China’s Once-Hot Economy Is Turning Cold

You’ve seen the ghost cities before. They stretch across the outskirts of dozens of major urban areas, criss-crossed by empty highways. The rows of modern skyscraper apartments are all sold to absent investors. There’s little doubt these scenes create compelling television… But beyond, the gaudy, empty cities, China is now facing another property-related problem: housing slaves.

SocGen's Wei Yao is out with an interesting note about Chinese housing. Despite various warnings over the years, the market remains red hot. This is a major concern to the government, which is worried about an eventual collapse, but also the social implications of housing getting so expensive so fast.

“The central banks’ gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back” Eric Sprott tells us. He also says that these “bullion bank” intermediaries are probably turning around and selling their gold to China. China, by the way, is the mostly likely catalyst to set off the “zero hour” scenario we told you about on Friday…

Carnegie Endowment submits: Facing an overheating economy and a growing bubble in residential property markets, China began to tighten monetary policy in early 2010.

BEIJING — China’s factory output growth was surprisingly feeble in April and fixed-asset investment slowed, rekindling concerns that a nascent recovery is stalling and adding to pressure on policymakers to take action to stimulate the economy. However, China’s already-easy monetary policy and rising home prices complicate the options available to Beijing’s new leadership, leading some analysts to say that any response could be limited to fiscal measures.

On the one hand, Bloomberg today tells us retail demand for stocks is as hot as ever:

By Simon Johnson In most industrialized countries, attention now shifts to some form of “fiscal austerity” – meaning the need to bring budget deficits under control.  In the UK, for example, there is an active debate between those on the right of the political spectrum (who want more cuts sooner) and those to the left (who would rather delay cuts as much as possible).  There is a similar discussion across the European continent – although the precise terms of the debate depend on exactly which party was most profligate during the long boom of the 2000s.