A China Bubble?

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There is no end of commentary about China’s real estate bubble, with an even split between those who believe it may pop at any moment, and others who argue it never will.

The alternative ploy — that it doesn’t exist — doesn’t get same airing that it did in the US before the subprime crash. Instead, the “it’s a bubble, but it won’t burst” case is that the bubble is too important to China’s continued growth to be allowed to burst, and — unlike the US — China has the wherewithal to keep it going, at least for a while. (See There will be no Minsky moment for China, March 25; China Can’t Afford to Let Its Housing Bubble Pop, January 30;Templeton Braving China’s Housing Bubble, February 28; Chinese Property Sector Will Not Implode Like America’s Subprime Market, March 11.)

I have deliberately refrained from this discussion, mainly because I prefer to work from data, and I prefer data that — despite some warts — I trust. Until recently there was no publicly available data on China’s debt levels, which is a key metric for me; fortunately that has been remedied recently by the Bank of International Settlements, and I’ll analyse that in a future post. But whatever it reveals, I also concur with the alternative ploy to some extent — that though there is a bubble, China’s capacity and determination to contain problems is much more impressive than the US’s.

But I also wanted to see the phenomena first hand before I commented. Anecdotal and eyewitness evidence counts for something.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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3 Responses to A China Bubble?

  1. ken says:

    It seems a reasonable assumption is that the Chinese government will be much more interventionist than Western governments. The question is how well will it work? Can they deal with an economy that is failing in multiple ways? One thing that will go in their favour is that they won’t be restrained in taking over privately owned enterprises and continuing to operate them, but that may give them many of the problems of previous state-owned enterprises. May be very interesting times.

  2. Steve Hummel says:

    Inherent disequilibrium and either stubborn and irrational belief in its opposite or palliation of it instead of providing actual solutions to it….eventually never works out.

  3. koonyeow says:

    I was in Chengdu, Sichuan last month and I saw lots of empty apartments both around and at the outskirt of Chengdu. If the central bank is obedient, China should be able to go Japanese. What saddened me was the amount of resources being wasted.

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