Saturday, September 7, 2013

China's Debt Addiction: "Plenty of tinder, lots of fuel, all it needs is a spark" - Financial Times

Many believe that when China's bubble bursts, Vancouver's housing bubble will well and truly implode. 

Until five years ago, China’s economy relied remarkably little on debt. But China lost its debt inhibition in late 2008 when the global financial crisis erupted. With growth slowing sharply and 20 million people losing their jobs overnight, the government unleashed a giant stimulus that was powered almost entirely by bank loans. The debt genie was out of the bottle – and it has been extremely difficult since then for China to stuff it back in. 

In this video from the Financial Times, Simon Rabinovitch reports from Guiyang.

(hat tip 'Best Place on Meth')

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  1. It's becoming a bigger and bigger issue in that country. I've seen other reports like his video where the only local economic activity is construction, but there's not much else going on in terms of an actual living city. China's GDP growth has already been slowing over the past year or so. I think the whole world will feel the impact if China has a hard landing.

  2. I agree with your assessment. The reports I am getting is that the HAM has already slowed.

    The Unknown Marketer

  3. Many million $ plus houses in Burnaby sit unsold for over a year now. Market in Burnaby is very slow. Many builds have been put on hold, but still a few spec houses going up; they will also sit, unsold.

  4. Typical politicians take the quick and easy way out by fueling a debt based faux recovery instead of dealing with the underlying problems.

  5. I think everyones idea was that if the can got kicked long enough then eventually genuine growth might take over from stimulus induced expansion. We would all be saved. The risk was that the debt created in the process would overwhelm the ability of the participating nations to escape the stimulus bubble they were creating. This seems to be the outcome as normal growth dynamics have not materialized in force and so instead the burden has been magnified leaving little opportunity for escape. At some point there will be no option but to inflate the problem away and make the trouble disappear. We are heading for a wall otherwise. We will try to be cheery and optimistic in the meanwhile. If we just have a little more faith things might improve bit by bit.