China to Avoid a Property Market Bubble, Standard’s Hui Says

Tai Hui, the Singapore-based head of Southeast Asian economics at Standard Chartered Plc, comments on the outlook for investment in China today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

On the property market:

“We are seeing a correction in the property market around China and we don’t think the government will let loose on some of the tightening grips that we’ve seen in the past two years. The reality is, while many people have invested in the property market, many of them have not. So the affordability issue is a significant social issue, and as a result the government has been very keen to clamp down on speculation in the real-estate sector.”

“One of the definitions of a bubble, you do need over-leveraging. And I think if you look at the average homeowner in China, they are not over-leveraged.”

On the banking sector:

“The government does have firepower to recapitalize the banks if they choose to.”

“Foreign exchange reserves have been used in the past to recapitalize the banks, that’s one way of doing it. But, of course, if you look at the fiscal position of the Chinese government, especially the central government, they’re still actually in very, very strong shape.”

On government debt:

“We’ve all heard about the local government-debt issues in the past several years. And, even if that problem does manifest itself in a much more negative way, the central government debt-to-GDP ratio would only rise to 78 or 80 percent. So, in that sense, these are expensive problems but affordable problems.”

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