

The Chinese Century - r0h1n
http://www.vanityfair.com/business/2015/01/china-worlds-largest-economy

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kyllo
What worries me most is the fact that China has a massive real estate bubble
and corruption in the real estate and banking sectors. RE Developers take out
loans from the major banks at rock-bottom interest rates to build skyscrapers
in towns where no one can afford the rent, and promptly turn around and sell
the units off to investors. In the major cities, the average price of a new
flat is often hundreds of times the average annual income, and are bought up
by a tiny population of super-rich investors. Wealthy families often own
hundreds of flats in Beijing and Shanghai, as well as homes overseas in
Canada, the US and Australia/NZ. Many of them sit vacant. That is not a good
sign for economic stability in China.

~~~
crimsonalucard
How severe is the problem? How does the housing bubble that popped in the US
compare to the one in China?

~~~
seanmcdirmid
The one in China is much worse, there are entire buildings sitting empty, sold
to speculators, but no one living there. Even in "hot" markets like beijing,
occupancy is only around 60 or so %, the rest is speculation.

However a lot of property is bought with cash, or high down payments. The lack
of property taxes means you can sit on the property forever as a way of saving
that beats the bank, and China lacks good investment options. So this bubble
could go for awhile, and it really isn't good for the economy (unused property
is unused).

As soon as the gov introduces a property tax, it will burst pretty quickly. So
the gov doesn't do that.

~~~
kyllo
Yep, the Chinese stock market is garbage and interest rates on savings
accounts are too low, so real estate is the default savings/investment vehicle
for wealthy Chinese. Policy measures could change that pretty quickly. But the
policymakers themselves have a lot of skin in the game.

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legitquest
> _A new global political and economic order is emerging, the result of new
> economic realities. We cannot change these economic realities. But if we
> respond to them in the wrong way, we risk a backlash that will result in
> either a dysfunctional global system or a global order that is distinctly
> not what we would have wanted._

I just hope we don't mess this one up!

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yc1010
Let me get this straight,

China is selling its products to the US at artificially cheap prices and labor
in exchange for ... ... pieces of green paper with $ on them. To the tune of
3.5 trillion
[http://en.wikipedia.org/wiki/Foreign_exchange_reserves_of_th...](http://en.wikipedia.org/wiki/Foreign_exchange_reserves_of_the_People%27s_Republic_of_China)

The US could overnight introduce a "new" dollar exchangeable at 1:1 for any
bank accounts/funds held in US Banks in USA. Cash could also be exchanged at
1:1 provided a valid IRS tax clearance certificate is shown proving that tax
was paid on this cash.

So the US solves several problems with one stroke:

1\. China endsup with a pile of worthless paper and a broken economy bringing
manufacturing and jobs back to the US

2\. US Companies laundering and holding funds abroad problem is solved, They
can pay 20-30% tax to bring these funds back giving the economy a huge once
off surplus.

3\. The black economy is decimated as criminals endup with worthless paper or
are forced to convert and hence pay tax on their dollars.

Considering the US has in the past made holding gold illegal, its not exactly
outside the realm of possibility.

~~~
ginko
How does wrecking the Chinese economy solve any problems? (Not to mention also
completely destroying international trust in the US dollar)

~~~
yc1010
For one it would bring jobs and manufacturing back to the US.

It would also prevent the rise of a military adversary which could threaten
the stability of the region and allies such as Taiwan, S. Korea, Japan and
Australia.

Don't forget this
[http://en.wikipedia.org/wiki/Nixon_Shock](http://en.wikipedia.org/wiki/Nixon_Shock)

