Monday, January 11, 2010

Unfortunately, Stools Are Now Made in China

But wait until their bubble bursts. It could make the rest of our burst bubbles pale in comparison. And you know what they say about all things being interconnected.
New high points, it seems, are reached daily. China surged past the United States to become the world’s largest automobile market — in units, if not in dollars, figures released Monday show. It toppled Germany as the world’s biggest exporter of manufactured goods, according to year-end trade data. World Bank estimates suggest that China — the world’s fifth-largest economy just four years ago — will shortly overtake Japan to claim the number two spot.


Yet China confronts a number of questions about its recent surge, including whether its formula for growth is sustainable, and how it will manage its increasingly strained economic relations with the outside world. Those are likely to prove tricky issues for a leadership unaccustomed to making policy under an international spotlight.

The meltdown cometh. And it shall not be pleasant.

With property prices soaring in key cities, many investors and bankers worry that China has the next great real estate bubble waiting to be popped.

The Chinese government is worried, too. On Sunday, the nation's cabinet, citing "excessively rising house prices" in some cities, said it will monitor capital flows to "stop overseas speculative funds from jeopardizing China's property market." It also said that any Chinese family buying a second home must make a down payment of at least 40 percent.

For investors, many of the usual bubble warning signs are flashing. Fueled by low interest rates, prices in Shanghai and Beijing doubled in less than four years, then doubled again. Most Chinese home buyers expect that today's high prices will climb even higher tomorrow, so they are stretching to pay prices at the edge of their means or beyond. Brokers say it is common for buyers to falsely inflate income statements for bank loans.

Jesus H. Christ, don't they read the news?

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