China over the last three decades has gone from a 3rd world country into a global economic powerhouse, whose money finances much of the industrial world, most notably the U.S. But with China's enormous growth and its government providing plentiful cheap money, an unsustainable real estate boom began.
Now to try to let the air gently out of the real estate bubble, the Chinese government is tightening money and lending standards, raising the cost of funds and taking other actions. As a result, price have begun falling in Shanghai, Beijing, Guangzhou, Shenzhen and some other major cities.
Because a lot of speculative buildings went up, as the bubble bursts, there will be an abundance of empty apartments and falling prices. As in the U.S. the lack of construction and real estate financing will put a lot of people out of work and hurt the Chinese economy. Real estate investment plays a substantial role in China, 12% of its Gross Domestic Product and its drop will reduce the amount of money China has to invest elsewhere in the world at a time when the U.S. and Europe are desperate for funding.
Dick
To learn more, please see "Shanghai Slumps Amid Real-Estate Slowdown," The Wall Street Journal http://online.wsj.com/article/SB10001424053111903596904576515314278100504.html
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