Shanghai trade down 4% as property sales repeat Dubai crash
Posted on 07 February 2012 with no comments from readers
A massive slump in new home sales and a four per cent drop in container traffic through the Port of Shanghai, the world’s busiest is signaling a downturn for China that echoes Dubai in early 2009.
Dubai was then hit by a double whammy of the global financial crisis and slump in trade, and a local property bubble going bust. This is the China crisis of 2012.
Luxury sales down
Hong Kong shopkeepers have reported disappointing sales in the New Year celebrations this year and are concerned that the bubble in demand for luxury goods from China is over.
Falling house prices have a depressing effect on wealth, and if you’re not feeling wealthy then you spend less on non-essentials. Top housing developer China Vanke said sales fell 39 per cent in January, while Guangzhou R&F posted a 57 per cent decline.
The IMF is warning that the eurozone crisis could wipe four per cent off Chinese growth this year. China is also another indebted nation with the ratio of loans to GDP up to 200 per cent over the past five years, a more rapid accummulation of debt than the US housing bubble of the past decade.
This is ‘Dubai x1,000′ as China bear hedge fund manager Jim Chanos has predicted. But note the scale of the problem. Dubai could count on Abu Dhabi for a $20 billion bailout, are we really talking about $20 trillion for China? Nobody in the world has that kind of money.
Nouveau riche
Chinese visitors to Dubai show all the classic signs of nouveau riche in a boom. They check into the Burj Al Arab and buy Louis Vuitton although it is cheaper in China. The sensible ones buy depressed Dubai real estate because they know their own bubble is almost bust.
But at the moment China still looks like a slowdown rather than a crash. Dubai trade took a massive dive in the first half of 2009 and real estate construction came to a sudden stop. That is not yet the situation in China.
However, economists do normally extrapolate trends, only optimists always believe things can only get better. China is heading in one direction and it is not up. No wonder the CEO of Hong Kong says he has never been more worried about the global economy.
