China's real estate bubble

Telegraph:

...

... The sight of a "real" alpine village rising from the grimy industrial suburbs of Huairou outside Beijing provokes an increasingly common reaction when discussing China's property market: "You've got to be kidding me, right?"

With its alpine clock tower soaring 200ft into the murk emitted by nearby chimneys, the "Spring Legend" development offers a Disney-style version of a lifestyle that the residents of Huairou and Beijing can realistically aspire to.

"The air is so fresh it penetrates your heart," waxes the sales brochure, a claim that requires a suspension of belief equally demanded by Spring Legend's ersatz palm trees, faux red English phone boxes and plant pots brimming with plastic alpine flowers.

Making sense of such developments, along with the forests of empty new office blocks in Beijing and the tripling of land prices in some Chinese cities over the last 12 months, is now leading some heavyweight investors to cry "bubble".

"Dubai times one thousand – or worse", was the verdict of Jim Chanos, the short-selling hedge fund manager who was among the first to predict the demise of Enron and says that the Chinese asset bubble will pop "sooner rather than later".

George Soros has also given warning of "overheating", whilst two weeks ago Marc Faber, who runs an eponymous $300m (£196m) fund in Hong Kong went further, predicting "that the Chinese economy will decelerate very substantially in 2010 and could even crash".

Given that property and its ancillary industries account for up to 17pc of Chinese GDP and 25pc of investment in China it is clear that a crash in China's property market would have disastrous consequences – in China and beyond.

...

If China's wealth is wiped out, as appears possible, it will mean the Democrats will have trouble financing all the debt they are running up for so called stimulus spending as well as their health care debacle.

It is ironic that a communist government in China has unleashed the most unrestrained capitalist expansion currently surviving.

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