Chicken Little-Henny Penny says, “China’s Bubble is Bursting!”

The Chicken Little-Henny Penny story is a fable about a chicken that believes the world is ending. The phrase “The sky is falling!” features prominently in the story and is now a common idiom indicating a hysterical or mistaken belief that disaster is imminent.

Chicken Little’s warnings or predictions of calamity, especially without justification, dates from 1895.

Because of this, the tale has become politicized and one example appeared on ZeroHedge.com when Tyler Durden submitted this post, “Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month”.

Durden writes, “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.”

Durden says, “IF” the pummeling in the Beijing real estate market shifts to other cities not only is the Chinese tightening regime over, but the SHCOMP (?) in the next few weeks could get very interesting as people understand the world’s biggest marginal bubble has popped.”

“IF” I had a dollar for every time I’ve read a “Sky is Falling” prediction of China’s economy, I’d take my wife out to dinner, shopping at Nordstrom’s and a movie on the weekend.

China’s real estate market only represents about 15% of China’s GDP while in America, that number is more than 70% of GDP, which explains why America is in the cellar with its economy and China is still growing but just slower.

Meanwhile, Tory Capital.com reports “China’s First Quarter 2011 GDP Rises 9.7 Percent,” while Mostly Economics.com compares that to the US annual rate of 3.1%.

A better, possibly more informed comparison between China and America’s economies may be found at Heritage.org where Derek Scissors, Ph.D. writes, “Its (China) raw population means that the PRC will likely pass the U.S. at some point after a resumption of market reform.”

However, Scissors says for that to happen, “The 2012 Communist Party Congress (must) nullify actions by the 2002 Party Congress and restore Deng Xiaoping’s economic model—this would enable roughly two more decades of rapid growth, perhaps in the 7 percent to 8 percent range, then gently decreasing to the 5 percent to 6 percent range over time. China would then surpass the U.S.” as the world’s largest economy.

Back to Durden’s Chicken Little-Henny Penny statement. The drop in “new housing prices” in Beijing may be a response to complaints from the people that prices were out of reach of many. Instead of a bubble bursting, the Party may have let some air out so it would not explode as it did in the US in 2008.

Discover The Fear of Mao Buying the World

______________

Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to iLook China, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.

Advertisements

2 Responses to Chicken Little-Henny Penny says, “China’s Bubble is Bursting!”

  1. Justin says:

    Yeah, the % of people who own house in the cities is still low, and with 300 million people still set to urbanize over the next 10 years, the estate market/bubble still has plenty of legs.

    • From what I’ve been reading, most of those people that will be moving from rural to urban cities between now and 2020 will be going to 2nd tier cities–not Shanghai or Beijing. Many of these cities have already been built and are standing empty waiting. In other established second tier cities, property prices are still rising. Yesterday, I read that of 70 cities studied in China more than fifty still had prices rising. In addition, many of the empty buildings may be waiting for those three hundred million to make the move.

      Maybe the Chinese are attempting to avoid the growth of slums like we see in India and other third world countries where the poor arrive and built shacks out of anything without running water, sewers, etc.

Comments are welcome — pro or con. However, comments must focus on the topic of the post, be civil and avoid ad hominem attacks.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: