Which is worse, China's debt problem or ours?(Read article summary)
The US is in bad shape with subprime debt, but China's local governments aren't doing so well either
Ng Han Guan / AP / File
We’re not bearish enough [on China].” – Jim Chanos
Even if the US holds itself together, there’s a good chance that either Europe or China will drag it down.
The latest reports show China’s property bubble beginning to lose air. The Wall Street Journal reports:
After years of housing prices gone wild, China’s property bubble is starting to deflate.
Residential prices are heading downward in some major cities, damping some undesired real-estate speculation but raising the prospect that the Chinese economy may slow more rapidly than anticipated with profound consequences for global growth.
Real estate is a foundation of China’s phenomenal growth record in the past two decades, and its health is crucial to China’s construction, steel and cement sectors. Real estate is also a favored investment of Chinese looking to get better returns than bank deposits pay.
And legendary short seller, Jim Chanos, says China’s local government debt is worse than America’s subprime problem. Subprime debt in the US never surpassed 10% of GDP. China’s local governments have debt (much of it bad) of more than 30% of GDP.
We went to China recently. We were unable to form a clear opinion about it. Yes, there were plenty of buildings that looked empty…but the streets were full of people.
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