SHIBOR rising

Interest costs have been rising around the world and China is no exception. Since China isn't a market economy, the central bank has more power to push this number around, but it can't completely eliminate market forces and for now, this is a reflection of global market forces.

Here's Andy Xie on real estate: Fit to burst
Now is the last chance to burst the bubble without creating social chaos. China's labour market is quite tight. Blue-collar labour is in demand everywhere. As the property market adjusts, some bankruptcies would lead to lay-offs. But the laid-off workers should be able to find alternative employment quickly. Further, bursting the bubble would mainly bring down prices, but not necessarily sales volumes. On the contrary, lower prices would increase sales volumes. Hence, construction work would rise, rather than fall.
Lower prices would decrease local government revenue, which would lead to less infrastructure investment. But the negative effect on demand would be offset by the beneficial impact on consumption, because lower housing prices would mean households have more to spend on other things.
Real estate is China's Achilles Heel in many ways. It is the keystone of the government-led, credit fueled over-investment bubble. As Xie points out, lower real estate prices take money away out of government pockets and into the pockets of ordinary Chinese. Can they thread the needle again and avoid an economic crisis? Or is it too late this time? If there were no crises overseas, I'd lean towards the former, but it really may be too late this time because outside market forces will overwhelm attempts to engineer a soft-landing.

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