Saturday, September 24, 2011

We are hitched to China...

As the BC Premier quite clearly stated in her job's initiative, she is looking to Asia for growth and more investment.

The fate of our Provincial economy is tied to China in the way it was once tied to the USA. Our housing market especially is hitched to Chinese buyers.

They are the main buyers at the high end, there seems little doubt of that. They are also acquiring mid-level properties, often in bulk from developers for investment or to diversify or to move money out, no one is quite sure about the exact reason since the net returns are so low.

In any case it is a fact that we have to accept and deal with.

The quantities of money are also well beyond what we are used to. We have lots of people in Vancouver earning high 6 figures, but when you see 13 super-luxury cars - some $400K+ impounded for speeding, some driven by teenagers who OWN them too...you know we are dealing with a different level of wealth.

I am sure most of it is legit however I am also sure that some of it is not, and is very hot money.

We have a reputation after all for allowing very hot money to hide, particularly in this Province where we have a huge and thriving cash drug business. And as soon as you set foot here, even if you are a crook, it will take Millions and many years to get you out...it took 13 years for the Thai Government to get this fellow, meanwhile he lived in the lap of luxury in Vancouver.

Dozens of Hong Kong policemen and their underworld associates who amassed huge fortunes and escaped to Canada were never sent back. In fact they became amongst the wealthiest real estate investors in this Province. They came with wives, children and even concubines and yet how many people have even heard of them, and most of them died of old age here, unmolested by the law and enjoying their ill-gotten gains. There is a lot more on the net about this if you want to check.

OK, so we are bound in many ways to the state of the economy in China. It is indeed a double edged sword.

If they falter, the steam comes out of housing, but we may be really hurt. Think the $C hitting 75 US cents again, and big cuts in Provincial spending...OR...maybe instead someone will start to question the origin of the huge funds that are coming into our city and buying $7 homes or new developments.

I think that is very unlikely.

The whole world is now begging for Chinese money. We have it. The last thing our Governments want to do is frighten it away by asking too many questions.

Does this mean there won't be a correction?

On the contrary. My neck is sore from sticking it out so much, but I think we will have our correction anyway because locals are totally priced out and we are already at super-low rates and wages are not keeping up. I also think China will trip a little (but not fall) and that will add some drag too.


6 comments:

  1. I think China is going to have a significant correction in the next 3-5 years. It is simply investing in unproductive assets and seems incapable of redistributing its wealth to the people who helped build it.

    I'll stick my neck out even further: the Chinese "micracle" will look as silly as all the past "miracles" that fell under their own speculative weight. People, especially many in Vancouver, cannot believe this because it would ruin the belief that China and its culture is superior to the rest of the world.

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  2. I think the Chinese are prone to the same greed and fear that plagues all humans. I think True Chinese culture is very worthwhile studying - they were after all quite advanced when Europe was very backward and primitive. However the Nouveau Riche materialism is very far from that. It is something that every 'New to money' people have experienced eg the Russians, Arabs, US, etc.

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  3. So you're saying that we welcomed corrupt policemen, thieving bankers, notorious smugglers, brothel keepers, and corporate fraudsters etc, in the hope that these scoundrels will somehow impart to their offspring lofty values so wanting in our Canadian society.

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  4. "that we welcomed corrupt policemen, thieving bankers, notorious smugglers, brothel keepers, and corporate fraudsters etc"

    Why is that such a surprise? Canada has all these sans immigration.

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  5. FWIIW, I heard that someone inherited a big fortune and declined it, preferring to leave it offshore in various family trust funds.
    There are others, notably international students, seeking professional advice on how to transfer huge sums of up to M$ into their bank accounts here, that will eventually be re-transferred back to where they came from.

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  6. 2828-Nash-Drive serves as case study of what went wrong in a China-Canada context.
    - a 20yo foreign student @Langara married a new citizen and landed herself a PR status.
    - the night before checking into a battered women shelter,
    .. he turned on a tv program for the kids to watch
    .. she turned it off
    .. he delivered a blow that missed
    .. next morning she disappeared with the kids for 3 weeks
    - he paid for the rents of her 2-bedroomed condo in Metrotown, on top of the mortgage payments of 2828-Nash-Dr, plus all living expenses.
    Moral of the story for the PC crowd - you don't just marry one spouse, you marry her whole tribe, and everyone will be living in Lotusland happily ever after.
    You do not need a 6-digit annual income to buy a $750K house. All you need is a 10-month course at Capilano, and jobs in between to qualify for a mortgage loan.

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