Overheating China Can’t Be Cooled

1 Mar

China’s rapidly overheating real estate bubble cannot be cooled, lending further weight to predictions that the Chinese economy will bust inside ten years:

Even among Western analysts who live and work in China, the major role played by municipal governments in fueling China’s increasingly speculative real estate boom is underappreciated. The actions of those local authorities are at the heart of China’s property bubble, and they explain why the central government’s attempts to cool lending and construction are failing.

The key difference between China’s current real estate bubble and the U.S. bubble that popped in 2007 is this: In the U.S., it was individuals and lenders who made overleveraged, speculative bets via subprime mortgages. In China, explained Northwestern University researcher Victor Shih to NPR, the leveraged debt fueling the speculation comes from local governments, which have borrowed trillions of dollars worth of funds from China’s banking system to develop real estate projects in their jurisdictions.

Rudd Labor, Treasury Secretary Ken Henry, RBA Governor Glenn Stevens, and a lazy, blinkered mainstream media can no longer try to blame Barnaby Joyce’s warnings for scaring off the Sino-cyclical angel on which they have pinned all their hopes for economic prosperity.

After all, there is a growing chorus of leading international economists and financiers all around the world who are warning of a China implosion.  Perhaps our talking-head economic commentators, and the EPIC FAILURES currently in charge of the Australian economy, would like to start ridiculing and smearing all of them too?

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