Puzzling times in the new New China, dear readers. We have been much of the time in the past seven days pondering the dual documents revealed last week by the official organs about the economy, one in the name of an “authoritative person” and the other the party chief. The basic message was that the economy has been run wrong in recent times, and things must change, especially with regard to credit bingeing. Since then, we have seen several indications that bailouts, credit splurges, loans to local governments, cash to cover problems, and the march of the zombie companies are all still waiting to be reined in. It may happen, don’t get us wrong. We don’t doubt the sincerity of the leaders’ desire to free the economy from debt burdens and move into the sunshine of balanced and efficient economic growth.
So why the statements warning of the dire consequences of what they are continuing to do? One theory we have heard has a logic such as this: a barkeep, after plying his customer with double whiskies, warns him that excessive alcohol consumption is bad for the health, and one should really be careful driving, or even walking, upon leaving the bar. The purpose of the homily? To give the barkeep a protective level of plausible deniability, distancing himself from any dire consequences resulting from the drinking binge. Cynical? You bet!
One area connected to this and of growing interest to us, is the housing market. The housing bubble buying frenzy passed through Shenzhen, Shanghai and Beijing and seems to have cooled slightly in those cities, but has now moved on to second- and third-tier cities. We understand from whence comes the debt pile problem and what appears to be some level of central policy paralysis, but the housing market frenzy is perplexing. It must be a reaction somehow to uncertainties, and a lack of alternatives. Are last week’s documents perhaps a pious reminder to the new apartments buyers? “Don’t say we didn’t tell you so”? Who knows, dear reader. It is the inscrutability that keeps us interested.
And what of the Shanghai stock market? Thanks for asking! Another difficult week for the National Team with the battle lines now arrayed around the number 2,800, not 3,000. A restful weekend to all, unless of course you’re hoping to catch the speculation wave on apartments.