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China Unlikely to face similar US-style Subprime Crisis

While parallels have been drawn between China’s inflated housing market and the U.S. housing bubble that triggered the 2007-2008 global financial crisis, the world’s second-largest economy is unlikely to face similar subprime problems, according to former chairman of the board of supervisors of China Investment Corp (CIC) – the country’s sovereign wealth fund.

“You can’t generalize about a housing bubble in China. In tier-one cities there’s strong demand, in second and third-tier cities there may be some bubbles. But as long as we handle it carefully, it’s not the same as the U.S.,” Liqun Jin said at the The SkyBridge Alternatives (SALT) Conference in Singapore on Thursday.

“The down payment for home buyers is pretty high, you can’t have mortgage financing without a steady income. In the U.S. you could have zero [interest mortgages]; you expected the appreciation of property to pay for the mortgage. The [Chinese] banks will not have a problem in dealing with this,” he added.

CNBC [1]

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