Last month, China hit another major milestone. It passed Japan and became the second largest economy in the world, leaving only the US in its way. Give China a decade, maybe a little more, and it will inevitably surge into the lead. That’s the accepted narrative.

But then we come across this: the possibility that a mounting real estate bubble might derail China’s plans. This report from Australian public television gives you a disturbing look at how the Chinese government has pumped vast amounts of capital into fixed assets, like commercial and residential real estate, to keep the country’s economy growing. And what they’re left with is what James Chanos (a hedge fund manager) has famously described as “Dubai times one thousand.” Right now, there are an estimated 64 million empty apartments in China, and approximately 30 billion square feet of commercial real estate under construction — equivalent to a five-by-five foot office cubicle for every man, woman and child in China. It’s one thing to read these facts, another thing to see what it all looks like. And that’s the opportunity you get above.

For a more precise roadmap of what a Chinese crash might look like, you should spend some time with this piece in Canadian Business magazine.


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  • Twaikuer says:

    Interesting subject, complete failure at any insight into understanding it.

    China’s economy is fundamentally different than most of the world, in that the monetary system is NOT DEBT-BASED. It is why at a time the West has developed fantastic technology and improved productivity, it is drowning in debt, while China is creating wealth and progress at an unprecedented rate.

    Very few people understand how our monetary systems expand the money supply: by allowing private banks to lend money into existence, ie Fractional Reserve Banking. This is why even thought our economy is strangled by debt, the stated goal of the “stimulus” is to “get credit flowing” which is the same as saying create even more debt. Insanity.

    China is doing what the US colonies and other extremely productive societies historically have done – spend money into existence to create the infrastructure for growth. So comparing this bubble to the US one is apples and oranges.

    If you’re saying “creating money leads to inflation”, that is only true if you create more money than ACTUAL production. Our system is the worst one possible, creating an exponentially increasing amount of money, but every bit of it is debt, no real money to grow the economy and create jobs.

    This subject is so taboo in our media, I was really hoping this report would be a window to show the world what an uncorrupted monetary system can do. In the USA empty houses are the result of a failure of our system, in China it is more likely they are a stockpile of valuable assets ready for the coming boom.

    • Mike says:

      China has an uncorrupted monetary system? Now that’s a novel assertion.

      You say China is creating a stockpile of “valuable” assets — but what determines value, if not supply and demand? Do you wonder what will happen to the millions of Chinese who have invested their life savings in real estate? I personally know a few of them, and I worry.

      • Twaikuer says:

        You’re singing the banker’s version of reality.

        Want a real education on corrupt monetary systems? Watch “The Money Masters” on Google video.

        What is the worth of a house, is it valuable because it is something you can live in, or is its value defined by a monetary system where banks are allowed to create money out of thin air, and expand and contract credit on their whim.

        Why did people invest in this real estate when this huge stockpile of empty buildings obviously exists? They must believe the boom will soon be bringing millions to the level to afford to buy.

        One thing the video omits to tell us is how much of the investment driving up these prices is from foreign investors, I would bet a lot of it is. The Chinese will really have a good laugh when the dollar collapses as the international standard, foreign investors lose money, and Chinese workers will be able to buy at a better price.

        The video notes that the average cost of a house there is about 10 times the average yearly income, that’s the same as here. The difference is here banks create a shortage of real money so the only way to buy is with a 90% loan, there they are creating real money, people will soon be able to buy with savings.

        To compare this to what is happening in this country makes no sense. Here people created a Ponzi scheme of real estate investment, based on our monetary system which is a Ponzi scheme of debt/money-creation. There they are creating money based on real production to create a booming increase in standard of living. It’s the same method the American Founding Fathers used and fought for, spending Colonial Scrip into existence to build an infrastructure for future growth.

        • Mike says:

          Okay “Twaikaur,” you win: Luckily for China, its legitimate economic order was never usurped by a cabal of international bankers meeting in smoke-filled back rooms in 1913. Therefore China’s central planners are free to build an infinite number of apartment units and no harm can possibly come to the people who spend their life savings (and borrowings from the life savings of family and friends) on second condominiums as retirement investments. They are safely out of reach of that wicked Federal Reserve Bank.

          Personally, I think we all owe Glenn Beck an apology: the most influential nutjob in America is obviously Ron Paul.

        • Mike says:

          Okay “Twaikaur,” you win: Luckily for China, its legitimate economic order was never usurped by a cabal of international bankers meeting in smoke-filled back rooms in 1913. Therefore China’s central planners are free to build an infinite number of apartment units and no harm can possibly come to the people who spend their life savings (and borrowings from the life savings of family and friends) on second condominiums as retirement investments. They are safely out of reach of that wicked Federal Reserve Bank.

          Personally, I think we all owe Glenn Beck an apology: the most influential nutjob in America is obviously Ron Paul.

  • Laowai Blog says:

    This is an unbelievable coverage. The number of empty apartments is astounding: 64 million. That will undoubtedly cause trouble or social unrest in the very near future.

    http://laowaiblog.com

  • Though China is trying very hard to capture first place but it will take a lot time to reach there. This is only due to cheap labour, the things are categorized according to quality and demand of different countries. Lets wait for a couple of more years to assess properly.

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