A curious phenomenon is unfolding in China. Hundredsof couples are rushing to marriage bureaus across the country. Perhaps thefirst signs of spring are bringing on a sudden impulse for romance?
No, it's the opposite. These couples are filing fordivorce. In each case, a husband and wife mutually agrees to quick separation,no arguing, no quibbling over money or assets. How? Why? Well, actually, it wasabout money and assets. A vast majority of these couples are getting divorcedso they can avoid a new Chinese tax.
Beijing recently decided to impose a 20 percentcapital gains fee on sales of second homes. So the theory goes, if you have twohomes and you get divorced, you can register each home under separate names.Then, if you see one of those homes, you escape the new tax and, then, perhapsyou can get remarried. The bizarre exploitation of this loophole tellsa larger story.
At an individual level, it shows the importance of housing as an investment inChina, but, at the macro level, the story shows how Beijing's new leaders arestruggling to deal with some called a property bubble.
On the one hand, prices are soaring in the big cities.In Shanghai, for example, developers say property prices have risen 40 percentin one year. This is because demand has stayed well ahead of supply as more andmore people migrate to big cities. On the other hand, second and third tiertowns have a different problem. Here, supply exceeds demand. There are too manyhouses. Look at these pictures of ghost towns in China. You can seebuilding after building, mall after mall, but no people to live in them.
Essentially, China has a two-speed property market.One is booming. The other is languishing. Now, some might say, China may have aproperty bubble – but it's not a big deal. They don't have the kinds ofmortgage and credit cards Americans had in 2007. It was our debt that causedproblem. And the Chinese National Government is certainly doing fine. Theconsumer is doing fine. But there are those who say China actually has a huge,hidden debt problem.
According to Morgan Stanley's Ruchir Sharma, “China'stotal public and private debt has soared to more than 200 percent of GDP,” thehighest level in the developing world.
Sharma points specifically to private debt, a categorythat includes all kinds of quasi-state borrowers from localgovernments to state-owned enterprises.
If you look at the rate of increase of private debt, agood historic indicator of financial stress, China's levels are at dangeroushighs. They are higher than the peaks experienced by many countries before theentered a crisis; Japan in 1989, the United States in 2007, Spain in 2008.
If China actually faces a credit crisis, it willplummet the whole world into recession. So China needs cut down on its risingdebt which means cutting investment, which means an economic slowdown. That,too, has consequences not only for China, but for all the countries that havecome to depend on endless Chinese demand.
Beijing's new leaders have a number of problems, butthe new proposals announced this month, loopholes and all, do show that they'retrying to act. These are leaders who have studied the mistakes by theirneighbor Japan, they have examined the credit binges of Europe and America andthey've got a good track record at handling their problems
Let's hope they can manage this one even if it doescause marital stresses and strains in China.
j. von hettlingen
Indeed, many OECD countries have had excessivespending over the last 10 years and their economy is bearing the brunt ofcredit binges. Whatever tax China's leadership intends to impose to rebalancethe budget, the authorities will face less resistance from the population,unlike the Greeks, Italians and Spaniards etc.
The Chinese are guiltyof copying a time honored western culture.
Well yes they have copy for last how many years, butlet rolls the clock, few thousand years, Western civilation now has many thingsthat owed to Asia, let talk from Isreal to must estern part, Civilations allhave done the same, copy is not new thing, all have done it, including theWest.
Judeo-Christian foundation that inspire the West tochange a lot of things comes from the East, and so called Greeks the foundersof Western civilization, well guest what they are original got many of theyideas from the East. Look long range history please. so make this bigger
I think you are misintepreting his comment – I thinkJohnny meant copying the western trend toward divorce.
The author states that China's leaders are"trying to act ". Well that isn't a good outlook. It would be liketrying to pick up a pencil and never actually doing it. That doesn't work!
In other words.........they are experiencing thewealth taxes of the U.S., the marriage penalty tax, and all the rest of the"great" things our government slams its citizens with.