Beijing Is No Dubai
So is this the Jim Chanos moment where China’s ”treadmill to hell” reaches its destination? Is China ”Dubai times 1000”, as the hedge fund manager claimed?
Hardly. Beijing, Shanghai and Shenzhen – where real estate excitement has been most frenetic – only account for 8 per cent of Chinese residential construction, according to UBS. Household debt is rising fast but remains minuscule when compared with Australia. Chinese incomes continue to outpace the rise in house prices.
Slowing real estate investment will assist with China’s long-deferred economic rebalancing project, so that Beijing will not become Dubai. Most importantly, when policymakers find they have overapplied the brake – as they probably will – they can simply repeat the global financial crisis recovery program.