In past posts to this blog, I have expressed concerns that China's policies are not only creating imbalances in global currency markets and trade, but also in their own real estate market.
This a recent post on the topic (July 18):
Another interesting article on the same topic appeared in the WSJ today.
A quote from the article:
"Despite the global downturn, China's economic growth rate remains above 10%. But there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world's second-largest economy down to earth."
Dalmia, Shikha and Anthony Randazzo (2010), "China's Looming Real-Estate Bubble," The Wall Street Journal, Aug. 21.
I think the important word in the above quote is "misallocated." With a huge stimulus program in relation to the size of China’s economy, it is almost certain that the money will be misallocated. Further, the remnants of a command economy will make the situation worse.
Some believe a wave of under performing loans will result with a corresponding drop in housing prices. It is hard to argue against this outcome.
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