Stimulus Prep or Prelude to Deflationary Crisis: China Tightening Screws on Real Estate (Investing in Chinese stocks, 4 min read)
Real estate prices are rallying due to loose buying restrictions in Chinese localities and Central Government stimulus. Meanwhile, credit has failed to flow to SMEs and other industries. But the situation may not last – Beijing is tightening up loan supervision, claiming that real estate won’t be the engine of GDP growth. Further, the real estate businesses of banks are being investigated in 32 cities, with inspections focusing on areas such as development loans. It is also worth noting that July showed a decrease of 19.63% in real estate trust since June.
Why does this matter? There were some worrying tales of a huge real estate bubble in China, especially given that 25% of the country's GDP comes from construction, 80% of the nation's wealth is in domestic property holdings, and that right now there is a $3.4 trillion real-estate debt stacked up.
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