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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.