More about unsustainable trends in China. From Charles Hugh Smith at oftwominds.com:
Who’s going to buy the tens of millions of empty flats held as investments?
I’ve been writing a lot about China recently because it’s becoming increasingly clear that China’s economy is slowing and the authority’s “fixes” are not turning it around. That means the engine that pulled the global economy out of the 2009 recession has stalled.
Many people see China’s slowdown as the source of the next global recession, but few seem to realize the extreme vulnerability of China’s vast housing market and the many knock-on consequences of that market grinding to a halt.
I’ve just completed a comprehensive review of China’s housing market, and now realize it’s much worse than the consensus understands.
The consensus view is: Sure, China’s housing prices are falling modestly outside of Beijing and Shanghai, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008.
The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector.
China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing.
To continue reading: Could China’s Housing Bubble Bring Down the Global Economy?
