After the housing bubble popped in 2007, many people realized the dangers of easy credit combined with speculation. However, while US politicians are currently doing everything they can to artificially inflate the housing market, Chinese officials are implementing every possible measure to deflate their growing real estate bubble. The Asia Times reports on the why China fears real estate speculation and price inflation:
Efforts to stop the flow of loans and speculative energy into the real estate sector have, to some extent, succeeded. The carnival of greed and folly surrounding construction of high-end residential and commercial properties has abated thanks to a combination of tightening loan requirements, higher interest rates, limits on purchases of second and third homes, and arm-twisting to get local governments to build low-income housing.
Suppressing the real estate markets has had unfavorable knock-on effects. The industries that provide building materials, appliances, and services as well as finance and sell the product – which according to estimates account for 40% of gross domestic product (GDP) – have experienced a fall-off in business. Local governments, which rely inordinately on real estate development for revenues, are predictably dismayed.
Unfortunately, the economic slowdown accompanying the crackdown on real estate has been exacerbated by pervasive woes in China’s export industries.
The eurozone simply isn’t pulling its weight, the recovery in the United States is faltering, and the growth rate for China’s exports is dropping.