Beware of China's housing bubble
The housing bubble was a global rather than US event. The bubble outlasted the US experience in several other countries such as Australia and Canada which are experiencing some weakness. However, the one I鈥檝e worried about is in China. Keep your eye on this one.
:
The Chinese government鈥檚 announcement last week that growth for 2011 slowed only slightly to a still impressive 9.2% was greeted enthusiastically by the world鈥檚 stock markets. Investors also remain buoyant on China鈥檚 future. They appear to be buying the official line that the gigantic property price bubble is gradually and smoothly deflating, posing little risk to an engine that鈥檚 so crucial to the future of global trade.
But the math tells a different story. The housing frenzy has driven prices so high, so fast, that a crash on the scale of the real estate collapse in Japan in the 1990s is a virtual certainty. And China鈥檚 already exaggerated official growth rate could take a pounding, all the way to the zone of the unthinkable, into the low single-digits.
