Recent newsflow from China suggest that the country’s real estate market is poised for a sharp slowdown and the heavily controlled financial sector is sitting on huge piles of NPAs which are as yet undeclared.While I don’t think a crash will happen in China , I feel more certain that the stellar growth in China driven by exports is going to slow down as its major trade partners in US and Europe face low growth . China’s government has been proactive in trying to defuse any real estate price explosion , I am not sure if they have been totally successful.Now they are facing the currency appreciation against their biggest trade partner the EU.This will make the Chinese appreciation against the dollar tough if not impossible leading to more friction with a charge up US Congress.
China Stocks Plunge to Eight-Month Low on EU, Property Concerns – Bloomberg
Google+China’s stocks plunged, driving the benchmark index to an eight-month low, on concern a European debt crisis and Chinese government curbs on property will hurt economic growth.
Jiangxi Copper Co. and Aluminum Corp. of China Ltd., the nation’s biggest makers of the metals, dropped more than 5 percent as commodity prices tumbled. China Vanke Co., the largest listed developer, fell 4.1 percent as brokerages said home prices may drop 30 percent. Huaxia Bank Co. slumped 10 percent after saying it plans to raise capital. Losses worsened in the afternoon on speculation inflation accelerated in April.
“In the long run, we face the risk of the property bubble bursting,” said Xu Lirong, who oversees about $2.6 billion at Franklin Templeton Sealand Fund Management Co. in Shanghai. “If that happens, it’ll be a catastrophe for the economy and the stock market.”
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 117.45, or 4.1 percent, to 2,739.70, its lowest close since Sept. 2. The CSI 300 Index retreated 4.6 percent to 2,896.86. Futures on the CSI 300 expiring on May 21, or the most active contract, lost 3.4 percent to 2,972.6.
The Shanghai gauge has slumped 16 percent in 2010, Asia’s worst performer, as the government unwound monetary stimulus and stepped up measures to cool inflation and prevent a housing bubble inflated by record lending last year. The stock index surged 80 percent in 2009.
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