Emerging Markets Mark Twain once said that …“History never repeats itself, but it often rhymes”. China-Japan is an interesting parallel because Japan came form absolute obscurity in the late 1940’s to become an economic superpower by the 1980’s and then to a sudden stop. Japan got out of control and by 1991 Japan’s land value was estimated by the holding banks to be USD $20 trillion or about 20% of the world’s wealth. The land under the Emperor’s Palace in Tokyo, about 2,400 square metres was equal to the value of all the land in California. China today has a per capita nominal GDP similar to Japan in 1973 and car ownership is almost at the same level as Japan in the 1960’s (see attached). What does this imply? Well if history rhymes then either China has a few more decades of boom or the current property boom in China is on the verge of collapse. On the property front, China now requires a 50% deposit on land purchases, sales tax has been re-imposed on homes sold within five years of their purchase and the People’s Bank of China has twice this year raised the proportion of deposits banks must set aside as reserves to reduce lending. China’s Premier Wen Jiabao pledged in his annual report to congress in March to crack down on property speculation and “keep price levels stable”. Source FIL Investment Management (Australia) Limited. As they say in China, ‘…may you live in interesting times’. At Newealth we are always looking to innovate and improve our ongoing services wherever possible and if you have any ideas or comments, please feel free to email me via ‘Contact Us’ at www.newealth.com.au or to call me on +61 2 9267 2322.
22nd-April-2010 | 
