Books on China's RE bubble

[permabear]

Can anyone recommend some good books on China's potential real estate bubble? I am very interested in learning more after watching this: http://www.aljazeera.com/programmes/101east/2016/09/china-economy-160913081105227.html

 

It just seems like something has to give here. Government levering up to finance massive, worthless ghost cities, encouraging citizens to lever up to "invest" in same...

 

Thanks!

[LongHaul]

That video was fantastic.  Thx for posting. I am not a big bear type but China is a total mess.  Classic real estate bubble and credit bubble that will likely have a very serious bust.  Now if I only knew when....

[Foreign Tuffett]

The video is interesting, but far from convincing given how anecdotal most of the "evidence" is.

 

I do agree with the thesis though. The unprecedented amount of uneconomic investment, especially in real estate, is a sign that something in China has seemingly gone haywire.

 

The signs can be seen outside of the China as well as within. I think most of us on this board are at least somewhat familiar with the debacle that is Vancouver residential real estate. Vancouver isn't the only place Chinese capital is causing issues. In Phnom Penh, Cambodia the amount of (seemingly unneeded) residential real estate towers being built by (mostly) Chinese companies is a common topic of conversation.

[wondering]

For a overall view of the Chinese debt crises, please look up Michael Pettis.  His blogs are excellent and he has written several books on various modern day debt problems. 

[HJ]

It's such a complicated topic and touches on so many different areas of how the Chinese economy works that it's very difficult to figure out how long it can still be sustained, or how the imbalance may be worked off in the future. The way resource is allocated for the society has something to do with it, the way local Chinese governments fund themselves has something to do with it, the closed Chinese currency system has something to do with it, the extraordinarily unequal distribution of Chinese wealth has something to do with it, the cultural mindset has something to do with it, the extraordinary short amount of time it took the Chinese to experience what the West experienced over 200 years has something to do with it, etc., etc. 

 

There's very little precedent for it, just like there's very little precedent for the kind of monetary policy the world all over is experimenting with.  The two are likely related, and it's also arguable which imbalance is the bigger one.

[petec]

Neither are directly focussed on housing but Michael Pettis' Avoiding the Fall is good as is Inside China's Shadow Banking by Joe Zhang.

[JBTC]

It's such a complicated topic and touches on so many different areas of how the Chinese economy works that it's very difficult to figure out how long it can still be sustained, or how the imbalance may be worked off in the future. The way resource is allocated for the society has something to do with it, the way local Chinese governments fund themselves has something to do with it, the closed Chinese currency system has something to do with it, the extraordinarily unequal distribution of Chinese wealth has something to do with it, the cultural mindset has something to do with it, the extraordinary short amount of time it took the Chinese to experience what the West experienced over 200 years has something to do with it, etc., etc. 

 

There's very little precedent for it, just like there's very little precedent for the kind of monetary policy the world all over is experimenting with.  The two are likely related, and it's also arguable which imbalance is the bigger one.

 

Totally concur on the complexity of the issue. But curious why you suggest it's linked to the current monetary policy of the world?

 

I cannot think of any topic that's harder than China. I have heard no China expert who can make sense of it - neither the bulls nor the bears. I don't think Chinese themselves know where it's headed. I have to assume the Chinese leaders think they can exercise a fair amount of control in the near- or perhaps medium-term but the long-term is anybody's guess.

 

But there are people who have made a lot of money in China. They must be good. Or just buy property. Plenty of cities are up 40-50% in the past year.

 

[petec]

It's such a complicated topic and touches on so many different areas of how the Chinese economy works that it's very difficult to figure out how long it can still be sustained, or how the imbalance may be worked off in the future. The way resource is allocated for the society has something to do with it, the way local Chinese governments fund themselves has something to do with it, the closed Chinese currency system has something to do with it, the extraordinarily unequal distribution of Chinese wealth has something to do with it, the cultural mindset has something to do with it, the extraordinary short amount of time it took the Chinese to experience what the West experienced over 200 years has something to do with it, etc., etc. 

 

There's very little precedent for it, just like there's very little precedent for the kind of monetary policy the world all over is experimenting with.  The two are likely related, and it's also arguable which imbalance is the bigger one.

 

Totally concur on the complexity of the issue. But curious why you suggest it's linked to the current monetary policy of the world?

 

I cannot think of any topic that's harder than China. I have heard no China expert who can make sense of it - neither the bulls nor the bears. I don't think Chinese themselves know where it's headed. I have to assume the Chinese leaders think they can exercise a fair amount of control in the near- or perhaps medium-term but the long-term is anybody's guess.

 

But there are people who have made a lot of money in China. They must be good. Or just buy property. Plenty of cities are up 40-50% in the past year.

 

If you choose to look at the details it's complex.  But at the headline level it's fairly simple.  Debt can't grow faster than GDP forever and it is growing so much faster than GDP that we will reach the point where it can't carry on fairly soon (single digit years).  Usually, that kind of event is unpleasant, and China is big enough for it to be unpleasant globally not just locally. 

 

It is linked to the current monetary policy of the world because it is very hard to build up this sort of debt level (globally, not just China) when interest rates are higher and there is less money.  If low rates didn't spur debt creation there would be no point lowering rates.  That's basically the whole point.

[JBTC]