When will the China bubble pop?

Quote from pikachu9:

I've been to China on different occasions the past several years. Every time I go I can't help but notice the numerous cranes next to newly developing skyscrapers. Their massive infrastructure spending and construction has been going on for years fueling their economy. I think the anecdotal reports of overbuilding are true. Furthermore, the price of copper tells part of the story. Classic head and shoulders topping pattern that's barely holding on to 3.00 support level. I think the breaking of that support would be concurrent with the anticipated hard landing in China. China in past years has accounted for ~ 40% of copper demand worldwide.
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There's a ton of building but at the same time if you see how crowded everything is, it seems like China needs more infrastructure than less.

I have read some short ideas on China that claim the ratio of infrastructure spending to GDP is unsustainablely high, and I've also read research that demonstrates China's amount of infrastructure spend is consistent with other developing countries in similar stages of development. I'm not a macro guy so honestly I don't know. I do note that many seem convinced on a China bubble, but appear to understand the situation far less than I do.

The issue with a lot of bad loans and inefficient lending among banks is a big one, but again, no real data exists to determine the extent of the problem. If the problem is not huge, you can view inefficient lending as a government subsidy in the same way Fannie and Freddie lose a lot of money in a downturn and serve as subsidies for the housing market. The Chinese government is certainly less levered than the US government, especially considering it owns a ton of state assets that can be monetized.

A big thing going for China is that the savings rate among consumers is so high. Most western countries have consumers that are tapped out. Chinese consumers have money and there is a good runway of grow if you can get them to spend more of it.
 
in china big cities including shanghai, foreigners cannot by real estate period. citizens can only buy 1 property to be used as primary residence, no investment / 2nd home can be purchased. Mortgage is 25% down payment minimum.

and the real estate market is still red hot even with those insane restrictions, due to real demand not bubble. All the government has to do is loosen one of those policies and any notion of a real estate crash goes away.

you will be waiting a long time for the china real estate market to crash like the us did.

all those bullsht stories about empty cities etc..are cherry picking in the middle of the desert noone cares about. It's like blasting detroit's boarded up houses in the front page and say that's indicative the us housing market is going to crash again!
 
Quote from newguy05:

in china big cities including shanghai, foreigners cannot by real estate period. citizens can only buy 1 property to be used as primary residence, no investment / 2nd home can be purchased. Mortgage is 25% down payment minimum.

and the real estate market is still red hot even with those insane restrictions, due to real demand not bubble. All the government has to do is loosen one of those policies and any notion of a real estate crash goes away.

you will be waiting a long time for the china real estate market to crash like the us did.

all those bullsht stories about empty cities etc..are cherry picking in the middle of the desert noone cares about. It's like blasting detroit's boarded up houses and say the us housing market is going to crash again!
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This is one of the most interesting phenomenon in China. You have people buying very expensive real estate with cash from all those savings. When people use a mortgage they pay 50 to 20% down payment, and mortgage rates aren't cheap, so as the lending standards aren't bad by western standards. On top of that you have restrictions on the number of investment properties you can buy. Yet home prices to median income is completely sky high, worse than it was in the US during the bubble.

Part of it is a part of Chinese culture, as they love real estate as an investment or store of value. If you don't own a house by a certain age, it is shameful and hard to get married.

I do think there is a bit of a bubble in Chinese real estate prices, and eventually that may pop and cause pressure on the general economy. Perhaps there will be a slow landing, as the government there has more tools and seems more adept at managing the market.

But I am skeptical that this means the overall economy is a bubble.
 
Right after their equivalent of Bubble Ben famously says what housing bubble, what problems with the housing market. Remember that speech?
 
Quote from OddTrader:

I agree, too many variables, every direction is possible!
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My guess is it's not impossible that China alone would lead the world's economic stability, if managed well, for the next 20 years, mainly because of the growth of its huge domestic consumption. Just 2 cents.
 
Quote from doublet83:

When people use a mortgage they pay 50 to 20% down payment, and mortgage rates aren't cheap, so as the lending standards aren't bad by western standards. On top of that you have restrictions on the number of investment properties you can buy. Yet home prices to median income is completely sky high, worse than it was in the US during the bubble.
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majority of the bad loans are not from residential mortgages but from munis that funded local infrastructure projects in small to mid sized cities that have no chance of reaching the profitability required to repay the loans.

It is a problem, but also need to remember the banks in china are owned by the government. China has a $3 trillion + surplus last time i checked and there is no concept of morale hazard nor going through the congress/senate for approval to bailout the banks. So if a 08 type crisis does become likely, all the government has to do is simply write a check to the banks and that would be the end of it. A couple scapegoats from the banks will be arrested and sentenced to death but there is little chance for systematic risk.

China's decline will be caused by its own success as its labor forces become too expensive and if it fails to transform itself from manufacturing to a consumption based economy in time. But we are talking about decade from now at least and a slow decline not a crash.

Government realized this years back and is trying very hard to transform the economy to be less dependent on manufacturing and promote domestic consumption (with somewhat limited success so far).
 
Quote from newguy05:

majority of the bad loans are not from residential mortgages but from munis that funded local infrastructure projects in small to mid sized cities that have no chance of reaching the profitability required to repay the loans.

It is a problem, but also need to remember the banks in china are owned by the government. China has a $3 trillion + surplus last time i checked and there is no concept of morale hazard nor going through the congress/senate for approval to bailout the banks. So if a 08 type crisis does become likely, all the government has to do is simply write a check to the banks and that would be the end of it. A couple scapegoats from the banks will be arrested and sentenced to death but there is little chance for systematic risk.

China's decline will be caused by its own success as its labor forces become too expensive and if it fails to transform itself from manufacturing to a consumption based economy in time. But we are talking about decade from now at least and a slow decline not a crash.

Government realized this years back and is trying very hard to transform the economy to be less dependent on manufacturing and promote domestic consumption (with somewhat limited success so far).
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Possible, mostly agree.
 
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