Has China's property bubble burst?

0:00 [Music] hello I'm Kamal Santa Maria this is counting the cost

0:12 on Al jazer your weekly look at the world of business

0:15 and economics this week China we know how growth is tapering

0:19 off but has the property Bubble Burst too or maybe the government's

0:23 just shaking out IR responsible lenders we find out what's going

0:25 on in Chinese Suburbia also this week fake drugs in Bang

0:30 and their victims unsurprisingly it are some of the poorest people

0:33 in the world who get hit the hardest and Ghana's illegal

0:37 gold mines destroying land polluting water but while miners need jobs

0:42 the government's getting [Music] tough property in China isn't something we'd

0:49 usually delve into that much maybe only because it doesn't grab

0:53 headlines like property Bubbles and subprime mortgages do elsewhere but to every

0:58 rule there is an exception and here it is there are

1:01 now widespread fears China's property Market could be heading for a bust

1:06 because the last two down turns the government provided a financial

1:10 boost to reignite the economy but this time it's different

1:14 this time the government's not willing to play back stop

1:17 as it tries to manage a wider economic slowdown the real estate

1:21 sector actually accounts for about a fifth of China's GDP

1:25 and the building of new homes has fallen almost 25% in the last

1:30 12 months and with that house prices have gone too down

1:35 almost 8% in the first four months of this year because

1:38 of that glut of unsold properties the problem is all

1:42 the contradictions the government wants urbanization

1:44 but new developments have become ghost

1:46 towns because country folk can't afford them property developers have taken

1:50 loans from so-called Shadow Banks but those Shadow banks have been

1:53 indirectly funded by the state once and local governments have got

1:56 debts but they can't Finance them without land sales whatever happens

2:01 the economy will be hurt the IMF estimates every 1% decline

2:04 in real estate investment wipes half a percent from overall growth

2:09 here's how we'll look at it this week from inside China

2:11 and outside with Wayne Haye in Brisbane Australia but first Adrien Brown

2:15 in yinga China it is new cities like yinko that offer

2:20 Clues as to what's happening in China's economy and the picture

2:24 is a worrying one it is 5 years since the property

2:28 Bubble Burst here and there is still no sign of a recovery

2:33 just one business is open in this otherwise Empty Apartment

2:37 and shopping complex the owner moved in two years ago after

2:41 paying three years rent in advance this is just the wrong

2:46 time I was told a lot of people would move here

2:49 to leave but it didn't happen this block of Apartments has

2:54 been standing empty for 5 years the developer fled before work

2:59 finished saddling the government with the debt it's a situation that's

3:03 been replicated in other parts of the country in yinko the chickens

3:09 really have come home to roost a collapse in Chinese property

3:14 values has been predicted many times in the past and on each

3:18 occasion the doomsayers have been proved wrong the difference now

3:23 is the number of homes standing empty with some economists saying

3:27 the figure could be at least 50 million some developers are

3:31 panicking buy three flats and get one free says this sign

3:36 estate agents do their best to talk up Yo's prospects she's

3:41 showing me the model of an apartment which I'm told would

3:44 be an ideal investment the down payment $44,000 not much moves

3:51 even during rush hour but yinko has to succeed it was

3:55 chosen as a special economic zone almost 10 years ago

3:59 by the man who's now prime minister Lee K Chang which is perhaps

4:04 why a local government official only reluctantly agreed to go

4:08 on camera our locations Industries environment our policies are all the best

4:16 compared with many cities in Northeast China including so-called ghost towns

4:22 those cities cannot compare to us there are occasionally crowds here

4:27 on a summer's evening people from the Old City Venture

4:31 into the new one for now though happy to visit rather than live

4:35 here bid now forever hold your peace Australian property values may

4:39 have cooled slightly last month but it's still a hot Market 6,

4:44 730 730 that's a man on the mission good bid sir the international monetary

4:49 fund says it's one of the world's most expensive it's a difficult time to be

4:55 searching for that perfect home very stressful what you go for it not sh

5:00 what the price is going to be and what levels and what reserves are

5:03 going to be it's yeah it's a stressful experience one of the reasons

5:06 for the inflated Market is an influx

5:09 of money from Asia we very much have embraced

5:12 uh the activity from uh the Asian market and we're seeing uh buyers that are

5:17 coming to our auctions continually uh

5:20 that are competing and pushing local buyers either

5:23 to pay a little bit more uh and or securing the property over and above

5:27 where the local buyers are seeing value it's raised a debate in Australia about

5:31 Asian investment people are questioning who's actually

5:34 doing the buying Australian residents or speculators

5:38 sitting in other countries Australian law states

5:41 that non-residents or temporary Visa holders can only

5:44 buy vacant land or brand new houses

5:47 they can't buy existing older homes but there's

5:50 a perception out there that there are many people finding ways around the law

5:56 Peter hang is from Southern China but now calls Brisbane home he's a property

6:01 investor and agent who specializes in selling

6:04 homes to Chinese investors overseas young students they

6:09 bought for Investments and uh most likely

6:13 their parents money they're able to get

6:15 around the law by developing the property

6:17 within 2 years he says Australians shouldn't be

6:20 worried about increased Chinese investment generally most

6:24 of the people I think they should be grateful instead of have concerns so

6:29 and less because most of Ouran people own

6:31 their property already therefore everyone's investment goes

6:34 up but at the same time it makes life increasingly expensive for buyers so

6:39 it's interesting isn't it money from China going

6:42 into places like Australia but problems

6:44 at home for the Chinese property Market let's

6:46 try to make some sense of it joined via Skype from Shanghai by Frank Chen

6:50 the executive director of CBRE research Frank

6:52 thanks for your time can you explain what's

6:54 going on with this property Market in China it appears that it's this the second

6:58 tier City which you might call them the less developed cities that are getting

7:01 the hardest hit yeah that's right I think uh from late last year there

7:06 were we have witnessed a slow down in the property Market uh in the China

7:10 domestic property market and basically the transaction

7:14 volume has come down quite significantly

7:16 and as you mention in your uh documents uh in your documents you know especially

7:21 for new constructions It's s by over uh one quarter uh in the first quarter

7:26 of this year so uh and also I guess uh the key reason is

7:30 because partly because of the economic slowdown

7:34 but also you know there is a tighter credit market conditions in China as well

7:38 so is the government managing to manage

7:41 this slowdown we know about the wider economy how it wants to have a bit

7:44 of a soft landing and obviously not fall right off a cliff is it

7:47 managing to do the same thing with the property Market uh absolutely I think uh

7:52 actually as you might noticed uh in May this year the people's uh Bank

7:58 of China which is the uh Central Bank they step up to issue a note

8:02 a statement to to urge the domestic

8:05 commercial Banks to provide liquidity to the first

8:09 home buyers and also as you notice uh there are a number of local

8:14 governments they have been uh trying

8:16 to relax the home purchase restriction uh which

8:19 is the most severe measures uh so far and I think the market in some

8:25 uh uh second tier cities have stabilized a little bit in the last month

8:30 also okay so the government sort of playing the game of how much we stimulate

8:33 how much we help because it doesn't I guess want to help too much

8:36 then you start uh distorting the market

8:38 again absolutely uh totally agree with your point

8:42 I think uh the government really is learning the lessons from the 2009 uh

8:47 stimulating measures because you know after that they

8:50 uh relaxed all the measures in 2009

8:53 and all of a sudden the the property Market had another booming time in 2009

8:58 and 2010 and after that they are trying to control with some more uh

9:03 austerity measures so uh they definitely don't

9:06 want to repeat that kind of a kind

9:09 of mistake again problems in other property markets in other parts of the world

9:13 have had huge effects I'm obviously

9:15 thinking the big stuff like subprime mortgages

9:17 in the US which effectively triggered the financial

9:20 crisis in the global financial crisis now I

9:22 guess we're not in the same boat here with China but should there be any

9:26 concern from the outside world about this property

9:29 slow down in China and the wider

9:31 effect it might have okay I think uh for the China situation I would

9:36 say is quite different from the uh us Supply Market first of all you

9:40 know uh the holding power of the Chinese

9:44 buyers is quite different because you know

9:46 in China the minimum down payment for first home buyers is 30% and for second

9:51 home buyers the minimum down payment in a lot of cities is 60% so

9:57 that means that on average uh the every uh every home payers home buyers they

10:03 need to pay a down payment of around 40 to 50% from their own

10:08 with their own Equity but if you look back in uh at the peak

10:12 of the financial uh of the supp crisis in 2006 and 2007 in the states

10:18 a lot of time people don't have to pay any down uh down payments so

10:22 you know the holding power is quite different and also uh you know uh

10:27 uh there are a lot of liquidity in in the system as well the M2

10:31 has been uh M2 in China has been growing rapidly in the last uh

10:36 13 years at the beginning of the century uh the M2 in China was only

10:41 about 13 trillion IMB but by the beginning of this year it was over 110

10:46 trillion R&B so there is a lot of liquidity in the system and the holding

10:51 power is quite different as well Frank just quickly you would have heard

10:53 our second report from Australia showing the amount

10:56 of Chinese money and Chinese investors going

10:58 into the Australian property Market who are

11:02 those people are those are those the aent

11:03 ones who can afford to because you know we've been talking about people not

11:06 being able to buy back at home and yet the money is going overseas

11:10 I would say most of these individual buyers I would say they are the high

11:13 net worth individuals and uh as you point out because of the introduction

11:19 of the home purchase restriction uh domestically

11:22 a lot of time these people they find

11:24 very limited investment channels and that's part

11:27 of the reason why they go overseas

11:29 to purchase properties in cities like Sydney New York or London and uh the other

11:35 reason I believe is because out

11:38 of the uh concern for diversification as well Frank

11:41 Chen it's been a pleasure talking to you thank you so much for your time

11:43 today and still ahead on counting the cost the gold mines of Ghana illegal

11:48 but still being operated because well people need a job don't they that story

11:51 a little later [Music] on remember last week we talked about the French Bank

11:59 B&P paraba facing A10 billion fine for breaking

12:03 us sanctions in its dealings with Iran

12:05 and Sudan well it's not the only one facing such Hefty fines other International

12:10 Banks including Britain's Barkley are curtailing their activities

12:13 in some Emerging Markets to avoid clashing

12:15 with us Regulators Barkley has been attempting to shut down services to a number

12:20 of remittance companies the money transfer operators

12:24 because of concerns those networks could be used

12:27 for money laundering and terrorism but money

12:29 transfer companies are well they're two things

12:31 their big business and their vital business there

12:34 are countries the Philippines certainly Springs to mind

12:36 where remittance accounts for almost 10%

12:39 of the economy well let's bring in the CEO

12:41 of Africa's biggest remittances company Abdu Rashid Dali is from theab and he

12:46 joins us from London this week Abdi let's start with the issue of Barkley's

12:51 uh planning to well let's say step aside what sort of progress have you made

12:55 in finding a new partner there we had an agreement with par bank that's

13:01 interim agreement and uh we have been talking to other Banks and um and still

13:08 we are in discussion with some banks and uh we hope we'll find a Solutions

13:11 uh very soon okay then I'm interested in talking a bit more about the idea

13:15 of of remittances or or or simply the the money transfer companies as they

13:19 are because there has been and this is perhaps in the west more a bit

13:23 of a perception problem I think people think oh well this is how people

13:27 send money around the world this is how they do dodgy transactions if they want

13:33 to how do you sort of allay any of the fears that may exist

13:37 about money transfer companies well uh I can talk about the hill and we are

13:43 the F regulated company here in the UK and also in the US and uh

13:48 you know we help the African diaspora Community who want to help their families

13:53 uh the average transaction that we deal with are $200 uh and it's not

13:58 only we uh serve the African diaspora

14:00 we also serve International communities like uh uh

14:04 Charities that work in the regions like the UN United Nations oxom and others

14:09 so for us as theab you know we we we respect the regulations and rules

14:14 where we operates and um and our community is the key uh for providing

14:20 the lifeline service that we offer to them I I'm glad you used the word

14:24 Lifeline there because that was the exact word I was actually going to use

14:26 I don't think we're going too far to say that these are life lines

14:29 for Africa uh and and African people because well tell us about the amount huge

14:33 amounts of money well uh the I mean the remittance coming from uh the diaspora

14:40 community and going to Africa it's

14:41 a different estimate some people estimate to be

14:44 24 billion American dollars the contribution that African

14:49 diaspora are making back to their Homeland

14:51 whether it's investment whether it's tourism whether

14:54 is remittance going back to and uh

14:57 and and you know remittance can come from different kind you know you know if

15:00 you if you send some Clues to your family it's part of contribution

15:04 in a way so that's why the Immigrant communities that uh live here in the UK

15:09 and other Western world are key

15:12 to the development of their home countries and sometimes

15:16 even the security depends on uh remittance

15:19 coming from the diaspora a country like

15:21 Somalia where uh the national economy of the country in a way rely on remittance

15:26 coming from the country like UK and United States and Middle East also it

15:30 is um it is a important for the national economy I guess it's important

15:34 as well because you've probably got money

15:36 going into parts of Africa where there's no

15:39 uh banking system you know 30 40% I believe actually in these rural areas

15:43 remittances go there where there is no

15:45 what we might call conventional banking system absolutely

15:50 and uh it's not only about actually the ruler uh uh communities even certain

15:54 towns if you go to Nairobi or if you go to Uganda or if you

15:57 go to at the sub you don't have everywhere A Bank big Bank in fact

16:01 you don't have a some certain area no bank at all and it is

16:05 those kind of community that rely on company like theab shill to receive money

16:09 from their uh loved one in the in the diaspora uh in a matter

16:13 of hours and the and the price

16:15 that's reasonable if somebody sending $200 and they

16:18 they they really don't have a lot of money to to help their family many

16:21 of those people people are poor and they don't have other income so they

16:26 rely on receiving $200 or $100 from their families and uh and that's why

16:31 company like theab Shi have been working that market for nearly 20 years and we

16:36 are happy to continue offer that uh of course in the Western Country there's

16:40 a challenges and in the name of terrorism and uh all of these different

16:45 regulations are affecting certain Community to send

16:48 money back home and that's why the UK

16:51 government has been set up some kind of corridor to address that but our only

16:56 our only concern is that we're very grateful what they are doing but we all

16:59 we ask them is to hurry up because you know this is a lifeline

17:03 and we want you know Community to help their families in a St of solution

17:07 coming next year or or two years time we need a solution now you

17:10 know and uh and that's only thing we can say about this here's my concern

17:16 coming from everything you've said ABD it's the fact that if there's this much

17:19 money coming in from remittances and we know there's a lot of money coming

17:23 in as well from development aid for example I wonder if all of this could

17:27 end up sort of masking the real lels of of natural organic growth that there

17:32 are in Africa now recently you know you hear things about how Nigeria

17:35 for example has become the biggest economy

17:37 in Africa well that's great but if it's

17:38 being masked by all this other money coming in what's the real growth story

17:43 in Africa um well you're right a lot of African country the economy is growing

17:49 and uh it doesn't have to be dependent on remittance you know if you

17:52 go to Rwanda or Kenya or Ethiopia or Nigeria you know all over African country

17:57 the econom is much better than than it was 5 years ago 10 years

18:01 ago and uh and and from the where I'm coming from the diaspora angle you

18:07 know uh diaspora has a contribution to play to the economy of those countries

18:11 whether it's Nigeria or any other countries they they invest back to the country

18:16 and you know if you go to saaba or Nairobi or or or Uganda

18:20 you will see you know uh buildings and uh people invest in property and many

18:25 of them are from the diaspora whether it's they call it London CER New

18:29 York Center or Sydney you know you can see the link from the diaspora

18:33 and and many of them use company like the H Shield so that's why the diaspora

18:37 really are playing important role and all

18:39 I can say is that the African countries

18:41 they should encourage the investment coming

18:44 from the diaspora I think they should uh

18:46 help them in term of getting the proper idea and documents that they need

18:50 I think they should help them to encourage them and you know invite them

18:54 to uh investment opportunities that they can

18:57 invest you know and I think diaspora yes

19:00 they still want to maintain the link in the diaspora like myself I'm a briti

19:04 citizen I love UK it's my country but as well as I love Africa

19:08 and I want to invest and I want to go back to whenever I

19:11 can so I think many diaspora Community are uh that kind of group who want

19:16 to be part of the development of their home country as well as here

19:20 ABD Rashid Dali talking remittances with us

19:22 on counting the cost thanks ABD to Bangladesh

19:25 now in a case of counterfeit medicine

19:27 you know the World Health organization estimates

19:29 nearly 10% of all drugs sold worldwide are fake and in Bangladesh it's a problem

19:35 that refuses to go away Mahar satar sent us this report from tangil where

19:39 he met victims of fake drugs most of them the rural poor every day HOSA

19:45 goes to visit her baby's grave she says she can't believe he's gone and that it

19:49 happened so quickly she' taken her child to a hospital because he was sick

19:53 then her world fell apart the doctor has put a needle into his hand

19:59 to give him an injection and I saw with my own eyes his hand

20:04 started to go dark and it moved up towards his head and my baby

20:08 screamed and then went quiet that's when I started to cry but the doctor told

20:13 me to stop crying and leave the room I asked why should I you

20:19 killed my boy three other children also died that day in the same Hospital

20:26 from the same sort of injection medicine

20:29 can be really cheap in Bangladesh I just

20:31 bought 10 tablets from this Village pharmacy and it cost me only $2 it's almost

20:36 a 100 pills however that does mean that a lot of people are cutting

20:40 Corners the government says that there arees

20:43 selling substandard expired and even fake medicine especially

20:46 in the villages in 2009 24 children

20:50 died after taking contaminated paracetamol a mild

20:53 over-the-counter painkiller but the worst outbreak took

20:56 place between 1990 to 1992 when three 339

20:59 deaths were reported also due to contaminated

21:02 paracetamol this is mitford Market it's Bangladesh's

21:05 largest wholesale medicine Hub the government has

21:07 called it the ground zero of conterfeit pharmaceuticals

21:10 it seized fake medicine worth more than half a million dollars in raids

21:13 of the market over the last year

21:15 but the Traders here are defined and have threatened

21:17 to shut down sales of all medicines if the raids continue There are no

21:22 fake medicines at this Market the government

21:24 picks on us because they want the attention we just sell the medicines we don't

21:28 make them the health Ministry estimates there

21:30 are 16,000 unlicensed pharmacies in the country

21:33 mostly in rural areas the government says it is trying to shut down illegal

21:37 dispensaries it's action that's long overdue but it

21:40 could save many mothers from sharing

21:41 the Heartbreak felt by hosneara finally this week

21:45 gold in Ghana despite the country's efforts to shut down illegal mines the lack

21:49 of Jobs means many return to illegal

21:52 operations and in doing so they're polluting waterways

21:56 and destroying land and local communities maaten

21:59 has this report these young men are

22:02 hard at work mining for gold in the Eastern region of Ghana what they're doing

22:06 is illegal they haven't gone through the stringent

22:09 process of trying to get a license but they're here with the consent

22:12 of the landowner illegal mining or galam as it's

22:15 called here is taking place in countless sites like this across Ghana the miners

22:20 don't want to be filmed but the leader of this group agreed to talk

22:24 to us about why they're doing this this gu at least every day you can

22:28 get something to feed your your family

22:31 that's why everybody is pting and pushing himself

22:34 into this system to support your life see that's it but the work is

22:37 dangerous is is it worth it it's so dangerous oh okay if you take good

22:42 care of it it's not so much dangerous that's what I say they divert

22:46 entire waterways in search of gold and once they finish with the site they often

22:51 just abandon it the small scale miners

22:53 who are licensed and regulated are required

22:56 to reclaim the land this group of have been here for about a month now

23:00 and they say in the next few days they're actually going to be wrapping

23:02 up now they also say they're going to reclaim this land but from what we've

23:07 seen in this area so far that just doesn't seem to be happening

23:11 this is just one of the abandoned sites we came across and this is what's

23:15 left of the river brim which runs through the area of chbby the methods

23:19 the illegal miners use make the water

23:21 murky and too dirty for the local community

23:23 to use they normally treat with Mercury

23:27 and then Cyanide and these chemicals are also

23:31 deadly for our health Bear in mind that the water they are dealing with are

23:36 for drinking purposes the boss of the government

23:39 body in charge of regulating the mining

23:41 industry admits that more needs to be done to tackle the problem we were

23:47 not firm enough to stem the the the the the problem when it started

23:53 we did not nip it in the bat so I think it is now

23:57 for us to deal with it we need the the the traditional leadership to be

24:00 involved we need the district assemblies to be involved we need the the public

24:06 the mindset the public support the threat

24:08 of arrest or prosecution is no deterrence

24:11 for the illegal operators the police regularly catch some of the minors the bill

24:16 for the environmental cleanup is likely to run

24:18 into millions of dollars but it's not

24:20 clear who will pay for it and that is our show for this week but there's

24:24 more for you online at al.com you just click through the programs Link

24:28 in from there you'll find the count in the cost page it's got all our previous

24:31 episodes for you to catch up on you can get in touch as well

24:34 you can tweet either me at Kamal AJ uh there's our business editor Abid Oliver

24:39 Ali and don't forget to use the hasht counting the cost when you do

24:42 or just drop us an email counting the cost at al.net is the address

24:46 but that is it for this edition of counting the cost I'm Kamal Santa Maria

24:49 from the whole team thanks for joining us the news on outra Zer is next