China's Property & Credit Bubble

Buildings developed by China Evergrande Group that authorities have issued a demolition order on in Danzhou, Hainan Province, China, January 7, 2022. Picture taken with a drone.(Aly Song/Reuters)



The country’s property and credit-market bubble is now showing every sign of bursting — at a dangerous time for both China and the world at large.


The late American Enterprise Institute economist Herb Stein famously wrote that if something cannot go on forever, it will stop.


Mr. Stein might very well have had in mind the unsustainable, decade-old, property and credit-market bubble in China, which is now showing every sign of bursting. 

Compounding matters, it is doing so at the very time when the Chinese economy is experiencing a perfect economic storm as a result of President Xi’s zero-tolerance Covid policy, his attack on big business, and his ramping up of political tensions with the United States over Taiwan now coinciding with a severe drought. 

A Chinese economic slowdown would have major implications for the world. Not only is China the world’s second-largest economy; until recently, it was also the world’s main engine of economic growth and its largest consumer of internationally traded commodities.

Over the past decade, China’s economic miracle was heavily based on an unsustainable property and credit-led economic-growth model. 

That led to a situation where private-sector credit grew by more than 100 percent of GDP: a pace of credit expansion faster than that which preceded Japan’s lost economic decade in the 1980s, or that which preceded the 2007 bursting of the U.S. housing and credit-market bubble.  READ MORE...