Reading Assignments:

China No-Money-Down Housing Echoes U.S. Subprime Loan Risks

China’s home buyers are being offered no-money-down purchases in an echo of the subprime lending that triggered a U.S. economic meltdown and the global financial crisis. 

Deals skirting government requirements for minimum 30 percent down payments have emerged this year from Guangzhou and Shenzhen in the south to Beijing in the north as real-estate sales slump, according to state media and statements by government agencies and developers.

Chinese Dominance Isn't Certain

Not a chance. Two new books provide a corrective to the lately fashionable gloom-and-doom analysis. Each is by a crack journalist. The first, Geoff Dyer’s The Contest of the Century, addresses the U.S.-Chinese relationship through the prism of China’s military, political, diplomatic and economic development. The second, Robert Kaplan’s Asia’s Cauldron, focuses on the competition between China and the states around the South China Sea—the central route for shipping between the Middle East and East Asia, and the site of disputed claims to resource-rich maritime territory.

 Certainly the fresh attention to China’s aspirations is a good thing. As late as 2006 the defense correspondent Fred Kaplan (no relation to Robert) was belittling the Pentagon’s attention to Chinese military modernization in its annual congressionally mandated report on the subject. In an article called “The China Syndrome,” Kaplan wrote:

“At present,” the report states, “China’s conceptfor sea-denial appears limited to sea-control in water surrounding Taiwan and its immediate periphery. If China were to shift to a broader ‘sea-control’ strategy”—in other words, if it were seeking a military presence farther away from its shores—“the principal indicators would include development of an aircraft carrier, development of robust, deep-water anti-submarine-warfare capabilities, development of a true area anti-aircraft warfare capability, acquisition of large numbers of nuclear attack submarines,” etc., etc. The point is: The Chinese aren’t doing—they’re not even close to doing—any of those things [Kaplan’s italics].

Junk Loan Market Getting “Silly And Sillier”: Cov Lite Loans At All-Time High

More than half of the loans in the $747 billion U.S. market for loans made to junk-rated companies don’t have financial “covenants,” triggers that could cause a borrower to shore up its health, including periodic tests of overall debt levels and cash flow to cover scheduled interest payments. Thus far this year through Thursday, 62% of leveraged loans lacked these regular requirements, up from 57% for all of 2013, according to S&P Capital IQ LCD.

 

 DYI