A slowdown in the Chinese real estate market would have severe global ramifications, possibly causing more damage to the U.S. economy than the eurozone crisis.
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Slowing chinese real estate prices a big risk to america
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2. Slowing Chinese Real Estate Prices a Big
Risk to America
By Michael Lombardi, MBA for Profit Confidential
Falling Chinese real estate prices are becoming a big
concern…and the after-effect could reach America.
Sixty-six million people live in Beijing, Shanghai, Guangzhou and
Shenzhen and these four big cities are seeing the price of homes
softening. Chinese real estate prices could fall as much as 20%
to 30% next year in these cities, according to a story in Beijing
Business Today.
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3. As you may recall, the Chinese government, fearing speculation
in the Chinese real estate market, raised home down payment
requirements and mortgage rates in April to cool the housing
market. These steps may have gone too far, cooling the Chinese
real estate market too quickly.
As China’s economy has grown so fast, as the country has
become a big world-buyer of materials related to home building,
materials companies have looked at exports to China as an
offset to the pathetic American new home construction market.
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4. The big fear is that a hard landing for the Chinese real estate
market could mean a hard landing for the Chinese economy, the
economic ramifications of which could be felt worldwide.
According to the Bureau of Economic Research, the gross
domestic product (GDP) of the U.S. was about $14.7 trillion in
2010—that’s a 46% increase in our GDP since 2001. The GDP of
China was $5.9 trillion in 2010—a 353% increase in China’s $1.3-
trillion GDP of 2001.
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5. Now here’s where it gets really
interesting…
Back in 2001, the economy of the U.S. was 7.8 times bigger than
China’s economy if we look at the GDP of both countries that
year. Last year, the U.S. economy was only 1.7 times bigger than
China’s economy, again according to GDP numbers. Our
economy is simply growing slower as China’s economy grows
faster. And American companies are becoming more and more
reliant on demand for goods from China.
As China’s economy has grown so rapidly, be it the precious
metals, infrastructure, or strategic non-Chinese companies—the
Chinese have been busying either buying them or financing
them, as the country remains focused on bringing its 1.3 billion
people into either the working class or middle class.
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6. A pullback on Chinese real estate prices would slow the Chinese
economy dramatically, possibly forcing China to pull back on
foreign investment.
A slowdown in the Chinese real estate market would have
severe global ramifications, possibly causing more damage to
the U.S. economy than the eurozone crisis.
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