Rocky Vega

Whether or not China is in a bubble, particularly in housing, is a source of great debate… even among your very own Daily Reckoners. Now, even a staff member from inside China’s own central bank has weighed in with a dour opinion.

Li Daokui, of the central bank’s monetary policy committee, has publicly stated to China’s State Council that their nation’s housing market is deeply troubled in way that could cause profoundly negative financial and social outcomes.

From the AFP:

“‘The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,’ said Li Daokui, a member of the bank’s monetary policy committee.

“‘It is more than (just) a bubble problem,’ he told the Financial Times in an interview published Tuesday. The property market in the United States collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up…

“…He warned the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home. ‘When prices go up, many people, especially young people, become very anxious,’ he said. ‘It is a social problem.’”

Chinese authorities have been looking at a variety of avenues to cool the potentially overheating market. A property tax will be tested in key areas like Beijing and Shanghai, and other new restrictions on home sales have been introduced. The real estate market is structured quite differently in China, but a collapse could be just as severe for its financial system, and possibly even worse in terms of social upheaval.

You can read more of Daokui’s comments in the AFP reporting on how China’s property woes could be worse than the US downturn.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

Recent Articles

Protect and Serve Thyselves

Ryan Mcmaken

The police operate in their own self-interest, the same as every other human being on the planet. For that reason you cannot rely on your local police department to keep your best interest at heart. As Ryan McMaken explains -- and Ferguson Missouri demonstrates -- your police department’s is not necessarily interested in “protecting and serving you”...


Minerals vs. Marijuana

Douglas French

It might go against conventional thinking, but following the crowd usually makes you miss the real opportunities. At one monetary metal conference recently, the smartest guys in the industry sat down to discuss where these real hidden gems lay. But where does marijuana fall in this debate? Doug French has the scoop...


The Growth of Big Data is Unfathomable

Josh Grasmick

One of the most important trends in the evolution of technology is the advent (and growing importance) of "Big Data." And yet, some people are still confused about what it is - not to mention grossly unaware of just how massive the market for data has become. Today, Josh Grasmick offers an insightful explanation...


4 Ways the Government Is Set to Take Your Money

Byron King

The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...