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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Authoughts podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 3: And I'm Joe Whisenthal.

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Speaker 2: Joe, we've talked before in reference to I think it

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Speaker 2: was the US real estate market. Yeah, there seems to

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Speaker 2: be this weird thing going on with housing where it

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Speaker 2: feels like policymakers or maybe people even are not sure

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Speaker 2: what exactly they want it to be. Right, Is it

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Speaker 2: supposed to be this social good, this affordable thing we

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Speaker 2: all can live somewhere that we can, you know, preferably

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Speaker 2: a place we want to live in, something that we

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Speaker 2: can afford. Or is it effectively a giant piggy bank, Yeah,

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Speaker 2: an investment vehicle, in which case we would expect prices

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Speaker 2: to always keep going up.

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Speaker 3: Yeah, right.

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Speaker 4: I mean my personal preference is for housing to be

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Speaker 4: very affordable, very briefly, and in that time that I

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Speaker 4: buy how to accumulate more hows and then it stops

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Speaker 4: being affordable.

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Speaker 3: That's my I don't many people have different takes. I

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Speaker 3: just want a very brief period.

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Speaker 5: Thing about it.

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Speaker 4: Very important that in that brief period I don't lose

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Speaker 4: my job. It's very important that in that brief period,

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Speaker 4: my other investments don't go down. I just want a

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Speaker 4: very brief period of housing affordable.

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Speaker 2: But this is another thing about housing, which is like,

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Speaker 2: historically it is one of the few ladders to big

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Speaker 2: yea for the masses. Right, We've all heard the stories

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Speaker 2: about artists and soho buying a loft correct for like

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Speaker 2: five hundred dollars and now it's worth ten millions, so

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Speaker 2: good for them.

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Speaker 4: The other thing that's interesting about housing, particularly when it

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Speaker 4: comes to affordability, is that this seems to be a

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Speaker 4: truly global challenge. So people have lots of theories like, oh,

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Speaker 4: it's because they didn't allow zoning and San Francisco or whatever,

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Speaker 4: and it's like maybe, but like I think any question

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Speaker 4: about housing affordability has to wrestle fact that this is

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Speaker 4: a really global phenomenon, so it can't be some idiosyncratic thing.

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Speaker 4: It does seem as though places where housing is more

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Speaker 4: affordable do not have particularly dynamic economies. So it's like

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Speaker 4: I know that people are like, oh, look how cheap

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Speaker 4: Tokyo is. It's like a umb success story, but like

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Speaker 4: they had a massive bubble and it's been deflating ever since,

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Speaker 4: and it's not like Japan, is it like some cutting

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Speaker 4: edge of particularly any booming industries and its population. Japan's

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Speaker 4: still pretty nice. I'm sure it's very nice. I'm not

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Speaker 4: saying otherwise. It's just not clearly not where the action is.

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Speaker 4: I'd love to go to. Japan seems like one of

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Speaker 4: the nice places. And the other thing that's interesting about this,

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Speaker 4: which is that there are all kinds of ills that

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Speaker 4: sort of devil particularly the rich world these days, and

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Speaker 4: then we look at China's like, oh, they have it

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Speaker 4: all figured out. It seems like housing is a mess

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Speaker 4: in China too. One of these rare congratulate like sort

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Speaker 4: of like moments where we could shake hands with China's like, yeah,

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Speaker 4: we're dealing with a lot of.

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Speaker 3: The same issues.

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Speaker 2: Well, here's the thing. China is like the ultimate example

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Speaker 2: of that tension between investment, asset and social good, right

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Speaker 2: because even in China, as you point out, there are

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Speaker 2: affordability issues, and every once in a while you see

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Speaker 2: policymakers try to put limits on house prices in like

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Speaker 2: really expensive cities. But then when they start doing stuff

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Speaker 2: that actually pops housing crisis, everyone starts protesting, which is

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Speaker 2: kind of you know, a rare thing in China, so

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Speaker 2: that is the tension.

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Speaker 4: I also find real estate speculation in China to be

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Speaker 4: kind of I thought there were communists, and I mean

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Speaker 4: that on ironically, like, where did communists get the idea

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Speaker 4: of real estate?

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Speaker 2: No, well, this is another thing because the social net

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Speaker 2: starts going away in like the nineteen nineties, and so

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Speaker 2: people have to do something with their money to have

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Speaker 2: retirement income to.

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Speaker 4: I guess the houses in the old days used to

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Speaker 4: like be owned by the companies. There more dormitories, and

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Speaker 4: then when that started to split apart, I don't know.

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Speaker 3: Maybe our guest knows more.

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Speaker 2: Yeah, we do have the perfect guests, the perfect guest. Yes,

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Speaker 2: we are going to be speaking with Mike Byrd. He is,

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Speaker 2: of course, the Wall Street editor over at The Economist

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Speaker 2: and the author of the new book all about this

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Speaker 2: called The Land Trap, a New History of the World's

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Speaker 2: Oldest Asset. So welcome to the show.

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Speaker 5: Mike, Thank you very much for having me. Great to

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Speaker 5: be here.

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Speaker 3: I love my We both love my, so we're excited.

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Speaker 2: Also, someone who spent some time in Asia when I

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Speaker 2: was there in Hong Kong as well, so knows the

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Speaker 2: sort of global history of land, and I was reading

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Speaker 2: your book and you go all the way back to

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Speaker 2: like Babylon or Samaria, so very impressive. So why did

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Speaker 2: you decide to look at land?

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Speaker 5: It's a great question. I guess it started. I started

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Speaker 5: my career in London, and there's a huge thing in

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Speaker 5: London about housing as there is here, you know, people's

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Speaker 5: lack of ability to afford it. I think it's even

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Speaker 5: even worse than the UK than the US, because you know,

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Speaker 5: the culture of equity investing in all sorts of other

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Speaker 5: things is so much weaker. But I guess I really

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Speaker 5: got into it when I moved to Hong Kong, because

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Speaker 5: Hong Kong felt like London on steroids. The housing was

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Speaker 5: even more expensive. It was part of you know, I

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Speaker 5: moved in twenty eighteen. You there, Tracy, it was like

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Speaker 5: the extraordinary bull run, like the absolute peak the post

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Speaker 5: two thousand and eight surge in Hong Kong. And learning

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Speaker 5: about how land was really expensive but also the government

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Speaker 5: owned all the land and leased the land out made

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Speaker 5: money from the land. I found it very confusing and

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Speaker 5: it helped me to sort of dig into things, and

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Speaker 5: I think it helped me to like start thinking about

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Speaker 5: this as like a framework of how land works at

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Speaker 5: different places and how you can use it and abuse

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Speaker 5: it and whatever. And yeah, Hong Kong was a great

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Speaker 5: place to think about that because it's such a example

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Speaker 5: story of how bad things can get.

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Speaker 3: So if you buy property in Hong Kong, what exactly

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Speaker 3: are you buying?

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Speaker 5: You are buying like you're buying an apartment, right, but

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Speaker 5: you don't own the land. So if you say you're

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Speaker 5: a real estate developer, right, you buy a land lease

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Speaker 5: from the government, like a seventy five year, ninety nine

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Speaker 5: year land lease. They've clipped back and extended the terms

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Speaker 5: of the lease over time. But yeah, that's what you're buying.

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Speaker 5: You're buying the right to use it for a certain

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Speaker 5: amount of time.

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Speaker 4: Does every just go away like other examples, like you

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Speaker 4: know what, seventy five years is up?

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Speaker 3: Not your land?

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Speaker 5: This is a big problem. This is a big problem

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Speaker 5: them and in these places, in places like Hong Kong

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Speaker 5: and Singapore, there is the difficulty of when lots of

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Speaker 5: the land starts to roll over, when lots of the

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Speaker 5: leases start to get at the end, the question of

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Speaker 5: whether you just bow to political pressure and just give

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Speaker 5: it to people, right, just let people keep it, or

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Speaker 5: whether you kick them off and start again, whether you

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Speaker 5: knock something down and rebuild. It's a big difficult issue.

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Speaker 2: Yeah, Mozambique is the other country I know that does this,

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Speaker 2: which is kind of funny. Also communist history there. Anyway,

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Speaker 2: what role does housing actually play in the Chinese economy?

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Speaker 5: So, I think the best part of living in Hong

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Speaker 5: Kong was learning how this relates to Hong Kong. Right,

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Speaker 5: So put in very simple terms the nineteen eighties, Gemin

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Speaker 5: the Mau is dead dung shopping, consolidating power, and you're

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Speaker 5: in a strange position where you have to start or

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Speaker 5: dounge once to start bringing in market forces into the economy.

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Speaker 5: But it's pretty dangerous. He's got a lot of political opponents.

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Speaker 5: You've got to step pretty slowly. And housing is one

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Speaker 5: of the areas it's most difficult. China's housing at the

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Speaker 5: time is pretty ramshackle and terrible. It's attached, as Joe

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Speaker 5: suggested at the beginning, to like the industrial base. Your

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Speaker 5: employer houses you on a farm or next to a

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Speaker 5: factory or wherever it is. But what China needs is urban,

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Speaker 5: modern residential housing. So Jao Xiang, who's the premier of

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Speaker 5: China later on, and he's one of the sort of

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Speaker 5: peak reformers in Dung's China. He credits this to a

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Speaker 5: conversation with a Hong Kong real estate developer called Henry Fox,

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Speaker 5: who said, in a conversation with him, where Joao is

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Speaker 5: explaining the difficulty of oh, we don't have any money

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Speaker 5: and we can't get foreign investment in and Henry Fox said,

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Speaker 5: but if you have land, why don't you have money?

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Speaker 5: How can you not have money? And basically they started

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Speaker 5: adopting on a small scale, initially the Hong Kong system.

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Speaker 5: They started leasing out land to make money. First one

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Speaker 5: of these is in Shenzen in December nineteen eighty seven.

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Speaker 5: There's an auction. The Hong Kong government gives them the

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Speaker 5: avil to do the auction, the auction of for pretty

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Speaker 5: small piece of land. But this is a symbolic thing

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Speaker 5: because you know, it's a communist country and the Chinese

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Speaker 5: government owns all the land. They hadn't even at this

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Speaker 5: point changed the constitution to make this legal. They're sort

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Speaker 5: of experimenting just at the edge, and then slowly this

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Speaker 5: becomes the main financing model. It's a big tax change

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Speaker 5: in the middle of the nineteen nineties that shifts this,

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Speaker 5: but it's it's a really good way of making money,

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Speaker 5: especially if you're the government and you own all the land.

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Speaker 5: China owns that in the mainland for communist reasons, but

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Speaker 5: it's actually a handover to some degree from Hong Kong.

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Speaker 3: Actually, can I back up a few decades? What's land reform?

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Speaker 4: You always here the people debating economics like, Oh, they

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Speaker 4: instituted land reformer, this is really important.

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Speaker 3: This is what else says? Oh no, actually, land reform

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Speaker 3: was not there. What is land reform?

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Speaker 5: Yeah, I've got a chatter on this in the book,

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Speaker 5: and it was sort of towards the end of it

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Speaker 5: quite carefully worded to not upset the people that feel

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Speaker 5: very strongly about land reform.

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Speaker 4: Land reform things you don't talk about on Twitter. Yeah, yeah,

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Speaker 4: el asterisk and d reform. Absolutely, the bots don't attack you.

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Speaker 5: The land reform is mostly middle of the twentieth century phenomenon,

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Speaker 5: and it's basically there was a lot of economic thinking

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Speaker 5: at the time. It was a guy called Wolf Ladashinski

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Speaker 5: who was a US Department of Agriculture employee. He was

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Speaker 5: an economist and he was an obsessive about land reform,

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Speaker 5: which essentially is redistributing really concentrated ownership of land to

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Speaker 5: larger numbers of people, especially in the developing rural world.

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Speaker 5: We're not talking about like, you know, cities or anything here.

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Speaker 5: And he went into Japan after World War Two, a

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Speaker 5: bunch of other reformers basically forced the Japanese government at

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Speaker 5: the time to pass a land reform bill which redistributed

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Speaker 5: an enormous amount of Japan's agricultural land. This happens in

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Speaker 5: Taiwan as well, it happens in South Korea, and there's

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Speaker 5: a huge amount of attempt to do it elsewhere, to

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Speaker 5: varying degrees across Asia in other parts of the world. Basically,

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Speaker 5: it's by far the most successful in those three original countries.

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Speaker 5: They try it in India, it doesn't work. They try

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Speaker 5: it in Vietnam at South Vietnam, it doesn't really work.

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Speaker 5: You know. I think one of the.

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Speaker 4: Most impressing recurring themes on this podcast is the number

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Speaker 4: of times there is some like sort of very successful

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Speaker 4: project in industrialization or economic development, and then at the

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Speaker 4: end there's disasters. But it's only ever worked in three

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Speaker 4: like East Asian countries, and we have no evidence that

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Speaker 4: any of this works anywhere else.

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Speaker 3: Here's the problem.

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Speaker 2: Now you have a solution that you cannot use. Yeah, okay,

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Speaker 2: Well the other thing about land in China, and again

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Speaker 2: we're sort of fast forwarding back to the nineties, and

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Speaker 2: we should talk about the hukou systems as well later on.

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Speaker 2: But land has this really unique position I guess culturally,

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Speaker 2: socially and financially for Chinese people. Right, Like, everyone basically

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Speaker 2: decides they want to be a landlord, they want to

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Speaker 2: own an apartment, even if it's not built. You see

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Speaker 2: the ads in like newspapers, flyers, things like that in

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Speaker 2: a way that you don't necessarily see them for stocks

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Speaker 2: or bombs.

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Speaker 5: Right Totally. I think there's a big cultural thing there.

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Speaker 5: I'm never too sure whether I'm like a culture is

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Speaker 5: downstream of policy or policy is downstream of culture guard

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Speaker 5: but it clearly is a big cultural impulse there, whatever

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Speaker 5: it's driven by. I remember when I lived in Hong Kong,

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Speaker 5: obviously not mainland China, but used to get adverts pushed

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Speaker 5: through your door and they'd be like invest in the

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Speaker 5: northern English riviera, right, there's housing in Leeds in Bradford

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Speaker 5: to be bought as investment properties. This is a big thing.

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Speaker 5: You didn't get those in Leeds and Bradford, right, if

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Speaker 5: you learn in the UK, you don't get those adverts.

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Speaker 5: So yeah, it's a big cultural thing. It's also a

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Speaker 5: big thing in the mainland, I think because of financial repression.

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Speaker 5: Basically you can't invest long term in the equity market

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Speaker 5: in China. Right, It's a sideways game. It's a terrible

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Speaker 5: way of compounding. Wealth. Bank accounts in general in China

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Speaker 5: for a very long period of its modern history had

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Speaker 5: like near a real negative returns because of financial repression.

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Speaker 5: So the question is if you're saving a lot of money,

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Speaker 5: where do you put it? And it's only really been

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Speaker 5: one answer. It's been a completely rational thing for China.

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Speaker 5: These households to do that, you know, extremely high saving

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Speaker 5: households buying property after property, a lot of them left vacant.

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Speaker 5: One of the things I say in the book is

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Speaker 5: that China has the symptoms of both a housing shortage

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Speaker 5: and a housing glove. Right, it managed to get the

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Speaker 5: worst of both worlds.

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Speaker 2: Joe, you know what I call this what China's great

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Speaker 2: ball of money. Yeah, within the country, from asset class

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Speaker 2: to asset class.

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Speaker 4: So, Okay, the stock market hasn't done well for a

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Speaker 4: very long time, raids on the savings are very low.

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Speaker 3: How did like Chinese.

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Speaker 4: Leaders feel about those emergence of a very speculative, high growth,

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Speaker 4: high return at least during the good old days, Yeah,

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Speaker 4: before a few years ago, About the emergence of this industry,

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Speaker 4: About this emergence of this sort of thing that's crucial

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Speaker 4: for a living and also becoming a major respeculative of vehicle.

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Speaker 5: Houses are for living, not for speculations. Yes, say yeah,

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Speaker 5: I mean I should say. It's an incredibly useful way

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Speaker 5: of building out a city. Okay, this tool is like

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Speaker 5: super powerful if you're just starting out and no one

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Speaker 5: wants to invest. It's a really good way of pairing

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Speaker 5: real estate development with infrastructure. You can pay for a

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Speaker 5: lot of things. You can do it sort of expanding

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Speaker 5: very very rapidly.

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Speaker 2: Plus you boost other sectors totally, construction, manufacturing.

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Speaker 5: Employment, build out. Right, you don't know the industry, Yeah,

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Speaker 5: you don't have to do that much administration. It's fairly

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Speaker 5: easy to do this stuff, right, So there's lots of

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Speaker 5: advantages to it. I think people start to see the

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Speaker 5: problems even at the level of the central Chinese government

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Speaker 5: in these sort of early twenty tens, right, and you

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Speaker 5: get this series of like whack them all attempts to

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Speaker 5: get the big ball of money, the big ball of

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Speaker 5: credit out of the system. So the first thing you

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Speaker 5: see is the Chinese leadership saying, okay, banks limits on

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Speaker 5: real estate lending to developer, right, which is what pushes

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Speaker 5: them into the international bond markets where most of the

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Speaker 5: Chinese property developers fund themselves. Then you see the limits

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Speaker 5: on borrowing from the bond market, which sort of come

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Speaker 5: in and out during the twenty tens, and eventually it's

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Speaker 5: sort of seriously limited in twenty twenty, twenty twenty one.

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Speaker 5: But even then you see Chinese developers trying to essentially

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Speaker 5: borrow through pre sales from ordinary Chinese households, right, which

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Speaker 5: is like, you give me all the money to build

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Speaker 5: your house up front, I promise I'll get round for it,

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Speaker 5: you know, not stating actually, I've got twenty other projects

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Speaker 5: that I've got to build with your money first. There's

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Speaker 5: no escrosystem here. So yeah, you do see the Chinese

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Speaker 5: government sort of waking up to the problems, but it's

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Speaker 5: like in any other country you know, it doesn't have

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Speaker 5: same sort of Western democratic politics. But how do you

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Speaker 5: get off the train while it's moving?

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Speaker 3: Yeah?

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Speaker 5: Right, And they've tried with the three Red lines and

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Speaker 5: the campaign against the real estate development sector in the

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Speaker 5: last five years, and it hasn't gone very well.

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Speaker 3: You know something I'm wondering about.

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Speaker 4: You always hear about the CCP trying to learn the

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Speaker 4: lessons of the collapse of the Soviet Union, and they

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Speaker 4: don't want to have that fan So they're very obsessed

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Speaker 4: with this question of what brought the Soviet Union down.

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Speaker 4: Do they spend much time looking at the collapse of

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Speaker 4: the Japanese real estate bubble and the effect that Dad

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Speaker 4: had on Japan as an industrial dynamo.

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Speaker 5: It's a great question. I'm not in direct touch on

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Speaker 5: a day to day basis. My understanding was that they

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Speaker 5: did that this was a preoccupation of the Chinese leadership.

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Speaker 5: I used to hear it a lot from people close

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Speaker 5: to economic and financial policy making that this was a

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Speaker 5: serious consideration and it was why they didn't want to

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Speaker 5: pop the bubble, which is essentially what the Japanese government

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Speaker 5: and the Bank of Japan did at the very end

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Speaker 5: of the nineteen eighties early nineteen nineties, they seem to

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Speaker 5: have done that anyway. I mean, it is a fascinating thing.

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Speaker 5: There's always this discussion of, you know, on an autocratic

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Speaker 5: regime can think in really long term, you know, they

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Speaker 5: think in decades and centuries. But in this case, you know,

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Speaker 5: there was a land final model that Chines's local governments had,

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Speaker 5: which has been pulled out from under them. There was

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Speaker 5: an asset class that Chinese households could invest in, which

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Speaker 5: has been pulled out from under them. The government hasn't

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Speaker 5: replaced those two things with anything particularly good.

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Speaker 2: We certainly know that they look at it now, right

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Speaker 2: because we had Richard Ku on the broadcast a couple

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Speaker 2: of times, and we know that deflationary spiral caused by

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Speaker 2: real estate collapse is kind of a topic DuJour over there.

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Speaker 2: Talk more about the three red lines, because this is

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Speaker 2: something I remember. They came out when we were both

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Speaker 2: in Hong Kong, and you could see why policy makers

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Speaker 2: were doing it. And to some extent, you know, okay,

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Speaker 2: house prices came down and there's less new builds and

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Speaker 2: things like that nowadays, but they also seem to kind

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Speaker 2: of flub them, right.

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Speaker 5: Yeah, totally so the three Red lines were basically the

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Speaker 5: Chinese government identifies the real estate developers as the tool

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Speaker 5: through which they're going to cool the housing market down,

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Speaker 5: and they come out with the three red lines, which

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Speaker 5: are three different metrics of debt to cash and other

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Speaker 5: sort of debt metrics, and they basically say, if you

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Speaker 5: violate one or two of these, you can maybe keep

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Speaker 5: borrowing only to refinance old debt. If you're green on

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Speaker 5: all of the three red lines, you're fine. Right, if

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Speaker 5: your metrics are okay, keep borrowing, go for it. But

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Speaker 5: none of them are at this point. And if you

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Speaker 5: have three red scores on the red lines, basically, if

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Speaker 5: you're violating all of these, no borrowing even to refinance. Right,

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Speaker 5: You've got to pay down debt. Now, these companies are

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Speaker 5: some of the most insanely structured financial vehicles in history. Right.

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Speaker 5: They can only expand through extremely rapid debt driven growth. Right.

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Speaker 5: The model is such. You know, if you're Everground and

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Speaker 5: you're paying like a fifteen percent interest on your borrowing,

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Speaker 5: you've got to keep borrowing to expand. Right. It's not

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Speaker 5: a good idea, but you've got nothing else.

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Speaker 2: So funny thing about Evergrand also is the diversification into

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Speaker 2: a bunch of other things. I remember again in Hong

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Speaker 2: Kong asking someone like, we should do a graphic of

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Speaker 2: China evergrands all there are different businesses, right because it

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Speaker 2: would be really interesting, And it took like three weeks

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Speaker 2: to make and when it came out, it was almost

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Speaker 2: unreadable because there were just so many of them, like

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Speaker 2: splayed out.

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Speaker 3: You know, it sounds like we work.

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Speaker 4: I mean that was a company that had diversified into

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Speaker 4: literal wave wavepool.

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Speaker 3: Business and about one hundred other things.

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Speaker 4: So also just an insanely complicated, leveraged organization. There was

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Speaker 4: a multi billion dollar unicorn now is where the bag Offridos.

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Speaker 5: We mocked when they bought Friday Futures, the US EV company,

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Speaker 5: and we all mocked right everground saying honestly, now, I'm

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Speaker 5: like maybe if they the three red lines hadn't come in,

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Speaker 5: we'd be like soon around me.

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Speaker 4: This carsonization of Chinese companies were on a long enough timeline.

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Speaker 3: They're all becoming EV companies.

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Speaker 4: Like there was a great article in Bloomberg earlier this

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Speaker 4: week about multiple vacuum cleaner companies in China that are

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Speaker 4: now releasing EV.

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Speaker 3: So I guess I'll make sense.

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Speaker 5: That their argument was always like, you know, where do

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Speaker 5: you put your car in the car park in the

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Speaker 5: estate that you live in? Who built that? Yeah, they

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Speaker 5: believed in it, But basically, yeah, they bring the three

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Speaker 5: red lines in the real estate development sector begins contracting

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Speaker 5: very rapidly. The most in debted companies get into trouble

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Speaker 5: almost immediately, but also some of the companies that people

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Speaker 5: thought were pretty safe, that borrowed at pretty low rates

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Speaker 5: are getting into trouble fairly quickly as well. Your sort

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Speaker 5: of country gardens China, Vanka, like, they're all getting into

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Speaker 5: trouble quite quickly. The way I think of it is

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Speaker 5: that basically the Chinese government attacked the sector that had

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Speaker 5: grown up to intermediate between the households and the local governments,

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Speaker 5: but they didn't change anything about the incentives to the

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Speaker 5: households of the local governments. The households still need to invest,

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Speaker 5: the local governments still need money from somewhere, and these

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Speaker 5: companies were just making that arrangement work for those two sides, see,

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Speaker 5: and destroying them does nothing really, you know, it causes

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Speaker 5: a lot of distress, Construction activity drops, lots of people

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Speaker 5: aren't going to get the homes they invested in through

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Speaker 5: the pre sale system, But it doesn't really address the

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Speaker 5: actual core driving forces.

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Speaker 4: Talk a little bit more about the local government finances

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Speaker 4: and what it is about land that is particularly importantly

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Speaker 4: because there are other ways that local governments could theoretically

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Speaker 4: taxes on there.

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Speaker 2: I was never sure what the driving if the driving

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Speaker 2: force was at the sort of Beijing national level, or

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Speaker 2: if it was the local governments that you know, first

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Speaker 2: started doing this because they're like, Oh, here's a way

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Speaker 2: to make money and develop and look good in Beijing's eyes,

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Speaker 2: and then Beijing just kind of went with it.

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Speaker 5: So I would trace it back largely too. As I

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Speaker 5: said before, you know, people started experimenting with land auctions

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Speaker 5: land sales from nineteen eighty seven. It starts to get

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Speaker 5: more popular in the early nineties, but it's nineteen ninety

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Speaker 5: four when they change the tax and spending system, the

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Speaker 5: distribution of spending and tax responsibilities between the Chinese central

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Speaker 5: and local governments that really sort of hammers it home.

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Speaker 5: So traditionally China People's Republic like decentralized in terms of

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Speaker 5: revenue and spending obligations. Local governments did most of the

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Speaker 5: tax raising. They did most of the spending. The central

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Speaker 5: government told them there were certain things they had to do,

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Speaker 5: but they did it all fairly independently. And then nineteen

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Speaker 5: ninety four they switched the system and the central government says,

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Speaker 5: you could raise the red but we'll take most of that, right, yeah,

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Speaker 5: will tell you how much you get back of that.

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Speaker 5: It became a much more centralized system, and overnight the

437
00:21:24,119 --> 00:21:28,840
Speaker 5: local governments were left with huge spending responsibilities those don't change,

438
00:21:29,160 --> 00:21:31,879
Speaker 5: but only making sort of sixty or seventy percent of

439
00:21:31,920 --> 00:21:34,400
Speaker 5: the money that they needed to fund them. They stumbled

440
00:21:34,400 --> 00:21:36,879
Speaker 5: through the nineteen nineties trying to find ways of doing this.

441
00:21:36,960 --> 00:21:40,639
Speaker 5: There's lots of sort of flagrantly illegal administrative fees and

442
00:21:40,720 --> 00:21:43,320
Speaker 5: fines placed on things. This actually gets them in trouble

443
00:21:43,320 --> 00:21:46,959
Speaker 5: because it's very politically sensitive. You know, there's rural Chinese

444
00:21:47,000 --> 00:21:50,199
Speaker 5: residents being absolutely rinsed for anything the local governments can

445
00:21:50,240 --> 00:21:54,119
Speaker 5: get their hands on. And they land on land. Basically,

446
00:21:54,280 --> 00:21:58,560
Speaker 5: they see the land auctions, which are off balance sheet revenues.

447
00:21:58,600 --> 00:22:01,040
Speaker 5: They do not count for the purpose of being remitted

448
00:22:01,080 --> 00:22:03,919
Speaker 5: to Beijing in the same way that normal tax revenues do,

449
00:22:04,160 --> 00:22:06,280
Speaker 5: and they say, right, okay, that's it. That's what we'll do.

450
00:22:06,280 --> 00:22:07,720
Speaker 5: That's so why I will raise money. And you see

451
00:22:07,720 --> 00:22:10,959
Speaker 5: the proportion of income rise and rise and rise very

452
00:22:11,000 --> 00:22:13,680
Speaker 5: aggressively through the late nineteen nineties from a pretty sort

453
00:22:13,680 --> 00:22:17,040
Speaker 5: of residual amount that was useful for it was useful

454
00:22:17,040 --> 00:22:20,280
Speaker 5: for land allocation, it wasn't mostly useful the beginning for

455
00:22:20,359 --> 00:22:22,840
Speaker 5: raising money, and it becomes the main fundraising tool.

456
00:22:22,840 --> 00:22:25,119
Speaker 2: And then they're in the trap. Yeah, the land trap.

457
00:22:25,800 --> 00:22:29,200
Speaker 2: Has any country ever successfully gotten out of this type

458
00:22:29,240 --> 00:22:29,800
Speaker 2: of situation?

459
00:22:30,480 --> 00:22:31,840
Speaker 5: It depends what you mean my success.

460
00:22:31,960 --> 00:22:36,480
Speaker 2: Yeah, without a massive collapse or without a period of

461
00:22:36,760 --> 00:22:39,359
Speaker 2: very long stagnation, which seems to be what China is

462
00:22:39,400 --> 00:22:39,720
Speaker 2: in now.

463
00:22:39,840 --> 00:22:43,560
Speaker 5: I would say basically no. And funnily enough, I actually

464
00:22:43,560 --> 00:22:48,520
Speaker 5: think one of the best cases for relatively rapid like

465
00:22:48,600 --> 00:22:51,520
Speaker 5: return to normalcy is after two thousand and eight in

466
00:22:51,560 --> 00:22:55,200
Speaker 5: the US specifically. You can tell how few cases there

467
00:22:55,200 --> 00:22:58,480
Speaker 5: are that I'm using the Great Recession.

468
00:22:58,080 --> 00:22:59,440
Speaker 2: This is the best one, as like.

469
00:22:59,400 --> 00:23:01,280
Speaker 5: This might be the best outcome for a number of

470
00:23:01,320 --> 00:23:03,080
Speaker 5: different reasons. But yeah, that might be the best outcome.

471
00:23:03,080 --> 00:23:04,760
Speaker 5: There are places that didn't get into the trap in

472
00:23:04,800 --> 00:23:05,679
Speaker 5: the first place.

473
00:23:05,440 --> 00:23:07,920
Speaker 2: Right that that seems to be the ideal. Probably.

474
00:23:07,960 --> 00:23:11,919
Speaker 4: I've obviously never been to mainland China. All of the

475
00:23:12,080 --> 00:23:16,120
Speaker 4: China news that I consume is on propaganda that makes

476
00:23:16,160 --> 00:23:19,840
Speaker 4: it onto my Instagram reels that shows all these incredible

477
00:23:20,000 --> 00:23:24,479
Speaker 4: futuristic cities and robots doing everything. One hundred percent of

478
00:23:24,480 --> 00:23:27,359
Speaker 4: my China news consumption makes it look like paradise on

479
00:23:27,400 --> 00:23:30,040
Speaker 4: Earth again, because I only consume propaganda.

480
00:23:30,160 --> 00:23:32,200
Speaker 3: Is it actually stagnating?

481
00:23:32,560 --> 00:23:34,600
Speaker 5: I will say I can't claim to have been to

482
00:23:34,680 --> 00:23:37,560
Speaker 5: mainland China for years now. I think it is. I

483
00:23:37,560 --> 00:23:43,439
Speaker 5: think the long term threat from undermining what was really

484
00:23:43,560 --> 00:23:45,760
Speaker 5: right at the middle of the Chinese development model for

485
00:23:45,760 --> 00:23:47,800
Speaker 5: a very long time and not replacing it with anything

486
00:23:47,840 --> 00:23:51,880
Speaker 5: has been really dangerous. You've seen this effort as investment

487
00:23:51,880 --> 00:23:54,239
Speaker 5: in the real estate sector has dropped and dropped from

488
00:23:54,280 --> 00:23:57,040
Speaker 5: drop to drive it into the manufacturing sector. But the

489
00:23:57,040 --> 00:23:59,359
Speaker 5: reality is that the manufacturing sector, as big as it

490
00:23:59,400 --> 00:24:02,880
Speaker 5: is in China isn't big enough to productively absorb all.

491
00:24:02,880 --> 00:24:07,600
Speaker 4: This isn't the question like, can the Chinese manufacturing sector

492
00:24:07,680 --> 00:24:11,840
Speaker 4: just be so dominant that it just offsets the decline

493
00:24:11,840 --> 00:24:12,400
Speaker 4: of real estate?

494
00:24:12,480 --> 00:24:14,360
Speaker 3: And your analysis is no.

495
00:24:14,480 --> 00:24:17,200
Speaker 5: My analysis is no, Chinese economy is too big. I

496
00:24:17,240 --> 00:24:20,640
Speaker 5: would say, and too big means that the domestic real

497
00:24:20,720 --> 00:24:24,080
Speaker 5: estate market is absolutely gargantian. Right. The thing you're trying

498
00:24:24,080 --> 00:24:28,000
Speaker 5: to replace is enormous, and there's only so many buyers

499
00:24:28,000 --> 00:24:29,919
Speaker 5: for your products in the rest of the world. And

500
00:24:29,920 --> 00:24:32,880
Speaker 5: this is why you see I think the anti evolution campaign.

501
00:24:32,880 --> 00:24:34,960
Speaker 2: Trying to get consumption up exactly.

502
00:24:34,760 --> 00:24:37,679
Speaker 5: The pressure against it, because the sort of consequences, the

503
00:24:37,680 --> 00:24:40,720
Speaker 5: negative consequence is already starting to display themselves. And we're

504
00:24:40,760 --> 00:24:44,840
Speaker 5: really like three years into this really big push to

505
00:24:44,960 --> 00:24:48,200
Speaker 5: drive the investment into manufacturing, and it's showing those problems

506
00:24:48,280 --> 00:24:50,119
Speaker 5: in a way that it's a real estate much longer.

507
00:24:50,520 --> 00:24:52,440
Speaker 5: I don't think it can be a like for like replacement.

508
00:24:52,920 --> 00:24:55,679
Speaker 2: Wait, talk more about real estate and productivity, because this

509
00:24:55,720 --> 00:24:58,120
Speaker 2: is something that I didn't really internalize until I read

510
00:24:58,160 --> 00:25:00,680
Speaker 2: the chapter in your book China chapter.

511
00:25:00,880 --> 00:25:04,440
Speaker 5: Yes, so there is a lot of really really interesting

512
00:25:04,480 --> 00:25:07,680
Speaker 5: research about real estate in China and what it's done

513
00:25:07,960 --> 00:25:10,199
Speaker 5: to productivity. So if you think about it from the

514
00:25:10,200 --> 00:25:13,720
Speaker 5: perspective of we're going to get into a banking argument

515
00:25:13,760 --> 00:25:15,280
Speaker 5: that's already got that's going to get me in trouble

516
00:25:15,280 --> 00:25:16,600
Speaker 5: as well in terms of like the you know, the

517
00:25:16,640 --> 00:25:18,560
Speaker 5: amount of credit you can have. But if you think

518
00:25:18,560 --> 00:25:21,000
Speaker 5: there's any constraint on the amount of credit, which obviously

519
00:25:21,000 --> 00:25:24,200
Speaker 5: in China there is, there are actual like targets and limits.

520
00:25:24,240 --> 00:25:27,159
Speaker 5: It's still a fairly state oriented system in lots of

521
00:25:27,160 --> 00:25:30,080
Speaker 5: different ways. Then the resource is going to one part

522
00:25:30,080 --> 00:25:32,040
Speaker 5: of the economy means they aren't going to another part

523
00:25:32,080 --> 00:25:35,280
Speaker 5: of the economy. And in China's case, this means employment,

524
00:25:35,400 --> 00:25:38,439
Speaker 5: it means material investment, it means you know, steel and

525
00:25:38,480 --> 00:25:41,840
Speaker 5: concrete and copper and everything else. The real estate sector

526
00:25:41,960 --> 00:25:45,520
Speaker 5: in general, in a long run, I think has pretty

527
00:25:45,560 --> 00:25:50,040
Speaker 5: low productivity. Right. You can build constructively in places where

528
00:25:50,040 --> 00:25:52,359
Speaker 5: you know housing's really in demand, but there's only so

529
00:25:52,480 --> 00:25:53,399
Speaker 5: much you can get out of it.

530
00:25:53,600 --> 00:25:55,120
Speaker 2: It's not making new stuff.

531
00:25:55,000 --> 00:25:57,680
Speaker 5: No, totally, and certainly in China. What has happened and

532
00:25:57,680 --> 00:26:00,359
Speaker 5: what was certainly happening during the run up to the

533
00:26:00,359 --> 00:26:03,200
Speaker 5: the three Red Lines policy is you saw a lot

534
00:26:03,200 --> 00:26:08,040
Speaker 5: of productive, entrepreneurial and innovative activity instead going into real estate.

535
00:26:08,160 --> 00:26:11,200
Speaker 5: We talk about Chinese real estate developers having lots of arms.

536
00:26:11,560 --> 00:26:13,679
Speaker 5: Every big Chinese company was trying to run a real

537
00:26:13,760 --> 00:26:16,560
Speaker 5: estate company on the side during the twenty tens, right,

538
00:26:16,560 --> 00:26:18,800
Speaker 5: because there's so much money to be made, why not

539
00:26:18,880 --> 00:26:21,680
Speaker 5: do that as well? And there's really interesting research from

540
00:26:21,800 --> 00:26:26,480
Speaker 5: yush at the IMF talking about how individual Chinese entrepreneurs

541
00:26:26,520 --> 00:26:29,159
Speaker 5: would go into real estate over time because there's so

542
00:26:29,240 --> 00:26:32,399
Speaker 5: much money to be made and it is productivity destroying,

543
00:26:32,560 --> 00:26:35,440
Speaker 5: especially if I think you're in a state oriented financial

544
00:26:35,480 --> 00:26:37,240
Speaker 5: system where you're not probably going to see like a

545
00:26:37,240 --> 00:26:40,000
Speaker 5: two thousand and eight style crash. This is where you

546
00:26:40,040 --> 00:26:58,560
Speaker 5: see the consequences come through, you know.

547
00:26:58,640 --> 00:27:01,680
Speaker 4: I Wou was thinking about that the Sopranos where Aj

548
00:27:01,880 --> 00:27:03,880
Speaker 4: tells us Sunday's like by real estate, they're not making

549
00:27:03,920 --> 00:27:07,240
Speaker 4: any more of it, whether China elsewhere, that's not really true,

550
00:27:07,280 --> 00:27:11,040
Speaker 4: Like a artificial islands exist b again in.

551
00:27:11,040 --> 00:27:14,159
Speaker 2: The islands literally a drop in the ocean.

552
00:27:15,040 --> 00:27:17,160
Speaker 3: You guys start somewhere. You guys start somewhere.

553
00:27:17,240 --> 00:27:22,159
Speaker 4: But more importantly, again if the my mainlining consumption of

554
00:27:22,280 --> 00:27:25,080
Speaker 4: Chinese propaganda, I always see these things like this used

555
00:27:25,119 --> 00:27:27,920
Speaker 4: to be a desert. Now it's this beautiful like farmable

556
00:27:28,000 --> 00:27:32,200
Speaker 4: land and there's greenery here. Like whether it's China or elsewhere,

557
00:27:32,280 --> 00:27:34,960
Speaker 4: or the history of land like, it's not really that fixed.

558
00:27:34,960 --> 00:27:38,920
Speaker 4: They always find new ways to sort of create habitable land.

559
00:27:38,960 --> 00:27:40,320
Speaker 4: That's that's what it used to be human.

560
00:27:40,480 --> 00:27:44,280
Speaker 5: I think there's two things. That one is like actual reclamation,

561
00:27:44,520 --> 00:27:47,359
Speaker 5: which is like we've probably added like can you.

562
00:27:47,400 --> 00:27:49,080
Speaker 4: But by the way, I think that's the most powerful

563
00:27:49,119 --> 00:27:52,480
Speaker 4: word in English language, reclamation, because it's like it means

564
00:27:52,560 --> 00:27:55,840
Speaker 4: turning watery land into land. Yeah, but the implication is

565
00:27:55,840 --> 00:27:59,280
Speaker 4: like we're reclaiming it. We are reclaiming what used to be.

566
00:27:59,359 --> 00:28:02,040
Speaker 4: Are think there's such a powerful world, right, It's very.

567
00:28:01,920 --> 00:28:06,520
Speaker 5: Like Francis Bacon. It's very like, you know, man's dominions.

568
00:28:05,640 --> 00:28:08,000
Speaker 4: Like this land that we ken't live in was only

569
00:28:08,240 --> 00:28:10,320
Speaker 4: we were temporarily embarrassed.

570
00:28:11,359 --> 00:28:13,120
Speaker 5: It's always good to do land recommention where you can,

571
00:28:13,119 --> 00:28:15,320
Speaker 5: but there's really not very much of it, Okay. I

572
00:28:15,320 --> 00:28:18,240
Speaker 5: think that the more interesting way that you can create

573
00:28:18,440 --> 00:28:20,360
Speaker 5: more land in the way that I think of it

574
00:28:20,400 --> 00:28:23,000
Speaker 5: is more like if you think of land as a

575
00:28:23,520 --> 00:28:26,720
Speaker 5: like a commutable, reachable area, then we've always at treaded

576
00:28:26,760 --> 00:28:30,439
Speaker 5: more land. Right, It's like the Bronx wasn't useful land

577
00:28:30,720 --> 00:28:33,320
Speaker 5: one hundred and fifty years ago, and now it's extraordinarily

578
00:28:33,359 --> 00:28:36,480
Speaker 5: expensive land because you can get into the productive center

579
00:28:36,520 --> 00:28:40,600
Speaker 5: of New York. And that's actually one thing that loosens

580
00:28:40,800 --> 00:28:43,880
Speaker 5: the sort of trap conditions around land over time. You

581
00:28:43,920 --> 00:28:46,960
Speaker 5: see this in the US, like during the early twentieth century,

582
00:28:47,360 --> 00:28:49,480
Speaker 5: you saw New York, for example, loosen a lot of

583
00:28:49,480 --> 00:28:52,520
Speaker 5: its problems with housing in real estate because suddenly it

584
00:28:52,640 --> 00:28:55,280
Speaker 5: was like the outer boroughs you could populate full of

585
00:28:55,320 --> 00:28:57,960
Speaker 5: people and they could work in Manhattan still and that

586
00:28:58,080 --> 00:29:01,200
Speaker 5: was fine. And that was a bit like multiple New

587
00:29:01,280 --> 00:29:02,880
Speaker 5: York's worths of land to attach to it.

588
00:29:03,040 --> 00:29:05,200
Speaker 2: Oh, here's where we can talk about the hook house system,

589
00:29:05,480 --> 00:29:08,480
Speaker 2: because that ended up being precisely a limiting force on

590
00:29:08,520 --> 00:29:09,160
Speaker 2: this dynamic.

591
00:29:09,400 --> 00:29:09,680
Speaker 3: Yeah.

592
00:29:09,720 --> 00:29:12,520
Speaker 5: Absolutely, And I think that that feeds into the whole

593
00:29:12,760 --> 00:29:16,640
Speaker 5: question of the Chinese welfare system and the fact that

594
00:29:17,320 --> 00:29:21,120
Speaker 5: Chinese households are driven to invest so aggressively in land. Right,

595
00:29:21,440 --> 00:29:25,840
Speaker 5: if your welfare is linked completely to the place where

596
00:29:25,880 --> 00:29:28,760
Speaker 5: you grew up, and you become a migrant worker and

597
00:29:28,760 --> 00:29:32,040
Speaker 5: you go and work somewhere else, then you're going to

598
00:29:32,080 --> 00:29:34,520
Speaker 5: want to invest very aggressively, either in real estate where

599
00:29:34,560 --> 00:29:36,479
Speaker 5: you can in the place you moved to, or in

600
00:29:36,520 --> 00:29:39,240
Speaker 5: real estate at home. It's essentially like a sort of

601
00:29:39,240 --> 00:29:42,320
Speaker 5: savings technique more than it is. Again in China, it

602
00:29:42,320 --> 00:29:44,840
Speaker 5: feels like the land use and the land as an

603
00:29:44,880 --> 00:29:47,600
Speaker 5: asset are more divorced from one another than anywhere else.

604
00:29:47,920 --> 00:29:49,880
Speaker 5: You can see this in the rental yield data right,

605
00:29:50,240 --> 00:29:53,400
Speaker 5: rental yields and rents in China aren't expensive, even in

606
00:29:53,440 --> 00:29:56,160
Speaker 5: you know, the really popular cities, they're not expensive at all.

607
00:29:56,640 --> 00:29:59,320
Speaker 5: So that that sort of gap and the hook how

608
00:29:59,440 --> 00:30:04,640
Speaker 5: system really feeds into this by essentially it's another force

609
00:30:04,760 --> 00:30:07,240
Speaker 5: driving Chinese households to invest more and more and more.

610
00:30:07,280 --> 00:30:09,680
Speaker 4: Sorry, I don't totally understand, explain a lot of what

611
00:30:09,760 --> 00:30:12,000
Speaker 4: is the essence of the system, what are the constraints

612
00:30:12,040 --> 00:30:15,120
Speaker 4: are played, and then clarify like how it how the

613
00:30:15,760 --> 00:30:17,840
Speaker 4: incentives therefore are to enquire.

614
00:30:17,880 --> 00:30:20,520
Speaker 5: But the essence of the system basically is that you

615
00:30:20,640 --> 00:30:23,120
Speaker 5: have a welfare system that is linked to the place

616
00:30:23,200 --> 00:30:26,160
Speaker 5: where you're registered as a household. It's usually the place

617
00:30:26,160 --> 00:30:30,520
Speaker 5: where you grew up, so you're able to get all

618
00:30:30,560 --> 00:30:35,080
Speaker 5: sorts of different ordinary welfare state things based there only.

619
00:30:35,160 --> 00:30:38,040
Speaker 5: And if you move for work it doesn't matter, right,

620
00:30:38,360 --> 00:30:41,120
Speaker 5: So you're not eligible if you're a migrant worker to

621
00:30:41,160 --> 00:30:44,000
Speaker 5: all of those things in Shanghai, for example, And these

622
00:30:44,040 --> 00:30:46,600
Speaker 5: things are really really so you can move there, You

623
00:30:46,640 --> 00:30:50,160
Speaker 5: can move there.

624
00:30:48,640 --> 00:30:51,840
Speaker 3: But you really be a sort of literally a second classes.

625
00:30:52,040 --> 00:30:55,560
Speaker 5: Yeah. Absolutely. So this is without huge amounts of external migration,

626
00:30:55,680 --> 00:30:58,920
Speaker 5: or with almost no external migration. Really, China has been

627
00:30:58,960 --> 00:31:01,360
Speaker 5: able to create system that lots of other parts of

628
00:31:01,360 --> 00:31:05,400
Speaker 5: the world have with very poorly paid migrant workers turning

629
00:31:05,440 --> 00:31:07,160
Speaker 5: up who don't have many rights in the place they'm

630
00:31:07,160 --> 00:31:09,760
Speaker 5: moving to. These are the people doing the construction jobs

631
00:31:09,760 --> 00:31:11,400
Speaker 5: that people doing a lot of low paid work.

632
00:31:11,880 --> 00:31:13,640
Speaker 2: I don't know if this still happens, but I remember

633
00:31:13,680 --> 00:31:16,360
Speaker 2: in the two thousands, if you early two thousands, if

634
00:31:16,360 --> 00:31:18,640
Speaker 2: you walked around Beijing at night and looked in the

635
00:31:18,680 --> 00:31:20,840
Speaker 2: windows of some of the restaurants, the waiters would be

636
00:31:20,840 --> 00:31:23,080
Speaker 2: sleeping on the table because most of them came in

637
00:31:23,160 --> 00:31:26,600
Speaker 2: from the farmland, didn't have access to housing. So kind

638
00:31:26,600 --> 00:31:27,040
Speaker 2: of crazy.

639
00:31:27,280 --> 00:31:27,960
Speaker 5: Yeah. Yeah.

640
00:31:28,160 --> 00:31:31,040
Speaker 4: People who are sort of more on the immigration restrictionist

641
00:31:31,240 --> 00:31:35,200
Speaker 4: end in the US will often say things like, you

642
00:31:35,240 --> 00:31:38,960
Speaker 4: know what, the US has actually fallen behind on productivity

643
00:31:39,200 --> 00:31:42,120
Speaker 4: because we have this endless supply of cheap labor with

644
00:31:42,200 --> 00:31:45,000
Speaker 4: diminished rights. Had we not had that, that would have

645
00:31:45,120 --> 00:31:49,400
Speaker 4: forced US firms to do more capital deepening, maybe invest

646
00:31:49,440 --> 00:31:53,080
Speaker 4: in robots, et cetera. It's interesting because we think of

647
00:31:53,280 --> 00:31:58,600
Speaker 4: China as a very advanced industrial nation, and yet your

648
00:31:58,640 --> 00:32:00,920
Speaker 4: description that makes me think that's story doesn't really hold

649
00:32:00,960 --> 00:32:01,719
Speaker 4: water totally.

650
00:32:01,760 --> 00:32:04,240
Speaker 5: And I understand why people concentrate on that element of

651
00:32:04,240 --> 00:32:07,240
Speaker 5: the Chinese economy. It's like the most exciting, interesting bit,

652
00:32:07,280 --> 00:32:09,800
Speaker 5: and you don't need to downplay in any way the

653
00:32:09,880 --> 00:32:13,120
Speaker 5: advanced manufacturing and sort of hyper futuristic elements of it

654
00:32:13,200 --> 00:32:17,240
Speaker 5: to say that that doesn't represent the overwhelming share even

655
00:32:17,320 --> 00:32:21,840
Speaker 5: Chinese industry, right, which is relatively low productivity, relatively low return.

656
00:32:22,000 --> 00:32:25,520
Speaker 5: It's at scale, but it's not enormously like futuristic, and

657
00:32:25,600 --> 00:32:28,680
Speaker 5: certainly once you get out of the manufacturing industry, you

658
00:32:28,720 --> 00:32:31,720
Speaker 5: are going into the standard East Asian development model, where

659
00:32:31,720 --> 00:32:36,520
Speaker 5: the service industries productivity is absolutely awful, right, really really

660
00:32:36,560 --> 00:32:40,200
Speaker 5: poor service productivity. So yeah, I think it's a the

661
00:32:40,240 --> 00:32:42,360
Speaker 5: two things are true at once. Right. It's large and

662
00:32:42,400 --> 00:32:44,960
Speaker 5: it contains multitudes, but it's not most of the story

663
00:32:44,960 --> 00:32:45,160
Speaker 5: to me.

664
00:32:45,680 --> 00:32:49,000
Speaker 2: Do you see any signs that Chinese people are starting to,

665
00:32:49,160 --> 00:32:52,840
Speaker 2: I guess move into other assets like equities, probably not bonds,

666
00:32:52,920 --> 00:32:55,040
Speaker 2: But we know that government has been trying to stimulate

667
00:32:55,040 --> 00:32:57,800
Speaker 2: the entire economy, and I think they've been pretty clear

668
00:32:57,840 --> 00:33:01,120
Speaker 2: they've been trying to lift various asset prices, not house. Well,

669
00:33:01,200 --> 00:33:04,120
Speaker 2: now they're doing housing as well. Actually, but do you

670
00:33:04,120 --> 00:33:06,120
Speaker 2: see any signs that people are starting to change their

671
00:33:06,160 --> 00:33:08,360
Speaker 2: minds on something like Chinese equities.

672
00:33:08,600 --> 00:33:11,600
Speaker 5: I think to make the Chinese equity market really work,

673
00:33:11,720 --> 00:33:15,240
Speaker 5: you would have to make a series of deep political

674
00:33:15,280 --> 00:33:18,560
Speaker 5: decisions about the way China's run that I think they

675
00:33:18,600 --> 00:33:22,200
Speaker 5: probably won't make, which is basically things like Jack mal

676
00:33:22,240 --> 00:33:26,160
Speaker 5: when he got really slapped down right. Basically, you need

677
00:33:26,200 --> 00:33:28,840
Speaker 5: to allow that sort of behavior, right, You need to

678
00:33:28,880 --> 00:33:31,320
Speaker 5: allow the innovation. You need to allow the entrepreneurs to

679
00:33:31,360 --> 00:33:33,440
Speaker 5: sort of go nuts. You can't have all of these

680
00:33:33,480 --> 00:33:36,720
Speaker 5: restrictions around. We don't want the young people playing video games,

681
00:33:36,800 --> 00:33:38,719
Speaker 5: and we want it to be driven into this kind

682
00:33:38,760 --> 00:33:41,360
Speaker 5: of robotics and not that kind, and all of those

683
00:33:41,400 --> 00:33:45,400
Speaker 5: sort of limitations are going to I would say, prevent

684
00:33:45,480 --> 00:33:48,160
Speaker 5: that from happening. There's too much political activity that a

685
00:33:48,280 --> 00:33:49,440
Speaker 5: Chinese company has to do.

686
00:33:49,560 --> 00:33:53,600
Speaker 4: What about just like the hyper competitiveness. I mean, people say, well,

687
00:33:53,840 --> 00:33:57,080
Speaker 4: there's hundreds of ev companies in China, most of them

688
00:33:57,160 --> 00:34:00,880
Speaker 4: are going to fail, and yet you read about launches.

689
00:34:01,600 --> 00:34:03,600
Speaker 4: I don't know, like this is one of those stories

690
00:34:03,880 --> 00:34:06,360
Speaker 4: that I really like because it feeds all my biases,

691
00:34:06,680 --> 00:34:07,640
Speaker 4: So therefore.

692
00:34:07,280 --> 00:34:08,640
Speaker 3: I'm sort of very skeptical of it.

693
00:34:08,680 --> 00:34:11,920
Speaker 4: But I've probably repeated it's like, oh, like China's stock

694
00:34:11,960 --> 00:34:14,480
Speaker 4: market hasn't done well because they're too good at capitalism,

695
00:34:14,480 --> 00:34:16,799
Speaker 4: because it's too competitive, because they really get it, they're

696
00:34:16,840 --> 00:34:20,960
Speaker 4: really competing has driven all this abundance and so forth, Like,

697
00:34:21,080 --> 00:34:24,200
Speaker 4: is there something to that that, Like, the reason Chinese

698
00:34:24,239 --> 00:34:27,839
Speaker 4: equities haven't done well is because with such intense competition,

699
00:34:28,120 --> 00:34:31,040
Speaker 4: with the provinces all having their normal champions, that none

700
00:34:31,120 --> 00:34:33,920
Speaker 4: can really sort of capture something that might reflect sort

701
00:34:33,920 --> 00:34:34,880
Speaker 4: of monopoly rents.

702
00:34:34,960 --> 00:34:37,320
Speaker 5: I think there's definitely something to that in a way.

703
00:34:37,480 --> 00:34:38,959
Speaker 5: When I think about that, I would say, it's true

704
00:34:38,960 --> 00:34:42,680
Speaker 5: when you're subsidizing the competition, it's not true competition in general. Right,

705
00:34:42,920 --> 00:34:45,319
Speaker 5: It seems crazy to me to say, like, not bad

706
00:34:45,360 --> 00:34:49,239
Speaker 5: if everyone's getting like cheap inputs. There's lots of competition.

707
00:34:48,880 --> 00:34:51,680
Speaker 4: But the provinces still do have a role in subsidizing,

708
00:34:51,800 --> 00:34:56,160
Speaker 4: either implicitly or directly in subsidizing their national champions. And

709
00:34:56,200 --> 00:34:59,480
Speaker 4: when she says, yeah that we want to make spark

710
00:34:59,520 --> 00:35:02,279
Speaker 4: plugs big priority for the next five years they all

711
00:35:02,320 --> 00:35:05,080
Speaker 4: go They still do that, right, They scramble to find

712
00:35:05,120 --> 00:35:06,200
Speaker 4: their local spark plus.

713
00:35:06,600 --> 00:35:09,520
Speaker 5: And I think there's lots of like American examples and

714
00:35:09,560 --> 00:35:11,799
Speaker 5: examples elsewhere. And sector is where people said, oh, it's

715
00:35:11,800 --> 00:35:14,360
Speaker 5: too competitive, no one will ever achieve it. Uber is

716
00:35:14,360 --> 00:35:17,440
Speaker 5: a good example. People said this would never work. It

717
00:35:17,480 --> 00:35:19,719
Speaker 5: does work, right, So there is a scale that you

718
00:35:19,760 --> 00:35:22,800
Speaker 5: can build where I think you develop a value even

719
00:35:22,840 --> 00:35:25,879
Speaker 5: in a market with it's really competitive and really sort

720
00:35:25,880 --> 00:35:28,680
Speaker 5: of low entry costs. But you won't do that if

721
00:35:28,760 --> 00:35:31,800
Speaker 5: every other imagine a world with Uber but where every

722
00:35:31,880 --> 00:35:36,000
Speaker 5: other rideshare company was aggressively subsidized every time above a

723
00:35:36,000 --> 00:35:38,799
Speaker 5: certain market cap, then yeah, you wouldn't have Uber at

724
00:35:38,800 --> 00:35:39,600
Speaker 5: a certain market cap.

725
00:35:39,760 --> 00:35:42,279
Speaker 2: I'm really curious because again, the book goes through it's

726
00:35:42,280 --> 00:35:45,560
Speaker 2: not just China. It goes through all sorts of land models.

727
00:35:45,600 --> 00:35:48,279
Speaker 2: But what was the most interesting one that you looked at.

728
00:35:48,520 --> 00:35:51,880
Speaker 2: Not only does it go across different ways that different

729
00:35:51,880 --> 00:35:55,000
Speaker 2: countries treat land across the world, it also goes across time,

730
00:35:55,120 --> 00:35:57,439
Speaker 2: like three thousand years worth of human history.

731
00:35:57,520 --> 00:35:59,759
Speaker 5: Yeah, I should emphasize to anyone listening. I was really

732
00:35:59,760 --> 00:36:01,560
Speaker 5: interest and the China stuff, but it's not a not

733
00:36:01,640 --> 00:36:05,040
Speaker 5: a child. The two most interesting to me, one of

734
00:36:05,040 --> 00:36:06,920
Speaker 5: which because I live there and I think it's the

735
00:36:06,960 --> 00:36:10,240
Speaker 5: most unusual and fascinating real estate system in the world

736
00:36:10,400 --> 00:36:14,359
Speaker 5: is Singapore, which has defied in many ways a lot

737
00:36:14,400 --> 00:36:18,719
Speaker 5: of the limitations that other countries have seen. And one

738
00:36:18,719 --> 00:36:20,040
Speaker 5: of the first parts of the book, which is like

739
00:36:20,080 --> 00:36:24,800
Speaker 5: Colonial America, where there were all of these efforts to

740
00:36:24,840 --> 00:36:27,759
Speaker 5: turn land into money. Right, these colonists get to a

741
00:36:27,800 --> 00:36:31,319
Speaker 5: place where they have essentially to them, infinity land. It

742
00:36:31,400 --> 00:36:33,399
Speaker 5: just keeps going on and on. They don't know where

743
00:36:33,440 --> 00:36:35,759
Speaker 5: it stops. It seems to be relatively fertile and good

744
00:36:35,800 --> 00:36:38,360
Speaker 5: and more people turn up, but have shortages and cash

745
00:36:38,400 --> 00:36:41,000
Speaker 5: and labor and everything else. And there's all of these

746
00:36:41,080 --> 00:36:43,920
Speaker 5: efforts to turn land into money with public and private

747
00:36:44,000 --> 00:36:47,160
Speaker 5: land banking projects. I found all of that like absolutely fascinating.

748
00:36:47,320 --> 00:36:49,600
Speaker 5: It's not actually something I knew very well before starting

749
00:36:49,600 --> 00:36:53,240
Speaker 5: to research the book. Yeah, so Singapore and Colonial America.

750
00:36:53,280 --> 00:36:55,800
Speaker 4: What is it about Singapore that makes it? I actually

751
00:36:55,840 --> 00:36:57,359
Speaker 4: I don't know why. I sort of assumed they did

752
00:36:57,400 --> 00:37:00,279
Speaker 4: the same ninety nine year they leason that this is

753
00:37:00,280 --> 00:37:02,120
Speaker 4: the most interesting thing. They start off with all the

754
00:37:02,160 --> 00:37:04,879
Speaker 4: inherited things that Hong Kong starts off with. Up until

755
00:37:04,920 --> 00:37:07,239
Speaker 4: the middle of the twentieth century, the cities have run

756
00:37:07,320 --> 00:37:10,000
Speaker 4: on very very similar lines. Hong Kong goes off in

757
00:37:10,040 --> 00:37:12,600
Speaker 4: one direction and Singapore goes off in another. And the

758
00:37:12,600 --> 00:37:18,520
Speaker 4: Singaporean direction is basically, how do you maximize home ownership permanently?

759
00:37:18,719 --> 00:37:20,960
Speaker 4: How do you have a sustainable model for making sure

760
00:37:20,960 --> 00:37:23,399
Speaker 4: people can still afford to come in. So what they

761
00:37:23,440 --> 00:37:26,920
Speaker 4: have is this bizarre public private system. I say bizarre,

762
00:37:27,160 --> 00:37:30,719
Speaker 4: you know, it's very impressive where the government owns most

763
00:37:30,760 --> 00:37:32,600
Speaker 4: of the city's land, not all of it like in

764
00:37:32,640 --> 00:37:34,239
Speaker 4: Hong Kong, but most of it, and they have the

765
00:37:34,280 --> 00:37:38,239
Speaker 4: Housing and Development Board that builds housing estates. They then

766
00:37:38,440 --> 00:37:41,719
Speaker 4: sell the units in the housing estates to Singaporean citizens.

767
00:37:42,120 --> 00:37:44,560
Speaker 4: You can only own one, you can't own multiple and

768
00:37:44,600 --> 00:37:47,520
Speaker 4: rent them out. There are restrictions on how long you

769
00:37:47,520 --> 00:37:49,480
Speaker 4: can hold them before but there's an internal market, but

770
00:37:49,480 --> 00:37:52,320
Speaker 4: you can only sell them to Singaporean systems and permanent residents.

771
00:37:52,800 --> 00:37:54,960
Speaker 4: The amount of building is done to make sure that

772
00:37:55,000 --> 00:37:59,240
Speaker 4: everyone can afford it. They've really divorced usage from speculations totally.

773
00:37:59,280 --> 00:38:01,799
Speaker 5: They divorce users from speculation and a place that I

774
00:38:01,800 --> 00:38:04,920
Speaker 5: think most people think of as very capitalistic, free market,

775
00:38:04,960 --> 00:38:08,200
Speaker 5: low tax has basically decided this asset class land and

776
00:38:08,280 --> 00:38:10,960
Speaker 5: real estate, this is something different and we're doing Yeah,

777
00:38:11,000 --> 00:38:12,759
Speaker 5: we're doing a different thing with this. Were you know,

778
00:38:12,840 --> 00:38:17,000
Speaker 5: the normal forces simple. There's so much international money center

779
00:38:17,040 --> 00:38:18,640
Speaker 5: of like capital and trade flows is.

780
00:38:18,680 --> 00:38:22,320
Speaker 4: Rich commercial reachs though in Singapore they do. You remember

781
00:38:22,400 --> 00:38:24,440
Speaker 4: this because when I was in Singapore, I saw the

782
00:38:24,480 --> 00:38:26,839
Speaker 4: ticker symbol on this out of a few buildings. It's

783
00:38:26,840 --> 00:38:29,840
Speaker 4: like you could invest in this but anyway, Yeah.

784
00:38:29,080 --> 00:38:32,080
Speaker 5: But commercial state a little bit different. But the residential

785
00:38:32,080 --> 00:38:34,640
Speaker 5: and real estate and they've done this in again, they

786
00:38:34,640 --> 00:38:36,400
Speaker 5: decided land was different. They have a thing called the

787
00:38:36,480 --> 00:38:40,000
Speaker 5: Land Acquisition Act, which really allowed them to strip a

788
00:38:40,000 --> 00:38:43,640
Speaker 5: lot of people of their land extraordinarily low prices through

789
00:38:43,760 --> 00:38:47,319
Speaker 5: the sort of sixties, seventies, eighties, and it's allowed them

790
00:38:47,320 --> 00:38:50,120
Speaker 5: to do something very very different. I don't know whether

791
00:38:50,160 --> 00:38:53,560
Speaker 5: most countries can sustain the idea that capitalism works for

792
00:38:53,600 --> 00:38:55,680
Speaker 5: everything but not land, and which is just going to

793
00:38:55,680 --> 00:38:59,480
Speaker 5: be One Singaporean senior politician described it to me as piracy.

794
00:39:00,040 --> 00:39:03,200
Speaker 5: They did in the seventies and eighties. Pennies on the

795
00:39:03,239 --> 00:39:06,200
Speaker 5: dollar basically demanding people handover this land so it could

796
00:39:06,200 --> 00:39:08,479
Speaker 5: be housing for Singaporeans. But it has worked very well.

797
00:39:08,760 --> 00:39:12,839
Speaker 2: Okay, so China probably cannot pursue the Singaporean model at

798
00:39:12,880 --> 00:39:15,920
Speaker 2: this point, right, But why can't they institute like a

799
00:39:16,000 --> 00:39:20,480
Speaker 2: stronger social safety net so that the burden of saving

800
00:39:20,680 --> 00:39:24,920
Speaker 2: for retirement, for health emergencies, things like that doesn't always

801
00:39:25,200 --> 00:39:28,719
Speaker 2: necessarily fall on the citizens and therefore they have to

802
00:39:28,800 --> 00:39:31,440
Speaker 2: invest in highly speculative assets.

803
00:39:31,719 --> 00:39:34,400
Speaker 5: Yeah, they should, is the answer. There seems to be

804
00:39:34,560 --> 00:39:37,320
Speaker 5: huge political opposition to doing this at the top of

805
00:39:37,360 --> 00:39:40,440
Speaker 5: the Chinese Communist Party, and it's bizarre again because you

806
00:39:40,480 --> 00:39:42,719
Speaker 5: talk to someone like Richard Ku and it'll give you,

807
00:39:42,800 --> 00:39:45,160
Speaker 5: it'll explain why if you don't do this, this is

808
00:39:45,160 --> 00:39:48,560
Speaker 5: the consequence, right Japan is the consequence long term stagnation.

809
00:39:48,760 --> 00:39:50,920
Speaker 5: It's going to be really difficult. They should do all that,

810
00:39:51,239 --> 00:39:54,719
Speaker 5: and maybe they will be sort of drummed into it eventually,

811
00:39:54,960 --> 00:39:58,880
Speaker 5: because I think the alternative is both stagnation and lots

812
00:39:58,880 --> 00:40:02,799
Speaker 5: and lots of trade friction with the people you're exporting to,

813
00:40:03,040 --> 00:40:04,240
Speaker 5: as we've already seen.

814
00:40:04,600 --> 00:40:06,719
Speaker 3: Right, because it's not just the US, is it.

815
00:40:06,760 --> 00:40:09,200
Speaker 4: Everyone's sort of no one there got to be a

816
00:40:09,200 --> 00:40:11,000
Speaker 4: lot of countries that are not thrilled.

817
00:40:11,160 --> 00:40:13,839
Speaker 5: No one's totally happy with it. It's a weird mix

818
00:40:13,880 --> 00:40:15,920
Speaker 5: because for some countries it's like, if you're not going

819
00:40:16,000 --> 00:40:18,560
Speaker 5: to make some of these items, right, If you're a

820
00:40:18,560 --> 00:40:21,440
Speaker 5: country that's simply not gonna make evs, then why should

821
00:40:21,440 --> 00:40:24,120
Speaker 5: you care about getting the really cheap evs. But everyone's

822
00:40:24,120 --> 00:40:26,239
Speaker 5: got something to be upset about. In Southeast Asia, it

823
00:40:26,280 --> 00:40:28,640
Speaker 5: was always steel when I was there. Everyone wants to

824
00:40:28,719 --> 00:40:30,719
Speaker 5: have their own local steel sector, and they don't like

825
00:40:30,719 --> 00:40:33,960
Speaker 5: the Chinese dumping of steel in Indonesia. They don't want

826
00:40:34,000 --> 00:40:37,520
Speaker 5: like cheap Chinese direct to consumer merchandise coming in because

827
00:40:37,560 --> 00:40:40,200
Speaker 5: it messes with their small and medium sized businesses. I

828
00:40:40,239 --> 00:40:42,279
Speaker 5: guess for most of these countries, the difficulty is do

829
00:40:42,320 --> 00:40:44,640
Speaker 5: you want to pick a fight with the Chinese government.

830
00:40:44,960 --> 00:40:47,319
Speaker 5: It's not an obvious question like it is in the US.

831
00:40:47,480 --> 00:40:50,960
Speaker 4: I guess I just have one last question. And you know,

832
00:40:51,080 --> 00:40:55,400
Speaker 4: the sort of Singapore example is what reminded me like

833
00:40:56,640 --> 00:40:59,319
Speaker 4: land is weird, Like the idea that you could have

834
00:40:59,320 --> 00:41:02,560
Speaker 4: a capitalist system except for residential land.

835
00:41:03,320 --> 00:41:06,240
Speaker 3: A lot of people actually kind of think that.

836
00:41:06,360 --> 00:41:10,399
Speaker 4: You hear, what is the Georgists right? And they think

837
00:41:10,480 --> 00:41:12,400
Speaker 4: like no land is special and we need to have

838
00:41:12,440 --> 00:41:14,960
Speaker 4: these like special taxes on ownership.

839
00:41:15,160 --> 00:41:17,040
Speaker 3: And yeah, we love free markets.

840
00:41:17,040 --> 00:41:20,399
Speaker 4: But again, maybe because there's always so much land, they're

841
00:41:20,440 --> 00:41:22,399
Speaker 4: not making much more of it, et cetera. Maybe there

842
00:41:22,400 --> 00:41:25,160
Speaker 4: really is something to do. It's sort of unfair, Like

843
00:41:25,480 --> 00:41:27,279
Speaker 4: I get born in the year nineteen eighty and I

844
00:41:27,520 --> 00:41:30,040
Speaker 4: already a bunch of people already own the land around me,

845
00:41:30,560 --> 00:41:33,000
Speaker 4: which doesn't really seem fair. It's like I was just born,

846
00:41:33,040 --> 00:41:36,360
Speaker 4: where's my chance? Like we're never going to go to

847
00:41:36,400 --> 00:41:39,680
Speaker 4: the pure Singapore model, But are there things that we

848
00:41:39,760 --> 00:41:43,319
Speaker 4: could do with the tax system that would like sort

849
00:41:43,360 --> 00:41:47,520
Speaker 4: of further hammer home the idea that residential land is

850
00:41:47,520 --> 00:41:47,960
Speaker 4: for living.

851
00:41:48,160 --> 00:41:50,319
Speaker 5: Yeah, I think there's dozens of different things you could do.

852
00:41:50,360 --> 00:41:52,080
Speaker 5: But I mean one of the big things is that

853
00:41:52,120 --> 00:41:55,920
Speaker 5: the legacy of Henry George and the politicians in municipal

854
00:41:55,960 --> 00:41:58,200
Speaker 5: America that really loved Henry George is that America has

855
00:41:58,239 --> 00:42:02,239
Speaker 5: relatively high property taxes. Anyway, you can do all sorts

856
00:42:02,239 --> 00:42:04,160
Speaker 5: of things with property taxes to lean more of the

857
00:42:04,239 --> 00:42:07,120
Speaker 5: value on the land rather than the structures. Right, Yeah,

858
00:42:07,120 --> 00:42:08,800
Speaker 5: lots of states, lots of cities have done this. I

859
00:42:08,800 --> 00:42:10,800
Speaker 5: think it's going to be increasingly important in the future

860
00:42:10,920 --> 00:42:14,839
Speaker 5: because what you're going to get is increasingly people inheriting

861
00:42:14,920 --> 00:42:17,560
Speaker 5: homes from their parents when you can't afford them. And

862
00:42:17,600 --> 00:42:20,359
Speaker 5: then that main store of wealth is about whether your

863
00:42:20,400 --> 00:42:22,360
Speaker 5: parents decided to buy in the right place at the

864
00:42:22,440 --> 00:42:24,400
Speaker 5: right time. I talked to a lot of seventy year

865
00:42:24,440 --> 00:42:26,440
Speaker 5: olds will be like, wow, I picked my two bedroom

866
00:42:26,520 --> 00:42:28,920
Speaker 5: flat in nineteen seventy three, and yes I bought it

867
00:42:28,960 --> 00:42:31,719
Speaker 5: for three and a half dollars, but it's mine. That's

868
00:42:31,719 --> 00:42:33,839
Speaker 5: going to be a lot less tenable I think when

869
00:42:33,960 --> 00:42:36,680
Speaker 5: it's handed down wealth. So yeah, there's loads and loads

870
00:42:36,719 --> 00:42:39,239
Speaker 5: of things. And Henry George is in the book. The

871
00:42:39,280 --> 00:42:42,439
Speaker 5: political consequences have George's and fell apart in there too.

872
00:42:42,760 --> 00:42:45,000
Speaker 2: All right, Mike Bird, thank you so much for coming

873
00:42:45,040 --> 00:42:46,439
Speaker 2: on our thoughts and grabs on the book.

874
00:42:46,560 --> 00:43:00,560
Speaker 5: Thank you very much for events Joe.

875
00:43:00,600 --> 00:43:03,680
Speaker 2: That was really great and genuinely the book is great.

876
00:43:03,880 --> 00:43:04,080
Speaker 3: Yeah.

877
00:43:04,080 --> 00:43:06,880
Speaker 4: I love talking to Mike once again. I'm just like,

878
00:43:07,480 --> 00:43:09,279
Speaker 4: hasn't he been like on the internet as much as

879
00:43:09,320 --> 00:43:09,520
Speaker 4: we have?

880
00:43:09,600 --> 00:43:10,920
Speaker 3: How do you? How did you write a book of

881
00:43:11,000 --> 00:43:11,479
Speaker 3: this time?

882
00:43:11,640 --> 00:43:13,800
Speaker 4: I have no idea, don't understand how anyone writes a book,

883
00:43:13,960 --> 00:43:18,280
Speaker 4: especially a very serious book on a very big, meaty topic.

884
00:43:18,400 --> 00:43:21,000
Speaker 2: But I just want tweeting constantly.

885
00:43:20,560 --> 00:43:23,520
Speaker 3: Well tweeting. He tweets a lot. Speaking of propect, It's

886
00:43:23,560 --> 00:43:25,160
Speaker 3: like it would be one thing if you were never online.

887
00:43:25,200 --> 00:43:26,560
Speaker 3: He's online as much as I am.

888
00:43:26,880 --> 00:43:29,440
Speaker 2: Okay, you know you asked that question about whether or

889
00:43:29,520 --> 00:43:33,200
Speaker 2: not Chinese cities are actually futuristic. Yeah, I have an

890
00:43:33,200 --> 00:43:35,439
Speaker 2: anecdote on this point. I think I might have said

891
00:43:35,440 --> 00:43:38,040
Speaker 2: it before, but China is the place where I went

892
00:43:38,120 --> 00:43:43,000
Speaker 2: to both the most impressive bathroom ever in like a

893
00:43:43,080 --> 00:43:48,120
Speaker 2: highly futuristic luxury shopping mall in Beijing, and also the

894
00:43:48,160 --> 00:43:50,800
Speaker 2: worst one ever in my entire life, which was a

895
00:43:51,719 --> 00:43:56,120
Speaker 2: rural It was basically a hole in the ground.

896
00:43:56,200 --> 00:43:57,600
Speaker 5: Right, Yeah, terrible.

897
00:43:57,920 --> 00:44:01,239
Speaker 3: China. It's a land of contradiction. Thank you.

898
00:44:01,360 --> 00:44:03,280
Speaker 2: Thank you for highlighting the cliche.

899
00:44:03,680 --> 00:44:07,040
Speaker 4: No, I thought like it. It always did seem very interesting.

900
00:44:07,120 --> 00:44:10,520
Speaker 4: It still does that. Like there's so much speculation that

901
00:44:10,560 --> 00:44:12,840
Speaker 4: happens in China, and I always found.

902
00:44:12,640 --> 00:44:15,760
Speaker 3: That to be a little weird. I also just find.

903
00:44:15,560 --> 00:44:19,240
Speaker 4: The idea of like buying a property, but it's actually

904
00:44:19,239 --> 00:44:21,440
Speaker 4: really you're not buying it early. Buying the property for

905
00:44:21,480 --> 00:44:23,440
Speaker 4: like seventy five years to be a little weird.

906
00:44:23,600 --> 00:44:25,560
Speaker 2: But on the other hand, that kind of exists in

907
00:44:25,600 --> 00:44:26,200
Speaker 2: New York.

908
00:44:26,200 --> 00:44:28,839
Speaker 4: Yeah, yeah, and in the US, like, look, we pay

909
00:44:28,920 --> 00:44:32,719
Speaker 4: property taxes and perpetuity, which means to some extent that

910
00:44:32,760 --> 00:44:35,920
Speaker 4: when you own something, you are paying a permanent rent

911
00:44:36,000 --> 00:44:38,360
Speaker 4: to use it, and if you stop paying that rent,

912
00:44:38,480 --> 00:44:41,959
Speaker 4: then you could theoretically lose it. So maybe it's less

913
00:44:41,960 --> 00:44:44,960
Speaker 4: weird than I thought it is. Actually we should do

914
00:44:45,000 --> 00:44:49,400
Speaker 4: more on Singapore specifically, like but also you know, like

915
00:44:49,560 --> 00:44:51,760
Speaker 4: I'm not sure to your point in the very beginning

916
00:44:52,080 --> 00:44:56,279
Speaker 4: whether people actually want the divorce between usage and speculation.

917
00:44:56,800 --> 00:44:59,720
Speaker 4: I just think that for several of the last decades

918
00:45:00,160 --> 00:45:01,600
Speaker 4: didn't have to choose. You got to live in and

919
00:45:01,640 --> 00:45:02,080
Speaker 4: he made.

920
00:45:01,920 --> 00:45:02,560
Speaker 3: A lot of money.

921
00:45:02,640 --> 00:45:05,160
Speaker 2: I think it's very hard to get off the train

922
00:45:05,280 --> 00:45:07,760
Speaker 2: once it's kind of rolling, right, And that's the problem

923
00:45:07,800 --> 00:45:09,799
Speaker 2: that we're seeing in China, and now they're trying to

924
00:45:09,840 --> 00:45:13,080
Speaker 2: walk this very fine tightrope where it's like, we don't

925
00:45:13,080 --> 00:45:17,120
Speaker 2: want to make everyone incredibly poor, but we also want

926
00:45:17,120 --> 00:45:19,640
Speaker 2: to depress housing and the importance of housing in our

927
00:45:19,680 --> 00:45:22,560
Speaker 2: economy in order to boost manufacturing and productivity.

928
00:45:22,719 --> 00:45:26,319
Speaker 4: This is why, again my proposal affordable housing for one

929
00:45:26,400 --> 00:45:29,640
Speaker 4: year and then it goes back to being really expensive.

930
00:45:29,760 --> 00:45:31,840
Speaker 2: All right, well you can suggest that, Joe, Yeah, we

931
00:45:31,920 --> 00:45:32,400
Speaker 2: go to Baja.

932
00:45:32,480 --> 00:45:34,480
Speaker 3: I'll run on that. I'll run on that. I'll run

933
00:45:34,520 --> 00:45:35,360
Speaker 3: on that platform.

934
00:45:35,400 --> 00:45:36,480
Speaker 5: All right. Shall we leave it there?

935
00:45:36,560 --> 00:45:39,240
Speaker 2: Yeah, this has been another episode of the All Thoughts podcast.

936
00:45:39,320 --> 00:45:42,560
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

937
00:45:42,200 --> 00:45:44,359
Speaker 4: And I'm joll Wisenthal. You could have followed me at

938
00:45:44,360 --> 00:45:44,960
Speaker 4: the Stalwart.

939
00:45:45,160 --> 00:45:46,120
Speaker 3: Follow our guest.

940
00:45:45,840 --> 00:45:48,759
Speaker 4: Mike Byrd He's at Birdie Word and check out his

941
00:45:48,840 --> 00:45:51,680
Speaker 4: book The Land Trap, A New History of the World's

942
00:45:51,760 --> 00:45:56,400
Speaker 4: Oldest Asset class Follow our producers Carmen Rodriguez at Carmen Arman,

943
00:45:56,760 --> 00:45:59,840
Speaker 4: dash El Bennett at Dashbot and kel Brooks at kel Brooks.

944
00:46:00,040 --> 00:46:02,160
Speaker 4: From our odd Lags content, go to Bloomberg dot Com

945
00:46:02,160 --> 00:46:04,839
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946
00:46:04,880 --> 00:46:06,879
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947
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948
00:46:10,600 --> 00:46:12,759
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949
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00:46:18,440 --> 00:46:21,319
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