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.