I know I probably don't have much company, but I don't think China is as powerful as a growing number of people seem to think that they are. Yes, they are, for all intents and purposes, our banker. We also are very dependent on their many exported goods, as our manufacturing sector is dead and buried. But at the same time, they also share a few of our problems in adjusting to this new economic world. A big one is that they must import a great deal of their oil for domestic consumption, as we also do. So, they are just as vulnerable to the peak oil bug as the United States. Another problem we have in common is the subject of real estate. Many contend that a main reason for our economic collapse in 2008 was the ponzi scheme model of our real estate bubble, in that mortgage companies and banks signed off on home loans for people who simply could not afford them. This raised prices into the stratosphere and we all know what happened.
As this article states, China is in the same bubble that we were as it pertains to real estate. There is an oversupply of real estate, and many people simply cannot afford them. One couple mentioned in the article says that they'd need to save their entire salaries for 15 years just to make a down payment on a 3-bedroom house. Over 40 percent of recently built real estate is standing empty, either in the hands of the developer or rich people who just want to flip them in hopes of making a profit.
It's a matter of when, not if, this bubble pops. And when China hurts, there's no question we will be too, as they wouldn't be as willing to keep buying our debt.
1 comment:
This means that china is very down such that they are sharing information In which one person is saying that they have to save their 15 years salary to the down payment.
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