China's Homeless Money

Bloomberg: China's Trouble With Bubbles

The situation places a premium on policies, rather than personalities, that can prevent things from unraveling. China needs to find a way to tap the brakes on credit without sending the markets into a downward spiral. Tighter rules and larger capital requirements for wealth management products -- a key source of risk -- are a start. But as long as loan growth continues to accelerate faster than GDP, it’s hard to argue that a true basis for stability has been established.

Bolded portion: see Come Undone: Shenzhen Home Prices Plunge 8.2pc

For evidence the underlying problems remain unsolved, look no further than China's other asset markets. One might've expected that after the trauma of the stock crash, Chinese investors would become a shade more cautious. Nothing could be further from the truth. The equity boom-and-bust was followed almost immediately by a similar cycle in the metal market, which saw steel prices surge almost 80 percent. Property prices in Shenzhen are up 64 percent in the last nine months. Leveraged bets in the fixed income market mean yields continue to creep down, even as default risks grow.

Inflation. Excess money sloshing around the economy looking for a home.