The Finance Insider blog

Search This Blog

Blog Archive

The Finance Insider

Sunday, June 15, 2014

Eight years have passed since the subprime crisis surfaced in the US. And by now it is fading from our memories. However, China seems to be preparing to remind us of it. As per an article in Bloomberg, the current trend of 'zero down payment 'in China is a scary reminder of the subprime bubble. The ghost cities in China are a reflection of the frothy property market. However, in a bid to remove the signs of glut in property markets, the housing financers are easing up down payment norms. The authorities defend the decision citing the need to offer easy payment terms to students and fresh graduates. However, loosening down-payment requirements could erode China's financial stability. Banks in the country already have a shoddy track record in sustaining asset quality. In addition by allowing realty companies to flourish, the economy could be skirting with a banking crisis in the years to come. At a time when China is headed towards the weakest growth in 24 years, a subprime crisis-of-sorts could lead the economy to a very hard landing.

No comments:

Post a Comment