There are only a handful of newsletters I look forward to each month and Vitaliy Katsenelson‘s ContrarianEdge is one of them.
This week he’s talking about how a Chinese real estate crash is a very real possibility:
I often hear the argument that China will not have a real estate crisis of US proportions because home and condo owners have to put 30-40% down when they buy. So where do people get the money to buy a house that costs, on average, 8 times their annual income (a figure several times higher than in the US)? Some of it comes from savings, and some comes from borrowing from relatives.
China just hiked rates overnight for the third time this year and the fifth time for this cycle. Should prices come down hard, an entire ecosystem of local government lending and borrowing (est at $2.2 trillion) could find itself facing some serious repayment problems.
For a succinct and well thought-out take on the bear case for China, I recommend heading over for the rest.