[rkon]

This may actually be one of the worst times to move to China if you're looking for a fresh start. They've been on a lending binge that's created a massive fixed asset bubble (mainly real estate), and it looks like the correction has recently begun. It's a lot like what happened in the U.S. and Dubai, although on a much larger scale and without the fancy derivatives (at least not yet).

Local governments have actually been forcing developers to borrow more money and buy land from them because they depend on those sales to meet their financial obligations. Real estate agents are offering luxury cars and bars of gold when you purchase an apartment, not to mention buy one get one free deals (the gold and luxury cars allow them to mask declines in the prices of apartments because list prices are still high).

I would stay far, far away... at least for the next 6-12 months so we can see how hard the landing will be. A lot of wealth is potentially going up in smoke and that could wreak havoc on their domestic demand, which is what they were planning to rely on in order to continue their rapid GDP growth (which we now know has been largely artificial).

[gbog]

I have been living in China for 9 years now, and ever since (and certainly before) there's been fears and rumors about real estate bubbles, pollution, war, social crash, etc.

I can understand that China raises fears and disbelief: how could dare a self-proclaimed communist country build the biggest capitalist market in the world? And, moreover, doing it using the exact opposite way as proposed by European social democracies (China has economic freedom without political openness, while France, for instance, has the opposite)

But for anyone coming here in China, from Westerners to Indians to Africans, there is this stone-hard fact: it works, it is happening and it works. In China, they actually have highways all over, they build new factories everyday, they grab millions of peasants out of poverty every year. This process has a lot of difficulties, yes, but who would hope it wouldn't?

So the real estate bubble fear: I can only talk about what I know, and what I have seen. I was in Chengdu for 3 years. An enormous percentage of the city center is actually owned by the local government. Same thing in Beijing, where I have lived for 6 years: in my street the local government did order renovation for all places it is owning during the post-olympic little depression (just a "post coitum anima triste"), so it was very clear: they own half of the hutong street. In Kunming, nearly half of the city is a University. What I mean is that, contrary to many Western govs, Chinese gov still has a strong leverage on real estate. They are already reacting in real time to stabilize the market.

So, sorry to tell you that, but your eruption feels a bit ill-grounded.

[nir]

Since I arrived here at Bob's Turkey Farm, I have been treated with nothing but the finest standards of hospitality a bird could hope for. Gourmet food is literally shoved down my throat - portions seemingly increasing by the day! - and I scarcely need to do anything, which is just as well as by now I've become rather plump.

[I don't really know much about China's economy. This is just about the notion that things will be great since they've been great for a while, and doubters are simply jealous]

[RyanMcGreal]

> how could dare a self-proclaimed communist country build the biggest capitalist market in the world?

Capitalist markets are susceptible to bubbles, panics, crashes and recessions.

[gbog]

True, but maybe less so when grown inside a Communist building.

[hessenwolf]

What is the investment return on buying an apartment? If it isn't a few percent above the government borrowing rate, it's a bubble.

What is the multiple of median gross salary the average dwelling is selling for? If it is up around 5 or higher, it is very probably a bubble.

[anamax]

> But for anyone coming here in China, from Westerners to Indians to Africans, there is this stone-hard fact: it works, it is happening and it works.

I don't think that communism is responsible for China's success.

Yes, the Chinese that I know are not representative, but unless they're 2+ sigmas different, the relevant question is "why has China done so poorly?" After all the people are top-notch, and that's not something new.

The truth is closer to "the Chinese govt is not keeping the Chinese people from succeeding as much as it used to", but that's not much to be proud of.

[mjwalshe]

Peopel ignord the looming real estate bubble in spain and Ireland for a long time and its not exactly working out for them is it

[Volpe]

Citations for any of your claims/assertions? Sounds like FUD to me. Some specifics on the following:

> Local governments have actually been forcing developers to borrow more money and buy land from them

> Real estate agents are offering luxury cars and bars of gold when you purchase an apartment

> GDP growth (which we now know has been largely artificial).

[nate_meurer]

Before you use the F-word, I recommend a cursory googling. Here's one of the first articles that came up for me, containing some of the info you seek:

http://seekingalpha.com/article/314696-debunking-the-chinese...

[GFKjunior]

Here is a link from my favorite website. It's a little dense but Zerohedge is known for their deep financial analysis with a libertarian leaning.

http://www.zerohedge.com/news/guest-post-making-chinas-epic-...

[math]

For the negative point of view on China, Jim Chanos provides very good information. The following is two years old, but very good:

http://www.marketfolly.com/2010/02/kynikos-associates-jim-ch...

[MrVitaliy]

Just watch/read the news

http://www.youtube.com/watch?v=rPILhiTJv7E

[nrao123]

Some more articles/links on the China property boom: http://cginsights.posterous.com/?tag=chinapropertyboom

[rkon]

I wish it weren't true, since any economic collapse has global implications, but they've dug themselves into a serious hole and haven't made any drastic moves to pull themselves out.

Numerous sources (and much better explanations of China's precarious financial situation) are in this post http://chovanec.wordpress.com/2011/12/24/china-data-part-1a-... It's a blog by an American economist who teaches at Tsinghua University, the top ranking school in China.

This sort of news is particularly distressing to hear as the bubble is only beginning to burst: "A source at a state-owned property firm in one provincial capital told Caixin that local agencies don't have enough money to cover basic healthcare costs or pay teachers." http://english.caixin.com/2011-12-19/100339928.html

[seanmcdirmid]

rkon is basically right. My landlord isn't selling his apartment because the prices are too high and so no one is buying, WTF? The real estate market here is incredibly bizarre and opaque.

Its not entirely clear how China will dig itself out of its current situation. On the one hand, perhaps they can grow out of these problems, but their are severe structural problems that need to be reformed sooner or later. A crash would bring those changes but it would be painful for all of us.

I naively have most of my savings in a Chinese bank. This year I'm thinking about diversifying since a banking collapse is always possible and its not clear how we would be insurancd.

[vishaldpatel]

So, your landlord is waiting for the market to crash rather than find someone to buy the place and still walk away with a possibly decent profit? Or did he purchase the home at an inflated price to begin with?

[Maarten_pi]

It's been hard in China. The realestate prices are heavily inflated and nobody wants to buy at the moment. Prices are already dropping. Selling is really hard.

When you bought a property in the last few years, selling it now means taking a loss.

[seanmcdirmid]

It's not just that. The real estate companies collude to keep prices high, and won't let landlords consider lowering their prices (they won't market the house, and you can't really market it yourself for some reason). A lot of craziness in this sector, something has to give.

[powertower]

I remember someone from Iceland here posting about how they worked as a web developer, and got paid in US dollars by the clients, which was deposited in an account.

When Iceland had its crisis, the government seized all accounts with foreign currency, as it was the only currency worth anything.

They of course paid the money back after converting it to the native currency.

I'm sure they did the same thing with all precious metal (gold, silver) accounts too.

So really think about how you want your money stored. Maybe it's best to stockpile gold. Or to get foreign equity or property. Something that can't be taken away from you with a mouse click.

[nl]

There isn't a lot of consensus about what the real situation with Chinese real estate is, and even less about what it means.

One thing to bear in mind is that China is still a developing economy, which means that it doesn't behave the same way as the US economy does.

Economic growth is high, inflation is 5% and population movement from the countryside into the cities is a huge factor.

There is a school of thought that a real estate bubble in China is not a significant problem - the driver of economic growth in China is the manufacturing sector, not real estate and a crash in property prices would just raise the standard of living for those involved in the manufacturing industry (ie, they could buy houses).

[nate_meurer]

If the data I have read is to be believed, the biggest driver of the growth of China's GDP is real estate investment. I have read this in many places, including here:

http://www.alsosprachanalyst.com/economy/nominal-vs-real-gdp...

[nl]

Your linked article doesn't even mention real estate investment(?)

(The title here is Nominal vs. Real GDP Growth Of China. "Real" - in this context - means "adjusted for inflation". Beyond that it is an interesting article but doesn't seem relevant to the real estate discussion at all)

[nate_meurer]

Read it again chump. You need to-- oh wait, damn, you're right.

Sorry. Try this instead. No real numbers, but perhaps a bit of inductive support:

http://www.foreignaffairs.com/articles/136963/patrick-chovan...

[Raphael]

Couldn't you just rent until it's a good time to buy?

[nate_meurer]

Excellent question. I've wondered this myself; is the real estate boom feeding the rental market, and if not, why?

[Maarten_pi]

I've asked my Chinese friends that same question. I've been told that rental prices aren't what we're used to. It's not lucrative business now.

[SilasX]

I could ask the same thing about the Americans that pumped up the American real estate bubble...

[forensic]

At least Chinese economists are working in the interests of China, unlike the USA. For every dire economic indicator in China there are 100 in the USA and most of them are caused by the government/media/universit economics departments.