Land in Wuhan has tripled in price during the property boom, and could quickly fall back to the old price or below if confidence in the city’s future were to falter. That is quite likely to happen, since Wuhan’s housing stock is already so overbuilt that it would take eight years to clear even the existing overhang of unsold apartments at the current rate of purchase, and never mind all the new stuff.I don't fully subscribe to the world contagion hypothesis. Yes, Brazil, Canada, Australia, will take a hard whack, but the drop in commodity prices will partly balance out the drop in export customers for the U.S. and Europe. Months ago, China stopped buying and started selling off U.S. Treasuries. Nothing happened. Only 500 billion of China's reserves are free for stimulus use, the rest is tied to Yuan. Every month they have an account deficit that number ticks down. At 30 billion a month, it won't last very long.
Multiply the Wuhan example by hundreds of other municipal authorities that are also borrowing billions to finance a similar “dash for growth,” and you have a financial situation as volatile as the “sub-prime mortgage” scam that brought the U.S. economy to its knees. Except that when the Chinese property boom implodes, it may bring the whole world economy to its knees.
Crazy notion I'll toss out there: Imagine if China starts selling its gold to raise cash.
China hard landing already here: JPMorgan analyst
“If you look at the Chinese data, you should stop debating about a hard landing,” Mr. Mowat, who is based in Hong Kong, said at a conference in Singapore Wednesday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” His team was a runner-up for best Asian equity strategists in a 2011 Institutional Investor magazine poll.