Will China's real estate collapse

Jakarta, CNBC Indonesia - China's regulators expressed great concern about this bladder (Bubble) in global financial markets and in the country's real estate sector. This was stated by the chairman of the Chinese banking and insurance supervisory authority (CBIRC) Guo Shuqing on Tuesday (February 3rd, 2021).

Reported The street Times cited Bloomberg, Risk of explosion bladder in the US and European markets due to the external reinforcement underlying the economy. The correction in the market will come “sooner or later”.

“The capital market in Europe, the USA and other industrialized countries is handled at a high level, which is very opposite to the real economy,” he said on Wednesday (03.03.2021).

He was referring to what happened 21 years ago when the dot.com bubble hit the US information technology sector in 1998-2000. At that point in time, stock exchanges in developed countries were seeing a sharp surge in stock value thanks to the growth of the internet and related industries.

This has led China's financial regulators to try to control risks domestically while limiting disruption from abroad. At this time in particular, China's economy is more open to foreign capital.

With an increasingly globalized economy, the inflow of foreign capital into China has increased significantly. It also has the potential to quickly inflate currencies, assets, and inflation.

In addition, Guo addressed another important issue facing the real estate sector in China. The bubble trend in this sector is relatively large.

This was also mentioned by Chinese President Xi Jinping at last year's economic conference. China, Xi said, needs to stabilize the real estate market in 2021.

Guo said the potential for a bubble was relatively large and many people bought houses not to live but for investment or speculative purposes. “Very dangerous,” he said.

If the property market collapses, the value of community owned property will suffer tremendous losses. This will lead to unpaid installments and economic chaos

The strong economic recovery, coupled with credit spikes and fears of being left behind, has sparked excitement among shoppers in China's largest cities despite tightened restrictions this year.

The authorities have responded with a number of measures to improve the industry. These include a new bank loan mechanism for real estate and a new land supply regime to curb rising land prices.

However, property prices in the secondary market, which are less subject to government intervention, rose the most in January in 18 months. According to China Real Estate Information Corp. Existing property prices from certain popular Shanghai projects rose more than 30% in the past year

Are you sure that bubble?

Analysts believe the bubble in China's financial and real estate markets is unlikely to come easily. Given the monetary policy regulations in China, this is not easy.

"China's monetary policy is not as straightforward as the US and Europe ... These recent comments will raise fears of further tightening," said Steven Leung, executive director of Uob Kay Hian Hong Kong Ltd.

“Beijing refers to overseas market rallies as Bladder. (This) will not improve sentiment in Hong Kong stocks, which have seen strong inflows from the mainland, ”said Castor Pang, research director at Core Pacific-Yamaichi.

[Gambas: Video CNBC]

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