Thursday, April 14, 2011

Uh Oh

China has been caught up in a large wave of real estate speculation with empty buildings dotting the landscape as Chinese investors buy up buildings without anything else to invest their money in within China. The building boom has been ordered from the top and not a response to demand for buildings.

Will this first drop radiate out to the rest of China? (Tip to Instapundit)

Prices of new homes in China's capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city's Housing and Urban-Rural Development Commission.

Normally, I wouldn't cry too much about Chinese economic difficulties. Couldn't happen to a nicer bunch or communists, really. But we and the rest of the West are in such a precarious financial situation that I'd rather not have any potential wrenches thrown in the spokes of our stuttering progress out of the 2008 financial crisis.

UPDATE: A timely article on over-building in China:

China is rife with overinvestment in physical capital, infrastructure, and property. To a visitor, this is evident in sleek but empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, thousands of colossal new central and provincial government buildings, ghost towns, and brand-new aluminum smelters kept closed to prevent global prices from plunging.

This could be rather bad.