Housing bubble -- Chinese style.

[DCBob]

From Bloomberg:

Danny Deng and his bride-to-be dreamed of their lives together as they walked through the showroom for a Shanghai housing project almost three months ago. Pooling his own and his parents’ savings, a loan from his boss and a 1.1 million yuan ($172,000) mortgage, he bought an apartment and secured his fiancee’s hand.

On Nov. 19, Deng faced off a ring of security guards three rows deep wearing camouflage and carrying shields as he joined more than 100 homeowners rallying in front of the development’s sales office. His transformation from newlywed to street protester came after China Vanke Co. slashed prices for future buyers at the Qinglinjing complex, erasing about 20 percent of the value of his three-bedroom unit overnight.

<snip>
“This is certainly sending a very alarming signal,” said Cheng Li, a senior fellow at the Brookings Institution in Washington. “If property prices really go down, there will be a serious political crisis led by the middle class.”

<snip>
Analysts at Credit Suisse Group AG say prices may fall 10 percent this year and another 10 percent in 2012. Huang Yiping, a Hong Kong-based economist at Barclays Plc, said the drop would be between 10 to 30 percent in the next 12 months.

more: http://www.bloomberg.com/news/2011-11-29/shanghaied-home-buyers-turn-protesters-as-shattered-dreams-vex-government.html

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Sounds like China is about to go through what the US went through. I suspect the Chinese leadership will not manage it well and I also suspect the people wont take it well either.

[johnd83]

1. This is just getting started

There is a LOT of private lending (p2p) that is completely unregulated and many middleclass chinese have invested in. Along with that, all the infrastructure lending is being paid for by land sales by local governments. Once the bubble crashes these will both unwind and cause massive fiscal problems.