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- Building Permits in U.S. Jump to Five-Year High – Bloomberg
Building permits climbed in October to the highest level in more than five years, signaling the U.S. residential real-estate market will strengthen in 2014.
Applications (NHSPATOT) for new construction rose 6.2 percent to a 1.03 million annualized rate, beating all forecasts in a Bloomberg survey of economists and the highest since June 2008, according to Commerce Department figures issued today in Washington. Other data showed property values last quarter increased by the most in more than seven years.
Consumers are very pessimistic though.
- Do Property Managers Need Insurance? – Multifamily Blogs
While the also insured designation protects property managers from exposures at the location they manage, they need to be covered for injury and property damage at their own office, where the property owner's coverage won't reach.
May we add that concerning any property manager, it behooves the manager to have full copies of the policies (owner's, management firm's, etc.) and to go over them with an insurance broker to aid in determining whether there are gaps in the coverage, etc., leaving the manager exposed.
Do not rely on lawyers or other non-insurance experts for this task.
If the manager is not an insured under adequate coverage and the owner refuses to adequately cover the manager, the manager should still seek coverage. The owner should probably expect a higher management fee on account of any proper and applicable coverage the manager obtains as a result.
- Do Lower Prices Mean Lower Levels of Customer Service | Refuse Specialists
This blog [post] is written by a property manager, who had correspondence with their waste removal representative after hiring a waste broker to lower their waste expenses.
- What Blackstone's Home Securitization Means to You
… if large investors are able to get financing at 2% from securitization, it makes a lot of financial sense for them to buy properties at 5-7% cap rates — they are getting a 3-5% spread between their income stream and their debt payment.
Traditionally, they've wanted more than 3-5%; but right now, larger spreads are harder to come by even for the Blackstones of this world.
- Features You Will Love | Happy Inspector
Do you use a software program like this for your property inspections?
Here's a list of features that our customers love about Happy Inspector.
We'd like to know what you think about such apps.
Source … http://happyinspector.com/features/
- The Capital Spectator: Is European Disinflation/Deflation Coming To The US?
Looking at all the numbers presents a mixed bag for deciding if inflation in the US is set to take an unhealthy turn lower. But this much is clear: at this stage, a further decline in pricing pressure would be a dark sign for the economy. The only thing worse than low inflation and sluggish economic growth is low inflation that's slipping further toward the dark side if the economy is still facing headwinds.
- mainly macro: Why no public fury over austerity?
UK economics: Simon Wren-Lewis is in a "take no prisoners" mood:
Austerity is either a
major technical error, or a political con.
- The Chinese Steamroller Is Already Sputtering – Justin Fox – Harvard Business Review
Good for long-term investment in US real estate:
For his new book The Myth of America's Decline, Josef Joffe spent a lot of time studying and thinking about China — the current leading challenger to U.S. economic and political supremacy. While many portray China's economic and political ascent as an epochal event, Joffe sees the country as yet another "fast riser" following a path previously traveled by Germany, Japan, and the Asian "tigers."
What that means, in Joffe's view, is that however impressive China's rise has been, the country now faces many of the same hurdles that slowed down the other rising nations — plus some obstacles of its own making.
I'm also looking at sources of future strength. What's enduring? Demography is one thing, and that's where the Chinese are really in bad shape, whereas the United States is getting younger. Why? Immigration, plus whatever else makes Americans procreate more often. Immigration, it turns out, is probably the single most important asset you can acquire in our world. It's no longer coal or even oil. And there the U.S. at this point beats everybody hands down.
- Disruptions: If It Looks Like a Bubble and Floats Like a Bubble … – NYTimes.com
Because so much in real-estate values is based upon the Internet sector in places such as Silicon Valley, we thought we'd include this article on whether there's another dot-com-type tech bubble.
In Silicon Valley, pointing out this sort of thing is considered a bit impolite.
If there is a social-media, etc., bubble and it pops, real-estate values for places housing those entities will pop too. The surrounding real estate will also pop. It will ripple throughout the economy.
- Micro Apartments: Modular Building in San Francisco
… the design and materials in use are following hyper-dense, hyper-green, hyper-efficient urban development trends. The inside has modern finishes and a minimalistic décor concept. Light, both natural and artificial is carefully placed and guided so there isn't a waste of energy and you can direct your finances in other more important areas.
- The One Metric Far More Important Than Cap Rate or ROI for Real Estate Investors
Use your own analytics to determine which property class is going to yield the better long term return after factoring extra vacancies, turn costs, maintenance costs, eviction costs, etc.
- Pro Forma Income Statement – Forecasting Rental Property Performance
This is a post designed to market particular software, but that doesn't mean it's not informative. We have no financial interest in the software company, and there are competing products out there. We just think it's wise that investors and potential investors be aware of the various analyses that can be, and really often should be, done concerning existing and potential real-estate investments.
The pro forma income statement is a commonly-used cash flow forecasting report used by real estate investors to evaluate the future financial performance of real estate investment property.
If you use this, or another like-type program, we'd love to hear about your experiences.
- Fire Prevention Tips: Identifying High Risk Apartment Residents | Property Management Insider
Properties can take a big step toward fire safety and prevention simply by identifying those who are at high risk of fires and educating residents about the importance of fire safety and prevention. Knowing your residential makeup and understanding language limitations and the ability to comprehend fire safety that go along with it can help property managers not only prevent catastrophic fire damage, but also increase the chances of saving lives.
- Chart of the Week: France Takes a Turn for the Worse | Alpha Now | Thomson Reuters
While the situation in Germany continues to improve — albeit slowly — the French economy appears to have taken a turn for the worse. Both the manufacturing and services surveys disappointed, coming in at 47.8 and 48.8 respectively, potentially foreshadowing a return to technical recession. Both Insee and the Banque de France forecast 0.4% growth in Q4, following a 0.1% contraction in Q3. The PMIs are clearly inconsistent with this sort of rebound.
- Short sales falling out of favor with lenders as prices surge | Inman News
Short sales were all the rage in late 2011 and early 2012, but surging demand has loan servicers with distressed properties on their hands going back to traditional foreclosure auction sales and bank-owned sales, where cash is often king, according to the latest report from data aggregator RealtyTrac.
- CBI Remains Virtually Unchanged In Third Quarter
WASHINGTON, D.C. — As the economy gradually recovers, nonresidential construction spending remains unchanged—a good sign the downturn in the industry has stopped, according to the Construction Backlog Indicator (CBI) produced by Associated Builders and Contractors (ABC).CBI also remained nearly unchanged between the second and third quarters of 2013.
"The most recent CBI reading suggests much of the growth next year is likely to occur after the first quarter of 2014, and only if a successful resolution to lingering federal budgetary issues emboldens decision-makers," said ABC Chief Economist Anirban Basu. "Even with successful negotiations in Washington, D.C., ABC expects publicly financed segments to continue to be hamstrung by reluctant state and local government budget officials."
- Housing Market's Slow Season: Best Time to Shop for a Home? | AOL Real Estate
Applies to investors looking to purchase too:
Here are key things that prospective homebuyers might want to consider before putting their quest on winter hiatus.
It's true that there are some key areas that probably can't be inspected or tested if it's cold or snow is on the ground, such as air conditioning units (which could be damaged in operated at temperatures below 60 degrees) and in-ground sprinklers. On the other hand, it's a prime time to see how the heater works and how well-insulated the home is. Some other things that might be much more evident include: roof leaks, a basement that floods, pipes that freeze, and inadequate lighting. And how easy is it to get to and from the property during bad weather? If it's in a rural area, are you likely to get snowed in, see a road washed out or be trapped by a mudslide?
And as for those uninspectable areas: If you can't wait until the weather warms to have those checked, explore a contingency built into the contract that takes care of any possible repairs.
- Top money priorities: Bills and debt – CBS News
Why many rent:
(MoneyWatch) A tough job market and stagnant real wages have caused Americans to focus on basic needs when citing their top money priorities, according to the third annual Bankrate.com Financial Security survey.
Some 36 percent of those surveyed said their top goal was just to pay the monthly bills, which is up four percentage points from last year. Their second-most pressing economic goal this year would be to pay down debt, with 20 percent of respondents citing it as their biggest priority.
These two issues were also the top priorities last year, though their weights may reflect slightly worsening perceptions of the economy. …
"Americans' financial priorities reflect the difficult economic realities of high unemployment, stagnant income and the absence of new high-paying jobs," said Greg McBride, CFA, Bankrate.com's senior financial analyst.
- How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme — Again – naked capitalism
It looks like Blackstone needs an excellent existing-tenant PR campaign.
They can't be expected to know it all right off the bat, but they certainly could perhaps hire a number of seasoned managers (at least as consultants) and then listen to them and do what they suggest.
In our view, they'll need to apply a human touch, always: clear and (most importantly) reasonable expectations.
The cash flow analysis in the documents sent to investors assumes that 95% of these homes will be rented at all times, at an average monthly rent of $1,312. It's an occupancy rate that real estate professionals describe as ambitious.
There's one significant way, however, in which this kind of security differs from its mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at least the assumption (often incorrect due to botched or falsified paperwork from the banks) that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single home-rental bond blows up, thousands of families could be evicted, whether or not they ever missed a single rental payment.
"We could well end up in that situation where you get a lot of people getting evicted… not because the tenants have fallen behind but because the landlords have fallen behind," says Baker.
We think that tenants would not be evicted. If they were, the cash flow would stop, the profits would stop, or at least the losses would be much greater. Stranger things have happened though.
- Mortgage News: Fannie, Freddie to cut multifamily financing
Not a good idea right now:
The agency that oversees Fannie Mae and Freddie Mac is going ahead with plans to scale down their financing of multifamily mortgages next year despite heated opposition from industry groups.
DeMarco seems to have a knack for making unpopular decisions. His plan to reduce the maximum loan limits for Fannie and Freddie has also met with industry-wide condemnation.
We don't expect Ed DeMarco to last in the job.
We need to be focused on the economy as a whole and not the welfare of Wall Street financiers at the expense of nearly everyone else.
Do you agree?
- Forever Changed: Since recession, CRE owners drive property management issues | AZRE Magazine
A decade or so ago, commercial real estate property managers might be considered a generic lot.
Not that they didn't have a full roster of responsibilities. They kept the buildings looking spiffy, made sure the trees were trimmed and the elevators inspected, and they provided standard financial reports of income and expenses to often faceless pension plan accountants or other absentee building owners.
To those investors, the bottom line was the only determinant of how well the property manager was caring for their assets.
Then the recession happened. …
- Focus For Many Consumers? Just Paying Bills | Bankrate.com
The economy may be recovering, but consumers are still struggling to make ends meet. More than a third of Americans — 36 percent — say in a survey commissioned by Bankrate that their top financial priority is simply to stay current or get caught up on paying bills.
Another 1 in 5 say their main concern is to pay down debt such as credit cards and student loans, according to the survey accompanying Bankrate's November Financial Security Index.
- Title Industry Centralization Will Happen, What Will Small Agents Do About It? | Mortgage News | Daily National and State Headlines
The recent announcement that Fidelity and Lender Processing Services Inc. (LPS) have reached an agreement to develop and implement a managed title and closing services platform should not surprise anyone. Title underwriters have, for years, grappled with the problem of how to manage and reduce the risk they face by allowing independent agents to handle searches, policies and disbursements at residential closings without the type of supervision that would ensure uniform quality and risk management. The inability of underwriters to manage this risk in the last financial crisis led to significant financial losses for them in litigation costs and claims, and resulted in increased fees for the CPL, efforts to find surety coverage for agents, and enhanced supervision. However, the risk remains, and as the market cycle exits the refinance boom stage and enters the more risky purchase business stage, the old fears of significant losses are sure to have re-surfaced.
- Buy Commercial Real Estate? | AdviceIQ
Want a good way to build wealth? Own commercial real estate. But only if you are willing to undertake due diligence that may not be readily available online, make a big hands-on commitment to mind the investment and exercise enormous patience.
Real estate is one of the largest asset classes in the world. The family home is the largest asset many middle-class Americans own. And real estate makes up a significant portion of the net worth of many wealth accumulators.
… the lure of investing in a tangible asset like real estate is enticing for high-risk tolerant investors who need a sense of control and interaction with their investments. If you are among them, here are a few guidelines that may keep you on a profitable path. …
- Opposing Views for the Role of Government in the Housing Market | Mortgage News | Daily National and State Headlines
A very balanced report:
Phillip Swagel, a former assistant secretary for economic policy at the Treasury Department under President George W. Bush, contends that, had the 10 percent equity requirement been in place prior to 2008, the federal GSEs (Fannie Mae and Freddie Mac) would have easily made it through the crisis."
Mark Zandi, chief economist of Moody's Analytics, agrees, stating that the requirement would provide a "Fortress financial foundation" and "All but eliminate taxpayers' exposure to risk."
… possible compromises might include some strengthening of the affordable housing guarantees, slight reductions in the industry's 10 percent equity requirement, and limits on the prices of the homes being financed. Trade-offs could also include some relaxation of the Dodd-Frank Act's provisions.
Read the whole thing.
- JPMorgan, mortgages drag down third-quarter U.S. bank profits | Reuters
(Reuters) – Huge legal costs at JPMorgan Chase & Co (JPM.N) and slowing demand for mortgages as interest rates rose caused the first decline in bank profits since 2009, a third-quarter regulatory update said on Tuesday.
Higher interest rates lowered the value of fixed income assets and sapped demand for mortgage refinancing, the Federal Deposit Insurance Corporation said.
Net interest margins benefited from the rise, but they were still lower than a year ago.
A $4 billion increase in litigation expenses at one institution – not named by the FDIC but identified as JPMorgan by a source – was the main reason why net income at U.S. banks declined 3.9 percent year-on-year.
"Had it not been for that, the upward trend in earnings would have continued," FDIC Chairman Martin Gruenberg said at a news conference.
- Sober Look: Why Fed's taper is essential to stabilize agency MBS liquidity
CS: – Liquidity in the MBS market could come under pressure in the coming months due to Fed's settled purchases exceeding 100% of gross issuance of non-specified conventional 30-year pools. Tradable float in conventional 30-year MBS should decline between 6% and 30% during the year, increasing the risk of a potential liquidity disruption in the market under longer taper delay scenarios.
As a result some of the private participants, particularly banks, have been reducing their agency MBS holdings.
We thought it was due to the potential lessening in price and increase in yield upon tapering.
We wonder whether "liquidity" is the proper term here. They are still liquid because the Fed is still buying regardless of the percentage (100%+ of issuance). What are we missing if anything?
- Top 10 cheapest U.S. cities to rent an apartment – CBS News
In these cities, if you're shelling out $1,200 a month in rent, you're getting a luxury condominium downtown or a lakeside, three-bedroom home with a backyard and a garage.
- Loanowners drowning in debt: 21% underwater, 40% can't move up – OC Housing News
Given lender's success, they will delay foreclosures and deny short sales to keep distressed inventory off the market for as long as it takes to reflate the housing bubble. Unless something changes, this means MLS inventory will remain low, and house prices will remain artificially high due to the imbalance between supply and demand. Perhaps in areas like ours where prices are near the peak, the pace of lender liquidations will quicken, but until those 21% who are underwater or the 40% who can't make a move-up are in a better position, between 20% and 40% of our normal supply simply won't be there.
- New insurance offers lifeline against negative equity – The Denver Post
AmTrust Financial Services has filed with the state to sell insurance policies that will protect homeowners who go upside down on their mortgages.
The new Underwater Mortgage Protection plan promises to make a borrower with negative equity whole on a first mortgage and cover transaction costs when it comes time to sell.
The Consumer Federation of America, however, argues that concerned homeowners would do better to self-insure by taking the money spent on premiums and other spare cash to pay down principal more quickly. Not only is the product late to the game, but it also relies on fear-based marketing, critics charge.
What do you think of that insurance product?
- Fed Reveals New Concerns About Long-Term U.S. Slowdown – Bloomberg
Federal Reserve Chairman Ben S. Bernanke and his colleagues are suffering through their own form of cognitive dissonance: revealing new concerns about the economy's long-term prospects even as they forecast faster growth in 2014.
Worker productivity, a key component of an economy's health, has risen at an annual clip of 1 percent during the last four years, as the U.S. has struggled to recover from the worst recession since the Great Depression. That's less than half the 2.2 percent average gain since 1983, according to data from the Labor Department in Washington.
"Slower growth in productivity might have become the norm," the central bankers noted at their Oct. 29-30 meeting, according to the minutes released last week.
In a Nov. 20, 2012, speech in New York, Bernanke said the financial crisis and its aftermath probably "reduced the potential growth rate" as discouraged workers dropped out of the labor force and businesses held back on investment.
He voiced hope, though, that these drags on expansion wouldn't last long. "The effects of the crisis on potential output should fade as the economy continues to heal," he said.
- Negative Rate Experiment in Denmark Seen Stretching to 2015 – Bloomberg
Though Danish banks stopped short of charging their clients to hold deposits, for fear of losing customers, lenders elsewhere did. State Street Corp. and Bank of New York Mellon Corp., two of the world's biggest custody banks, revealed last year they were charging clients for Danish krone deposits.
Those banks can afford to lose Danish customers. If US banks tried to do that to American customers were the US to go negative on excess reserves, we think it would probably cause a bank war to keep and gain more customers.
- Sober Look: 3 key facts about Japan's deteriorating demographics
Japanese seniors are having a greater impact on bringing down JGB yields than BOJ's unprecedented QE effort (see post).
Wells Fargo: – In addition to reducing potential growth, the aging of the population in Japan is having a downward influence on interest rates [chart below]. According to the IMF, elderly households prefer to avoid risk and feel more comfortable with safe assets such as Japanese Government Bonds; so much so that the downward effect on rates from elderly purchases has a bigger impact than purchases by the Bank of Japan.
- Philippine growth slowest in more than a year, steels for typhoon rebuilding | Reuters
Despite the expected slowdown, most analysts agree the loss of output from typhoon Haiyan, which killed at least 5,560 people and reduced most of what was in its path to rubble, will not derail an economic revival overseen by President Benigno Aquino.
The economic planning agency said the government expects full-year GDP growth will likely be close to the high end of Manila's 6-7 percent goal, and is confidently targeting 6.5 to 7.5 percent in 2014.
That optimism is shared by analysts, who see only a temporary setback for Southeast Asia's rising economic star as an expected jump in activity from typhoon rebuilding makes up for the near-term loss of output.
They need it.
- Evictions soar in San Francisco as real estate prices rise – Capitol and California – The Sacramento Bee
"The main issue is that San Francisco has not built any replacement rental housing to match the job growth that's gone on the last few years," said Janan New, executive director of the San Francisco Apartment Association. "When you don't build or supply more, there is going to be a squeeze on existing housing stock. That drives rents up, and people have to find a way to buy."
- New Construction Threatens Multifamily's Good Run – Multifamily Executive Magazine
…forecasts show that the tide is going to turn, sooner rather than later, and this will require a change in behavior on the part of investors for the next few years. In fact, construction is going to increase not only relative to recent history, but also relative to longer historical trends. New completions in the top 82 markets for 2013 are expected to total roughly 124,000 units. This is on par with the long-term historical average of roughly 120,000 units per year. However, for 2014, new completions are expected to total about 164,000 units, well above the historical long-term average.
Although demand for apartment units will remain rather robust, it is unlikely the market will be able to absorb this many units, causing vacancy to increase. This would represent a pronounced change from the past four years, when vacancy was compressing rapidly as demand far outpaced a subdued level of new completions.
Markets are going to have to contend with moderating demand, as well. This should cause the national vacancy rate to continue to drift higher, from about 4.1 percent at the end of 2013 to 4.9 percent at the end of 2017. However, that's the silver lining, as this increase would still leave vacancy tight, at below 5 percent. Thus, the increase in construction activity, while notable, isn't the death knell for the apartment market. Vacancy now is at a 12-year low, so even if it slowly increases, the market will remain very tight, creating an environment in which rents will continue to grow in excess of inflation.
- BBC News – S&P upgrades Spain's economic outlook
The economic outlook for Spain has improved, says ratings agency Standard and Poor's (S&P).
The debt-laden country, whose banks came under severe pressure during the financial crisis, has been struggling to improve its public finances.
S&P raised its assessment from negative to stable and re-affirmed its BBB- long-term sovereign credit rating.
Austerity measures have led to riots, while unemployment has now reached 27%.
During the Great Depression in the US, non-farm unemployment was approximately 25%.
- BBC News – UK household debt hits record high
The news of the record debt level may increase concerns that the UK's recovery is based on increased borrowing, rather than growth sustained by rising incomes.
However, the total debt figure is not adjusted for inflation, and the Bank of England has pointed out that – relative to income – debt levels have been falling.
The ratio of debt to household income has fallen from 167% at the start of the financial crisis, to 140% now.
- BBC News – Eurozone unemployment falls for first time since 2011
The eurozone's unemployment rate has fallen for the first time since early 2011, according to official data.
The jobless rate across the 17 countries using the euro currency fell to 12.1% in October, the first fall since February 2011, the European Union's statistics office Eurostat said.
About 19 million people are out of work across the region.
- Debt Time Bomb? New Record Sum 'On Tick'
Mortgage approvals have hit their highest level since February 2008 while total household debt reached a new record last month, according to figures released by the Bank of England.
The Bank reported that 67,701 home loans worth £10.5bn were dished out in October – just 24 hours after confirming that its Funding for Lending Scheme (FLS) would no longer support mortgage borrowing from January to help prevent the market overheating and future debt risks.
It also highlighted rising consumer debt levels in separate figures which reflected concern over the property market, as total household debt hit a new high of £1.43trn in October.
The figures add weight to fears of a 'perfect storm' for the economy amid unsustainable debt levels, rising prices and low wage growth.
See the article immediately above for more info.
- Nouriel Roubini warns that policymakers are powerless to rein in frothy housing markets around the world. – Project Syndicate
Signs that home prices are entering bubble territory in these economies include fast-rising home prices, high and rising price-to-income ratios, and high levels of mortgage debt as a share of household debt. In most advanced economies, bubbles are being inflated by very low short- and long-term interest rates. Given anemic GDP growth, high unemployment, and low inflation, the wall of liquidity generated by conventional and unconventional monetary easing is driving up asset prices, starting with home prices.
What we are witnessing in many countries looks like a slow-motion replay of the last housing-market train wreck. And, like last time, the bigger the bubbles become, the nastier the collision with reality will be.
- Huge demand for XXL warehouses – Independent.ie
A new report from CBRE has found that the changes in supply chains and online retailing in particular has contributed to … a significant increase in demand for XXL warehouses (warehouses more than 50,000sqm).
- Getting the Volcker Rule Done – NYTimes.com
December is deadline time for one of the most important unfinished pieces of businesses [sic] from the Dodd-Frank financial reform legislation: the Volcker Rule. Based on an important intervention by Paul A. Volcker, the former chairman of the Board of Governors of the Federal Reserve System, in late 2009, the "rule," whose legal intent is enshrined in Dodd-Frank, is simple — end proprietary trading by very large banks.
Remember, too, that the losses at Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS were in no small [degree] due to forms of proprietary trading; Citigroup also springs to mind. I testified to the Senate Banking Committee in early 2010 in favor of the rule; John Reed, the former chief executive of Citigroup, was on the same side. We were opposed by the chief risk officer of JPMorgan Chase, among others.
Subsequently, JPMorgan Chase suffered big losses in a proprietary bet that has become known as the London Whale.
- UK sees highest quarterly investment total since 2007
UK commercial real estate activity in the third quarter reached levels that have not been seen since 2007, with over €14 bn worth of transactions compared with €11.4 bn in Q2 2013.
The trend in the UK is in line with the rest of Europe which has seen a major pick-up in investment activity, according to the latest research published by CBRE.
- Bank of England cuts mortgage support to avoid housing bubble | Reuters
Britain's economy and its housing market have staged an unexpectedly strong turnaround since the FLS [Funding for Lending Scheme] was launched by the BoE and finance ministry in July 2012 in an effort to spur the long-delayed recovery by unblocking credit markets.
"Given the access to credit for households now … it would no longer be appropriate or necessary for us to have our foot on the accelerator. It's better to shift into neutral," BoE Governor Mark Carney said.
Another – much-criticized – government program to aid the housing market, Help to Buy, remains in place.
- Record Spread Blowout Sparks Mini-Crisis Warning: China Credit – Bloomberg
Chinese companies' borrowing costs are climbing at a record pace relative to the government's, increasing the risk of defaults and prompting state newspapers to warn of a limited debt crisis.
The nation's total debt, led by state-owned enterprises and local governments, may exceed 200 percent of gross domestic product, according to a Barclays Plc report yesterday. Implicit government guarantees and soft budget constraints have encouraged excessive borrowing and increased the potential for defaults, the analysts wrote.
These guarantees are now looking increasingly uncertain with China's Communist Party saying at the Nov. 9-12 plenum that it would encourage private investment in state-owned enterprises, which have enjoyed sheltered monopolies for years, and allow competition. The leadership pledged also to give markets a "decisive" role in the allocation of resources.
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