China Alarms Go Off -- Time to Hedge Bets
(Adds that the Chinese currency has fallen to the bottom of its official band.)
BOSTON (TheStreet Ratings) -- I'm concerned with what's possibly a massive bubble in China.
The real estate market is signaling alarms and may eventually fall into a worse situation than we had in the U.S. hedge fund manager Jim Chanos, popular for being all over the Enron scandal, has been pushing his China real estate bear case to anyone willing to listen. And while there hasn't been a collapse (Chanos started his crusade in 2009), the real estate market has been slowly, but surely, getting worse.
Chanos points out that construction represents nearly 70% of China's economy. And with China on pace to build nearly 25 million new homes in 2011, the value of real estate to GDP is approaching levels witnessed during crisis situations in Japan in 1989 and Ireland in 2007. Consumers can't afford or keep up with the rampant oversupply, as speculation and corruption have overtaken the market.You may have seen pictures of the so-called ghost cities in China. The following video from SBS Dateline provides an overview of some of the concerns in the market: http://www.youtube.com/watch?v=rPILhiTJv7E
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