OrionHunter
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Chinas economy is on a dangerous track and may soon experience a crisis worse than the European debt crisis, Chinese economists say.
Since the Chinese regime implemented a series of tightening policies to curb the real estate market, home prices have been falling across China. Meanwhile, land salesthe main source of local governments revenueshave also dropped sharply.
In late October, several developers in Shanghai abruptly lowered home prices in new developments by 20 to 40 percent. Soon after, price cutting spread to Beijing, Hangzhou and Ningbo in Zhejiang Province, and Nanjing in Jiangsu Province. Recent homebuyers, unhappy about the sudden devaluation of their investments, staged protests with many demanding refunds.
Cheng Xiaonong, an economist based in the U.S., told The Epoch Times that a 30 percent drop in home prices in a short period of time is a sign that a financial crisis is about to hit China.
When the housing bubble bursts and developers go bankrupt, banks will grapple with high default rates and bad debt, resulting in a financial crisis in the banking system, Cheng said.
Cheng said within a year China could experience a crisis worse than the European debt crisis. Actually, a financial crisis has already erupted in China, he said.
Chen Zhifei, an economics professor at New Yorks City University told New Tang Dynasty TV that the rapid drop in both home and land sales will lead to drastic reductions in local governments land revenues, and local governments will make up the loss through taxation.
Economist and author He Qinglian told The Epoch Times that Chinas real estate bubble should have burst in 2008. But at that time the Chinese regime put out a 4 trillion yuan (US$630.92 billion) stimulus package to save the economy, and half of it went to the real estate market and related fields, delaying the bursting of the bubble.
Ms. He said Chinas economic development is a false prosperity achieved at the cost of damaging the environment and natural resources. Being the worlds factory, China doesnt have its own brand name products. In addition China heavily relies on imports for its energy needs and has few resources to export except rare earth metals. Furthermore, with the largest peasant population in the world, China is unable to maintain self-sufficiency in food production.
Regarding some economists comments that the collapse of the real estate market will result in a hard landing for Chinas economy, He said: Chinas economy has never taken off, so there is no such thing as a landing. Actually, Chinas economy is more like an out-of-control high speed train that could derail at anytime.
Oh well, whatever goes up must come down! China's economy is not internal market driven like India's and therefore is a house of cards.
The bottom line: The bubble is about to burst! And that's bad news not only for China, but the world as a whole.
