If the Chinese bubble bursts, global effects how bad?

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IronWing

No Lifer
Jul 20, 2001
68,788
26,489
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how do you figure, given they're all paid in cash anyway? are you expecting the chinese to liquidate their housing assets into cash to bring back to the motherland?
Prices are driven by sales. If the Chinese stop buying, even of they don't sell, prices go down.

Next step, if prices go down enough that the Chinese get spooked, then they dump and run.
 

Ns1

No Lifer
Jun 17, 2001
55,412
1,566
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Prices are driven by sales. If the Chinese stop buying, even of they don't sell, prices go down.

I'm pretty sure in my neck of the woods if the Chinese stop buying, Americans will finally have a chance!

Maybe single family homes will stay on the market for 30 days instead of 10 (which is already an improvement from 3 days on the market just a few months back...)
 

Starbuck1975

Lifer
Jan 6, 2005
14,698
1,909
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how do you figure, given they're all paid in cash anyway? are you expecting the chinese to liquidate their housing assets into cash to bring back to the motherland?
The Chinese are parking a lot of cash in real estate, as the Japanese did before them, and there is plenty of speculation as to why.

And similar to the Japanese, if the Chinese economy goes stagnate, the inevitable outcome is the liquidation of assets, especially if the herd dynamic that led to their entrance into the market also creates a panic response exodus.
 

IGBT

Lifer
Jul 16, 2001
17,945
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Jaepheth

Platinum Member
Apr 29, 2006
2,572
25
91
I expect there will be a foreign aid bailout.

Because if they're in danger of losing the economic game they may resort to good old fashioned imperialism.
 

dullard

Elite Member
May 21, 2001
24,964
3,299
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China (especially local governments and local corporations) has a lot of debt. But, they also have a lot of assets. China's assets far outweigh their debts. So, China, as a whole, will not be insolvent. Yes, there will be a lot of turmoil, but the debt problem can be paid off.

China's debts are local. It is almost exclusively Chinese borrowing from Chinese. So, if debts aren't paid off (massive defaults) the damage will also be local.

Also, China doesn't import much from the US - less than 1% of our GDP. So, even if China completely disintegrates, we would barely notice it in our GDP.

So, for those reasons, we shouldn't be worried about direct effects. It is indirect effects that we should be concerned with. If China crashes and their currency devalues, then our exports will be harmed outside of just what China imports. Many people would rather buy up Chinese goods for pennies on the dollar instead of US goods. Also, what happens to our treasuries when China sells them en masse? Interest rates will significantly rise and the fed probably can't control them like they have for a century. China owns a lot of foreign currency, expect prices to be volatile as they are sold. Also commodity prices will plunge as China stops buying raw materials, sells off its gold reserves, stops buying so much oil, etc. Finally, expect wages to drop worldwide as the Chinese accept lower wages just to keep a job.

I don't have a good grasp on how bad those indirect effects will be. It probably depends on how fast and how large the bubble burst is. I wouldn't be surprised by a mild recession for the US (or a mild deepening of the recession for the rest of the world).

Finally, I would expect China to get more aggressive militarily. If you can't please your people economically, please them militarily (see Russia in Ukraine for an example).