His last column explained that the federal debt-limit deal left our Chinese creditors unconvinced of American creditworthiness.
The bald statistics are startling. While the West stalls (and Japan slumps), China’s current growth rate is just under 8 percent. Industrial production is growing at an annual rate of 15 percent. Capital investment in dollar terms is now greater in China than in the U.S. And last year the value of initial public offerings on Chinese stock markets exceeded that of IPOs in New York by a factor of 3.5. …
… And yet … A closer look at the Chinese economy reveals that an astonishingly large part of what is going on today is investment in urban residential real estate, which is growing at more than 25 percent a year. The evidence was all around me as I drove through my sample of Chinese provinces. On the outskirts of every city I saw, there was a veritable forest of apartment blocks under construction.
These are the fruits of China’s own stimulus. When the Western economies first tanked in 2008–09, China’s communist rulers ordered the country’s banks to lend, lend, lend. The biggest borrowers were property developers and local governments.
With inflation above 6 percent and the stock market down, the new Chinese middle class has gotten in on the act. An unknowable proportion of these new apartments have been bought as investments by people who already own one or more. With new-property prices up about 20 percent in just two years, who can blame them?
Sound familiar? Yes, this looks a lot like a real-estate bubble—with Chinese characteristics. As for debt problems, Chinese bank loans were 97 percent of GDP in 2008. Now they’re at 120 percent.