience member says if renminbi depreciates, her child can go to graduate school in America. If it appreciates, her child can go to undergrad in America too.

Lang Xianping around 42:00 compares the yuan's small drop to the big drops in other emerging market currencies and says if that happens, there will be huge problems. He doesn't want to think about it.

At the end the host mentions there are now Taiwan aunties buying renminbi. (a reference to China's gold buying aunties)

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.

China launched ￥4 trillion stealth stimulus in May

So says Lang Xianping on his Weibo account. He says the central government launched the stealth stimulus in May, which would help make sense of the June uptick in housing and PMI. Local governments have been furiously implementing the stimulus: Changsha (Hunan) has an ￥829 billion stimulus spread across 195 projects. Xian is planning 9 more subway lines, in addition to the 6 already in operation or planned, which will combine for a total 15 lines and 550 kilometers of rail. Guizhou suddenly announced ￥3 trillion spread over 2300 tourism related projects.

Lang Xingping closes by saying this is like giving a terminally ill patient a shot in the arm, after a period of excitement, [the economy] will sink into an even deeper crisis and the bill for these chaotic investments will be paid by the common people.

See China Cities Roll Out Stimulus as Changsha Targets $130 Billion for English coverage.

郎咸平

中央政府五月悄悄推出新四万亿之后,一如所料,地方官员也开推政绩工程,疯狂建设。例如,长沙自行推出高达8290亿元的195个项目，西安要在规划的六条地铁之外再建9条地铁，贵州竟要投资3万亿发展旅游。这情况就好比给病入膏肓的病人猛打强心针,最终会在短暂兴奋后,陷入更深危机,这些乱投资又得老百姓买单。

Lang Xianping warns: China repeating Hong Kong's mistakes; affordable housing bubble will destroy real estate and trigger Hong Kong-style recession

Governments are slow to act and almost always close the barn door well after the horses are gone. There's unrest from the public over high home prices, but the government let the bubble rip after 2008 to keep the economy humming. Now, slowly developing plans for affordable housing are hitting the market just as it turns over. Lang Xianping sees disaster and its hard to disagree, although he does neglect to mention the Asian Crisis. That said, governments do often end up acting pro-cyclically (boosting the economy when it is already booming, slowing it when it is already in recession), thus affordable housing policy may simply be a good sell signal. Below is my rough translation of his article:

Real estate market is a half step from collapse; government housing is the biggest bubble

We are a only a half-step away from a Hong Kong style recession, because of the three mistakes made by Hong Kong, we have already made two-and-a-half.

First, the government monopoly on land development rights, intentional creation of a property market volcano, public finances critically reliant on land, makes real estate into an economic pillar.

Property rights were always government owned and leases were the main source of government income. The higher the property prices, the bigger the government revenue. People today realize, the pre-handover British run Hong Kong government stoked the property bubble for short-sighted gains, just as these past few years local governments have been falling all over themselves to pillage land profits.

For a long time, real estate was the champion of the economy, the financial services sector also relied on real estate. Relied to what degree? I break it into three levels:

The first level: economic dependence. In 1997, real estate and related value added industries accounted for 40% of GDP, the whole economy revolved around the sector. Long-term real estate investment accounted for two-thirds of fixed asset investment.

The second level: public finance dependence. Government revenues depended on long-term leases and other real estate taxes.

The third level: financial dependence. Real estate shares were always the biggest stocks, accounting for one-third of market capitalization. Real estate shares and property prices pulled each other and shared fortune or disaster. Real estate and banking were also mutually dependent, developers and residential mortgages always accounted for at least 30% of total bank loans.

Now let's contrast that with China's economic data:

The first level: economic dependence: In 2010, real estate investment accounted for 46.6% of fixed asset investment.

The second level: public finance dependence: In 2010, property transfers hit a new high; the growth rate hit a new high, increasing 70.4%. Land transfer payments accounted for 76.6% of local government revenue, a new high, and this unprecedented scale reflects the local government finances' extreme dependence on real estate.

The third level: financial dependence. Real estate loans account for 20% of total loans, reaching 9 trillion yuan total; add in related real estate loans, mortgages and other credit, and it reaches nearly half of loans, about 20 trillion yuan. If we add in credit outside of the system, such as trust loans, real estate may account for as much as 60% of total credit.

Second, ignore negative interest rates, encourage capital into the false property, stock and manufacturing boom.

At the beginning of the 1990s, Hong Kong had negative real interest rates. Bank deposits were below 10% inflation rates, forcing people to look for investment opportunities to avoid seeing their savings consumed by inflation. However, the British run Hong Kong government adopted a laissez-faire attitude. From 1992-1994, "mansion" prices ferociously rose 600%, top rate office buildings rose 250%, Sha Tin and other non-downtown, mid-range properties gained 300%. The government issued many restrictions on property speculation, but all it did was cause a slight pullback.

However, the British Hong Kong government's "last governor" Chris Patten was consumed by politics and ignored the negative interest rate problem. This caused the boom in the high-end properties to spread to middle and low income housing. In the first part of 1997, the property market threw off two years of losses and rallied to new highs in the autumn. From the day of the handover on July 1, 1997, property prices rose another 80%, and a 40 square meter apartment cost two to three million Hong Kong dollars.

Where are we today? Also ignoring negative interest rates and the plight of ordinary people. Property taxes are good, buying restrictions are fine, but this doesn't do anything to resolve the problem of ordinary people looking for an inflation hedge. The most serious inflation issue is the difference between deposit and loan rates. One year deposits pay 3.5%, loan rates are 6.56%, the official inflation rate is 7.9% (all data is as of the time of writing). What does this mean? It means your deposits lose money, your loans lose money, but no bank loses money. Of course, the inflation rate is nowhere near that low, and don't think you can earn money by borrowing, because if you're borrowing for anything other than a home, the floating rate is 40%, which is to say, you may not even be able to borrow at 70-80% interest. Everybody know current Wenzhou interest rates? According to national news, monthly rates exceed 10%, which means annual rates exceed 120%. Only mortgages are relatively low, lower than the real interest rate, so this policy is in fact forcing you to buy a home to hedge against inflation.

Third, the recession is before your eyes, but for political gain, the housing market is suppressed.

On October 8, 1997, Hong Kong Chief Executive Tung Chee-hwa released a policy report called "Building Hong Kong for a New Era," later called the 85,000 homes policy. It had three goals: every year construct at least 85,000 public and private homes; within 10 years 70% of Hong Kong residents would own their home; reduce the wait for public housing to three years. At the time Tung Chee-hwa announced the policy, annual new private home supply was only 20,000, supposing the policy was implemented, public and private housing would be four times supply, it'd be a wonder if the market didn't crash.

What's worrying is that we are very close to Hong Kong's absurd "85,000"!

In 2011, through new construction, renovation, purchases, long-term leases and other methods, Beijing plans to create 200,000 units of affordable housing, provide 20,000 homes with rental support and complete 100,000 units of affordable housing. At the same time, Beijing started applications for public rental housing, audits, etc., and more than 10,000 homes were approved before the end of 2011. But is everyone aware of the 200,000 units idea? In each of the past five years, Beijing has increased housing supply by about 100,000 units. So Hong Kong used a 4:1 double punch to kill the property market, if Beijing implements the plan, it will use a 2:1 double punch!

What about Shanghai? In the latest 5-year plan, Shanghai plans to build 130 million square meters of housing, 60% of it affordable housing. In other words, Shanghai is planning a 1.5:1 double punch.

Furthermore, I want everyone to pay attention to the above 1.5:1 and 2:1 numbers, I think they are wrong, because the central and local governments keep revising their plans, the current version calls for 36 million affordable homes, including 10 million that began construction in 2010. What's the idea? In 2010, the completed residential housing was 612 million square meters, non-residential real estate was 222 million square meters, for 834 million square meters total. If the 10 million affordable homes that started construction in 2010 have an average area of 75 square meters, that would mean 750 million square meters total. For 36 million total units, that's 2.7 billion square meters. In other words, it's really a 3.5:1 strength crack down on the real estate market. And you should know, the Hong Kong real estate market didn't collapse when the affordable housing was completed, rather it collapsed not even several years after construction began.

In the past, high home prices were the biggest bubble in the Chinese economy, now affordable housing is the biggest bubble. What I want to say is, this is the real estate market's life or death moment, move forward another half step and there's a bottomless abyss, I hope we don't repeat Hong Kong's fatal mistake!

Source: 郎咸平：楼市距崩盘只差半步 保障房是最大泡沫


Lang Xingping made news in late 2011 when a recording of a private lecture went public (and viral in China). Here's a news story with English subtitles from last year, when Lang made headlines with his "China is in a depression" speech.