[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.

[hessenwolf]

Scary stuff. Where are you based? How is life in China comparing to the Republic?

[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...

[nl]

lol

Residential real estate construction now accounts for nearly ten percent of the country's total GDP -- four percentage points higher than it did at the peak of the U.S. housing bubble in 2005. Bullish analysts have long argued that large-scale urbanization and rapidly rising incomes warrant such an extraordinary boom.

10% of total GDP is significant, but when the economy is growing at 10% a year[1] it can afford to drop quite a lot without necessarily causing an economic meltdown.

To be clear - I'm not claiming that a drop in real estate prices won't cause problems for the entities involved in the Chinese real estate sector. What I am claiming is that it might not be as catastrophic as people expect based on the US experience.

[1] http://www.google.com.au/publicdata/explore?ds=d5bncppjof8f9...