Jim Chanos still thinks Chinese RE is the most important asset class in the world. twitter.com/WallStCynic/status/1191899839124189184?s=20
Problem is, like just about anything Chinese, nobody knows the real data on this, and whatever is reported is likely falsified or embellished.
The main questions that come to my mind now are if prices continue to drop and more people find themselves underwater how will the public react? Will speculative investors that own the 50 million vacant apartments try to get out at the top and bring it all down? Will the Chinese government step in?
Chinese Gov’t already has stepped in many times. Chinese RE will only go bust when the gov’t can’t keep this afloat any longer. The issue is… the CCP KNOWS how important real estate is to their economy. It’s why their recent stimulus binge at the start of 2019 once again mostly benefited steel mills, materials, banks, and real estate developers. They aren’t stimulating this sector because there is a demand for housing, they’re stimulating it because they can’t afford to let production drop since that would cause the collapse of all the important sub-industries as well as “wealth” stored in real estate.
For Chinese Citizens, the real estate prices are kept afloat simply by the fact that there is literally nowhere else to put their money that is viable. China has put in place extremely intense capital controls, which prevent currency depreciation even in the face of tons of stimulus. This also keeps the real estate bubble from popping.
Overall, it sounds ridiculous, but you can make an extremely valid argument that the global economy is being kept afloat by Chinese capital controls. You remove those and you get a wave of enormous problems within China, and then a ton of enormous knock-on effects around the globe.
It’s not a coincidence that the CCP has stepped up their human rights abuses, control and oversight of citizens and their $, and all other aspects of “control”. They realize that if the music stops in the Chinese economy, they may not be able to deal with the social unrest and loss of confidence that would come with that. They’re past the point of being able to make reforms to the economy. They made a piss-poor attempt at this in 2018 before too many things started to blow up, and during this episode, they weren’t even reducing leverage in the system, they just slowed down the expansion of it.