Foreign Policy Magazine: China's Bubble Trouble

Inquiring minds are reading an excellent report China Real Estate Unravels by Patrick Chovanec, a professor at Tsinghua University's School of Economics and Management in Beijing, China. The report confirms many of the things I said would happen in regards to the Chinese real estate bubble and GDP. Here are a few items of note.

ASK ordinary people about their own Chinese dream, and you find owning a home is high on the list. But years of rising house prices have put that dream out of reach of many. A slowing economy appeared to take some of the heat out.

World Market Pulse submits:As the famous Bob Marley line suggests, 'you can fool some people sometimes, but you can't fool all the people all the time'. The same is indeed happening in the Chinese realty sector.

Patrick Chovanec submits:One of the big debates among China real estate watchers is whether the country’s apparent property bubble – characterized by soaring purchase prices, low occupancy rates, and slumping rents — is restricted soley to premier cities like Beijing and Shanghai, or extends to 2nd and 3rd tier cities as well.

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.

By Williams Equity Analysis: China’s growth curve has gone parabolic in recent years. For the last couple of decades, China has typically averaged 10% GDP growth, and it has maintained that growth even as a multi-trillion dollar economy. Of course, 10% growth in an economy already worth trillions is an astounding achievement, but it can also lead to severe economic tribulations, such as soaring housing and food prices. China has incurred both of these troubles.

I'M NOW back from China, and I'm going to resist the temptation to draw grand, sweeping conclusions based on two weeks jaunting around the country. I will tell you some of my impressions, however. And I'll start with the primary question on my mind as I left to visit China: how real is its economic growth?

Patrick Chovanec submits:Back in May, I posted a blog entry called “Chinese Catch the Gold Bug,” in which I noted a strong surge in gold-buying by Chinese investors.