2009-06-13

Chinese real estate is bubbly

From ChinaStakes:
Weak foreign trade shows China's macro-economy has not experienced any rebound from the bottom. CPI dropped 1.4%, year on year, in May, while PPI dropped 7.2%. This is the fourth straight month for decline in both figures, indicating looming deflation.

But go figure--China's real estate market is booming along with its stock market. The March rebound in the real estate market has developed into a luxurious banquet for the property industry.

The latest National Bureau of Statistics figures show that between January and May China's commercial housing sales reached 24,644 square meters, a leap of 25.5%, year on year, with residential housing sales growing 26.7%.

The real estate market boom is led mainly by a liquidity surplus due to a huge increase in credit. The Obama administration is printing money to beat the band, over $2 trillion. China's currency placement is also very high. At the end of April, M2 growth reached 25.95%, the highest level in the past 10 years.


Using inflation to lift prices will only lead to another deflation once the bubble bursts.

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