Monday, March 15, 2010
China's Real Estate Bubble
"Jack Rodman has cashed in on property busts from Los Angeles to Tokyo, buying and selling soured loans and counseling other investors. Now he's convinced the Beijing real estate market is about to tumble. ... Much of the $1.4 trillion in loans made by Chinese banks last year--with considerable encouragement from officials aiming to boost growth--was spent on skyscrapers and other commercial property. Now empty buildings are sprouting across the mainland. Beijing had an office vacancy rate of 22.4% in the third quarter, the ninth-highest of 103 markets tracked by broker CB Richard Ellis (CBRE). ... 'There's a monumental property bubble and fixed-asset investment bubble under way,' says James Chanos, founder of New York hedge fund Kynikos Associates. ... 'The Chinese authorities are clearly trying to bring excessive bank lending under control,' says Stephen Roach, the chairman of Morgan Stanley Asia. ... Now some economists are speculating that the government could allow China's currency, the yuan, to appreciate against the dollar for the first time since July 2008. ... If Beijing can't cool things off and the property boom turns to bust, there could be a surge in nonperforming loans. ... Builders, meanwhile, continue to build. ... In eastern Beijing, officials are hoping to double the size of a vast development called the Central Business District, even though the vacancy rate is 35%", Michael Forsythe and Kevin Hamilton at Businessweek, 1 March 2010, link: http://www.businessweek.com/magazine/content/10_09/b4168018737687.htm.
Shades of Houston during the 1982-87 oil bust when office vacancy rates hit 28%! Here we go again! Is Alan Greenspan running China's central bank?