China’s GDP and individual household wealth is heavily tied to real estate. What happens when a correction hits?
China has had one of the wildest real estate sectors of any large global economy. Chinese real estate values have appreciated dramatically largely shutting out regular workers in the country. It is an interesting situation. You hear countless stories of young males trying to find a potential mate and given the restrictive one child policy, many eligible bachelorettes are looking out for those that actually own property. Nothing wrong with that but it adds fuel to the real estate flames in China. The flames are now cooling down. China’s real estate market has started to cool for the first time in many years. This will be challenging for the economy because a massive part of Chinese GDP is tied directly to real estate. We have many examples of ghost cities and ghost apartments sitting virtually empty but somehow, added to the GDP figures. It is also important to note that in China, a large portion of household wealth is tied up in one asset, real estate. Chinese stock exchanges do not reflect the massive growth of the country, fudge factors aside. So what actually happens when real estate contracts in China?
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