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WANT CHINA TIMESChinese investors are holding their collective breaths to see if the banking crisis predicted twoyears ago by renowned Chinese economist Li Zuojun will come to fruition in the next coupleof months.Li, the deputy director at the Development Research Center of China's State Council, pennedan article in Sept 2011 predicting that there will be a major banking crisis in July or Augustthis year caused by excessive local government debt or a housing bubble.Born in 1966 in south-central China's Hunan province, Li graduated with a doctorate ineconomics from Hubei's Huazhong University of Science and Technology in 1992. Mentoredby some of the most famous economics professors in China, Li has worked as a researcherand professor, teaching classes at his alma mater Huazhong and the Chinese Academy of Social Sciences, as well as real estate companies, investment banks and property developersacross the country.He has been involved in several major domestic and international research projects andpublished dozens of articles in major national newspapers. He has also been a leader of morethan 20 major research reports for the State Council and penned more than 50 internalpapers while working in the private sector. Over the years, his writings have won four ChinaDevelopment Research Awards.Li said back in 2011 that property developers were experiencing worsening cash flowproblems after their four main sources of funding — sales, credit, the capital market and trustfinancing — had all been on the decline or have hit bottlenecks. Despite having made a lot of money from China's housing market in recent years, the developers believed they would notbe able to hold on for much longer if conditions did not improve.Housing prices will definitely take a dive, Li said, though it is not clear how far. It is possiblethat the new Chinese government, led by president Xi Jinping, could maintain tight controls tolimit the drop to about 10%-20%, though Li did not rule out the possibility of a US-like collapsewhere property prices dropped by as much as 50% to nearly 100% in some cases.Li's astounding accuracy in predicting China's economy has led to him earning the nickname"China's most successful doomsayer."

GOOGLE

TRANSLATION

Zuo

Jun:

China

in

July

and

August

2013

economic

crisis

will

erupt

This

article

comes

from

Financial

Network

Right

leaders,

faced

with

a

choice,

a

choice

to

take

over

foam,

meticulously

maintained,

no

later

able

to

maintain

2015,

or

2016,

then

that

is

an

even

bigger

crisis.

The

second

option,

do

not

take

this

bubble,

the

bubble

so

soon

after

taking

office

to

rip;

so

that

the

economic

crisis

may

be

in

July

and

August

2013

Zuo

‐

Jun,

the

State

Council

Development

Research

Center

of

Resources

and

Environmental

Policy

Research

Institute

deputy

director,

was

hired

as

a

consultant

or

a

plurality

of

local

government

chief

economist.

Under

the

tutelage

of

economist.

The

following

is

his

September

27,

2011

should

be

invited

Huazhong

University

Alumni

2

Association,

in

a

report

will

be

made

within

the

ʺ

2013

China

will

be

the

outbreak

of

the

economic

crisis,

ʺ

the

report

content.

The

first

big

problem

the

first

point

‐

the

situation;

The

first

big

problem

of

the

second

point

‐

the

social

crisis;

On

social

issues

second

angle;

The

first

big

problem

is

the

third

point

‐

the

international

economic

crisis,

but

also

continued;

The

second

major

problem

‐

the

international

economic

outlook.

The

first

question,

what

kind

of

current

domestic

and

international

situation,

how,

how

evolution?

And

future

situation

of

how

you

look,

how

evolution?

It

may

be

we

are

concerned

about.

The

second

question,

in

such

a

new

situation,

our

business

and

entrepreneurs,

as

well

as

each

of

us

how

to

do?

The

first

big

problem

‐

the

situation.

The

situation

in

the

future,

this

situation

is

really

very

subtle,

I

would

like

to

focus

here

on

the

situation

and

to

tell

you

three

questions:

the

first

question,

the

future

we

face

some

relatively

large

adjustment

even

crises.

The

second

question

is

whether

the

future

is

how

the

international

economy

an

evolutionary

trend.

The

third

is

our

domestic

short

‐

term

economic

trends

over

how

big?

The

first

most

around

these

three

issues.

The

second

major

problem,

businesses

and

individuals

how

we

do?

This

relates

to

choose

what

kind

of

sector

investment,

including

the

choice

of

what

kind

of

investment,

there

is

a

comprehensive

enterprise

how

to

respond

and

so

on.

First

talk

about

the

first

one

big

problem

‐

the

situation.

The

first

situation

is

a

problem

in

the

Twelfth

Five

‐

Year

period,

we

may

have

to

happen

something.

One

might

want

to

happen

during

the

second

five

possible

an

economic

crisis

to

occur.

It

was

strange,

is

not

just

an

economic

crisis

broke

do?

Just

outbreak

of

the

U.S.

subprime

mortgage

crisis

triggered

a

decline

in

our

exports,

economic

growth

declined.

However,

we

Chinese

people

do

not

own

the

outbreak

of

the

economic

crisis,

our

banks

do

not

go

bankrupt,

we

Chinese

people

ʹ

s

economic

crisis

is

brewing,

and

that

when

it

broke?

I

think

it

was

in

2013,

and

why?

For

everyone

to

analyze

four

reasons:

The

first

reason,

for

economic

reasons,

economic

reasons

lead

to

the

possibility

of

the

outbreak

of

the

crisis

there

are

two,

one

is

the

real

estate

bubble

burst,

the

other

is

the

local

debt

crisis.

Of

course,

these

two

issues

are

related,

I

focus

from

the

second

angle

with

everyone

talking

about

the

local

government

ʹ

s

main

source

of

income

has

two

blocks,

one

is

the

industrial

and

commercial

taxes,

as

well

as

the

most

recent

coming

in

2012,

because

many

of

the

small

and

medium

private

enterprises

is

not

the

economy.

Some

local

governments,

industrial

and

commercial

tax

to

be

reduced

accordingly,

the

second

source

of

income

is

income

from

land

sales.

Beginning

this

3

year,

many

local

governments

have

been

large

reductions

in

land,

a

few

years

ago,

50%

or

even

30

‐

40%.

A

few

years

ago

all

we

ask

the

government

to

give

land

developers

have

recently

become

popular

for

some

time

the

government

asked

developers,

when

you

come

to

buy

my

land.

Why?

Because

they

are

already

facing

balance

of

payments

gap

pressure,

Beijing

land

reserve

loans

a

year

250

billion,

and

there

ʹ

s

interest

pressure

is

very

large,

light

Chaoyang

District

land

bank

loan

interest

a

month

on

more

than

10

million.

If

the

land

can

not

be

sold,

then

balance

in

trouble.

Therefore,

to

reduce

business

taxes,

as

well

as

the

reduction

of

land

revenue,

many

local

governments

under

a

lot

of

stress.

Spending

it,

but

is

increased,

two

blocks

spending

a

chunk

is

the

usual

expenditure

from

the

national

level,

this

is

a

defense

spending

increase

in

troops

wage

increases,

the

South

China

Sea,

the

aircraft

carrier

will

need

to

increase

investment

from

local

governments,

,

but

also

large

‐

scale

infrastructure

to

move

forward,

36

million

units

of

affordable

housing

construction

needs

government

spending,

strengthening

the

social

security

spending

two

full

coverage

of

the

need

for

government

to

strengthen

water

conservancy

facilities

require

government

spending,

vigorously

develop

strategic

emerging

industry

needs

government

spending,

at

all

costs

to

maintain

social

stability

requires

government

spending,

so

the

pressure

is

very

great

expense.

The

other

one,

not

before,

now

have,

and

that

is

the

arrival

of

centralized

repayment,

debt

service

pressure

soon.

A

few

years

ago,

four

trillion

investment

in

the

amount

of

days

of

credit,

was

very

handsome,

but

not

come

out

of

the

pie,

is

to

also,

from

the

second

half

of

this

year,

the

arrival

of

the

repayment

period

begins,

Ming

after

two

years

to

repay

a

4.6

trillion.

Why

the

recent

Yunnan

Road,

Shanghai,

Changsha

City

Investment

and

our

highways,

etc.,

began

to

show

some

of

the

problems,

in

fact,

this

is

just

tip

of

the

iceberg,

because

the

arrival

of

large

‐

scale

centralized

repayment

period

and

revenue

streams

asymmetry

caused

enormous

pressure,

So

over

time,

to

around

2013,

some

local

governments

may

go

bankrupt,

of

course,

there

is

the

army,

put

a

gun

to

put

here,

who

said

the

government

go

bankrupt?

Government

is

not

bankrupt.

Whose

breaking

capacity?

Breaking

the

bank

ʹ

s

assets,

the

money

from

the

bank,

the

bank

ʹ

s

money

comes

from

where?

From

the

majority

of

enterprises

and

people

are

breaking

their

production.

This

is

the

fiscal

and

financial

systemic

risk,

this

is

the

first

economic

reasons,

the

reasons

for

the

crisis.

Before

a

potential

real

estate

bubble

burst

crisis

because

of

the

time

does

not

expand.

The

second

reason

is

the

reason

that

the

international

external

reasons,

a

few

years

ago

our

country

ʹ

s

rapid

economic

development,

which

has

an

important

force,

is

the

large

number

of

international

hot

money

flowing

into

China,

support

our

economy

bubble

generation,

the

hot

money

is

the

benefits

or

reduce

the

,

speculative,

that

come,

say

you

can

walk

away,

he

is

mainly

depending

on

the

region

of

the

return

on

investment

profits.

The

reason

now

to

stay

in

China,

because

the

past

few

years

China

ʹ

s

economy

has

maintained

rapid

growth,

these

speculative

returns

still

relatively

high,

but

the

Chinese

economy

is

going

down,

China

is

gradually

emerging

risks,

there

are

a

number

of

international

organizations

began

rampant

short

China

concept

stocks.

U.S.

economy

is

slowly

recovering,

the

appreciation

of

the

U.S.

dollar

is

likely

to

occur,

the

United

States

also

may

raise

interest

rates,

so

these

international

hot

money

at

some

point

there

may

be

a

large

‐

scale

withdrawal.

This

will

cause

us

Chinese

economic

bubble

burst,

it

is

our

response

to

the

Chinese

government

is

not

good.