Chinese Real Estate Bubble Could Sink Global Economy

Posted: 11/14/2016

Economists are beginning to sound the alarm about a looming Chinese real estate bubble, which could put the brakes on the U.S. economic recovery. Hu Shuli, chief editor of Caixen Media in Beijing states that “The ratio of mortgage payments to a buyer’s income indicate that on a relative basis, China’s current housing prices are now more expensive than those during Japan’s property bubble, and are close to U.S. prices just before the global financial crisis exploded.”

An analysis of 252 land auctions in 10 cities by Deutsche Bank Research shows that if land values stayed the same, 105 of the purchases would end up losing money. The first three quarters of 2016 has seen an explosion in mortgage growth of 88% compared to the year prior.

Analysts are predicting that trouble for the Chinese economy will have a negative effect on the global economy. China has accounted for roughly half of all global GDP growth. While it is unlikely that a slowdown in the Chinese economy would create another recession in the USA, it could cause a massive slowdown in the ongoing economic recovery.