❗Help close the gap: We still need to raise $40,000 by the end of March. Donate now

A burst in the Chinese housing market would benefit the U.S.

Rob Schmitz Dec 3, 2010
HTML EMBED:
COPY

A burst in the Chinese housing market would benefit the U.S.

Rob Schmitz Dec 3, 2010
HTML EMBED:
COPY

TEXT OF STORY

STEVE CHIOTAKIS: There’s a report out from the International Monetary Fund on real estate prices in China. It says the housing markets in large Chinese cities are becoming more and more disconnected from reality. As a matter of fact, some home prices in Shanghai and Beijing are on-par with lofts in Manhattan. We’ve already seen what a U.S. housing bubble does to the global economy. But what about a Chinese bubble?

Here’s Marketplace China Bureau Chief Rob Schmitz.


ROB SCHMITZ: First of all, let’s get this straight: if there is a bubble in China, it hasn’t yet burst. In fact, much of the IMF report actually says China’s in good shape. But the IMF’s crystal ball has been cloudy in the past. So let’s assume China’s property market is in trouble, like some economists say. If there’s any impact on the U.S., says economist Michael Pettis, it’ll start with China’s real estate developers.

MICHAEL PETTIS: You’ve heard all the cliches of half of all the building cranes in the world are in China. I don’t know how true that is, but real estate has been a huge generator of growth in China.

Pettis says a property downturn in China might mean all those cranes would disappear from the skylines of cities across the country.

PETTIS : If it has a big impact on real estate development, then it would have a big impact on commodity prices.

In other words, shipments of building materials would slow. Less demand would mean the prices of copper, steel, aluminum, you name it, would tank. And, surprise, that would actually be great for the U.S. Cheaper building materials equals better business. Pettis says it’d be like a big tax cut.

In Shanghai, I’m Rob Schmitz, for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.