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The problem’s fairly serious. As I understand it, real estate is really the only form of investment open to the Chinese people, and often, the property is bough
by strawhatguy 4y ago
The problem’s fairly serious. As I understand it, real estate is really the only form of investment open to the Chinese people, and often, the property is bought and sold under the ‘greater fool theory’: no one actually lives in these buildings. Many don’t have working utilities. It is, (or was) an appreciating asset, handed from one to another until you can actually buy a livable place, or just make a ton of money off of, or Use it to buy foreign property, ie something more real.
So when building stopped altogether, due to government crackdown of developer loans, there aren’t any new entrants, and no greater fool to buy the worthless property, a lot of wealth might disappear in China.
It’s like US 2008, but much worse. Or perhaps US 2023… who knows?
- autokad 4y agoif you are right and this is a 2008 style real estate bust in China, I wonder if there will be global contagion.
- deleted 4y ago[deleted]
- strawhatguy 4y agoPossibly. Although the pains the government takes to separate its people from the West, hard to predict how exactly it’ll effect elsewhere, if there’s a Chinese crash.
- jollybean 4y agoProbably not. The world depends on US banks and have a lot invested there, not so with China. It will hurt, but the sideshow is that a lot of the stuff they make in China may get cheaper for us.
- manquer 4y agoWhen Chinese firms cannot get financing for manufacturing at all or cheap enough, because Chinese banks are hemorrhaging money from real estate, it will create problems for everyone.
- jollybean 4y agoThe difference is, CCP controls the central bank and can print money for that purpose.
- manquer 4y agoCCP and the People's bank of China are not setting monetary policy in a vacuum, the Chinese currency operates within a managed floating exchange and has been internationalizing for last decade, that constraints the actions PBC can take without crashing the currency or the systems they have been building up to make CNY the(a) international reserve currency.
- jollybean 4y agoYes, true, but they have sufficient capital controls and foreign reserves they can almost do what they want.