The inflation outlook for China (Brew, here is more) is 5%. The reason is that this will allow for the digestion of the 4 trillion rmb stimulus package. The problem is the overheating of the economy as we know.
So I was asking a friend about the reality and she says that food is at least 20-30% higher. Food and other things represent 70% of the cost of the basket of goods upon which China bases its CPi. This being China, however, that basket is complex and no one really knows how it works. Thus the government can tell “Chinese truths’ and make the cpi be what they wish. My contact who is in the know agrees that in the near term nothing will change in the inflation rate.
Thus, this person told me to use US money to do building here and capitalize on the lower US interest rate and high Chinese inflation and come out a double winner.
She says the housing in the suburbs is down 30% . Chinese in good standing will pay 8% for a home loan, and that is for a house that will last maybe 30 years, and remember in China you only have rights to the property for 70 years from the date it was manufactured.
Lastly, she says house prices will stay weak for a year then when restrictions are lifted, she does not know. if the restrictions are not lifted then there will be a supply shortage after a year, presumably because the builders will bail as they cannot make money.
she adds
“developers got lot of land in 2008-2009, that’s the reason for the a massive supply now, but the property restriction has decreased the land transactions by from 60-70% , so I believe there will be supply shortage in 1-2 years.”