I wonder how long will this continue… Last Sunday I helped my relatives to buy two apartment suites in the peripheral area of Xiamen, and it was not an enjoyable shopping experience.
We went there at 7:30 a.m in the morning and only managed to meet the sales representative at about 11:00 am. In less than two minutes, we decided to buy two sets and rushed to the counter for the paperwork and deposit.
Everyone around me appeared eager to buy and the atmosphere was nothing short of feverishness. The media people came and there were two police cars in the scene. One of the security guards told me some people began to queue up from previous night.
There was a strange festivity in the air and everyone seemed to have a party. But the real winner is the real estate sharks.
I consider this is very abnormal and the real estate companies are making obscene amount of money out of the pocket of common wage earners. How long will this last? I am not sure, but so far the bubble is still growing, at least in Xiamen.
(photo shows people queuing up to buy the apartments)
I am no economist, but I can make a few predictions of China’s economic situation in 2010. As a common consumer and wage earner, I see into my wallet and make the following economic forecast:
- House prices will NOT fall. The last thing the government wish to see is massive bank insolvency due to slump in real estate prices. It will try everything to save the cash cow while not inflate the market so much to burst the bubble. The house price will remain stable.
- The age of inflation has come. The cost of protecting the real estate market is steady rise of inflation rate. More money will be printed to make up for the staggering house prices, and consequently the cost of living will rise together with the price of commodities for livelihood.
- Hopefully, the printed money will flow more into the pockets of the grass people who are the engine of the economy. If left with shrinking savings and no reliable social safety network, the damaged engine will cause the economy to collapse.
So the key of all economic problems in China depends on one thing: if the mass population in the bottom of the social pyramid can restart the engine and keep it running.
I will see what happens next year.
Yes, everybody’s confidence seems to be boosted up by the sheer amount of 4 trillion yuan to be injected into China’s economy. Plus the investment from the local governments, the total boost package would probably amounts to 10 trillion yuan, some say.
Well, there has been no detailed and specific plans as to where the huge investment goes. Besides, massive construction projects, into which the money seem to flow, will not help too much with China’s economy.
Over the past decades, the whole China has become a construction site, and no other resources had been so sucked into an industry before. It certainly helped the GDP growth and fattened the wallet of bankers, real estate sharks and tax collectors. However, the whole economy was hijacked by the malignant, overwhelming expansion of the construction boom. Other industries are so dependent on the cement and steel industry or simply withered on the vine. Not even 4 trillion investment today will restore the ‘glory’ of the distorted economic development before the recession.
The right course for China is to transit from an exported oriented economy into a domestic consumer society. But the majority now has less savings and shrunk properties. In simple words: they have no money, and I do not see how the current investment arrangement would benefit them.
Singapore experienced similar recession in 1985, and they even reduced the telephone fees to lubricate the economy.
Here is a simple cure for China’s economy:
- Invest in the areas that directly benefit the mass majority: more hospitals, more schools and more economic housing
- Taxing the rich and cut taxes for the wage earners
- Break the monopolies such as CCTV, China Telecom, national Power grids and suppliers
- Reduce the administrative fees, license fees and surcharges. Many of the services for the public good are even more expensive than those in America — just drive on the highway in these two countries
I don’t see the staggering investment is heading in that direction, so I am pessimistic about the economy in this year.
Recently I have been reading about the 1997 Asian Financial Crisis, IMF bailout and the repercussions of the crisis. The more I read, the more I am struck with the similarities between the 1997 crisis and the current economic situation of China. After all, the symptoms are almost the same:
- Sharp stock market fall. The Shanghai Index of China’s stock market plunged from 6,000 points to approximately 2300 in less a year. The stock market in crisis-affected countries also fell sharply in 1997, only with a much deep dive.
- The government began to implement stringent money policies and credit control. In 1997, IMF recommended the crisis-torn countries like Indonesia to implement the same policy for the reason of macroeconomic restructuring.
- The export-oriented industries are having a hard time for it’s now harder to get bank loans to keep the business going. The same happened in Indonesia.
- High inflation and the sharp rise in the prices of food, energy and the general cost of living. This too happened in 1997, and the lack of food partially caused the riot in Indonesia in 1998, thanks to the suggestions of IMF and U.S. to relax food price control.
- Sharp fall of real estate prices. Shenzhen is a typical example, and the value of the new houses sometimes shrank by 30%. It is harder to sell houses and the real estate market is taking a downturn. The same happened in Hong Kong ten years ago.
The only difference I noticed between the ten-year-apart two situations is: right now, RMB (Chinese Yuan) appears to be appreciating in value against U.S. dollars, while ten years ago, the currencies of the crisis affected countries devalued a plenty against U.S dollars. But the appreciation of RMB is merely an illusion, and the currency is actually depreciating in my opinion. Inflation means the devaluation of the currency, and the mirage of a strong RMB is created by the very weak dollar.
So I would say in all the six aspects mentioned above, the history is indeed repeating the pattern of ten years before, fortunately, only by a smaller scale and a moderate pace.
This is a list I copied somewhere on the Internet. I have forgotten the link to the original page, and it is by no means authoritative. Just take it as a reference link when you are searching schools for hospitality industry.
- University of Nevada, Las Vegas
- Cornell University
- University of Houston
- Florida International University
- Florida State University
- Michigan State University
- Pennsylvania State University
- University of Central Florida
- Cal Poly Pomona
- Purdue University
- Virginia Polytechnic Institute and State University
- Washington State University
- Ashland University
- Bethune-Cookman College
- University at Buffalo – The State University of New York
- California State Polytechnic University-Pomona
- Delaware State University (Not University of Delaware?)
- Georgia State University
- Indiana University of Pennsylvania
- Iowa State University
- Kansas State University
- Kent State University
- Mercyhurst College
- Missouri State University
- New York City College of Technology
The best job prospects for 2008 – MarketWatch
As the nation’s employers gear up to start a wave of new-year hiring, the retail and health-care sectors are poised for the most public expansions, while the hospitality and export industries are angling for new employees as well, economists and job market experts said.
The hospitality sector also looks set for growth, said Sophia Koropeckyj, economist at Moody’s Economy.com in Westchester, Pa., because “there’s been a lot of hotel construction and also because there are a lot of international tourists coming in to the United States.” The leisure and hospitality sectors are expected to add 1.9 million jobs from 2006 to 2016, according to the Bureau of Labor Statistics.
USATODAY.com – Grads see brighter job prospects
A sampling of universities across the country suggests hot areas this year are health care, accounting, defense, education, hospitality, insurance and even consulting, which had shown a large drop-off in earlier years.
There is a big inflation going on in China. While the salary didn’t increase much in the past few years, the prices of goods for daily consumption have soared, most noticeably for such things as rice, cooking oil and pork.
A picture is worth a a thousand words and there is one I came across on kdnet.net
1. Before the inflation
2. After the inflation
Caption: A Nation on Diet