China Property Bubble Will Not Destabilize China's Economy

[kerrywins]

http://www.businessinsider.com/uh-oh-now-jim-rogers-is-warning-about-the-chinese-property-bubble-2010-1

At least thats what Jim Roger's is saying.

China's property value is being driven up and will need to pop eventually.

But it won't hurt the overall economy too badly.

[bossy22]

1. Right.......

and the housing bubble in the U.S. had very little effect on our overall economy...

this is not unexpected from an individual who makes money off of chinese prosperity- ofcourse he going to paint a pretty picture; he doesnt want to scare away investors.

This is just like the Enron situation- everyone who had money in enron kept saying "its amazing, great company, huge profits". Then in the early stages of the enron scandle those same people said the issue was just a small discrepency and that the company overall was in good shape. The rest is history

[kerrywins]

2. it is easy to compare US and China...

but he points out why they are a good bit different


I think he said something before to the effect of:

they don't have a federal reserve pouring money into the housing bubble..

they don;t have people buying houses with 0 money down....

the list went on and on....

[bossy22]

3. true, but there is also negatives

China's monetary system has almost no transparency. In fact the government has complete control over the entire financial aspect of that country- they could be pouring money into a housing bubble and not even show it.

People arent buying houses with 0 money down- that is correct, but the housing bubble in china will come from its commercial real-estate, not from its residential. Everyone likes to ignore that there are commercial sky-scrapers in shanghei that are almost completely empty. and lets not forget the New South China Mall which has more than 90% of its tenant spaces empty.

And besides the housing bubble there are other things that should be taken into notice when looking at the country's economic health. If you ever have been to a few restaurants in china you will notice that there are probably more servers than there are customers. I was waited on by 6 different people (i was in a party of 4) and noticed similar things going on at other tables. It is probably safe to say that the job done by 6 people here could easily be done by 1 or 2. This is an issue if the country ever hits a sizable speed bumb.

again in Shenyang a similar thing is going on. Most of the street cleaning is done by hand (individual with a broom) as of 2009, but the government had purchased a fleet of street sweeping vehicles as early as 2004. These vehicles are rarely seen being used (only after major street fairs and other large events) but could be used on a daily basis and save alot of money (exactly what NYC did in the early 1920's). The only problem is that 3/4 of the workforce could be let go.

To conclude this, what i'm trying to say is that the large government surpluses are used to prop up a whole array of different sectors in the economy. Its very likely that they are also propping up the commercial real-estate market