China Housing Bubble Update

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So is China in a housing bubble? In a recent paper, Christian Dreger and Yanqun Zhang say yes:

Our results indicate the presence of a house-price bubble. In Figure 1 it can be seen that increasing imbalances have emerged over the past two years. For example, real house prices in Shanghai have been 28% above the long run equilibrium in 2008, and 35% in 2009. While the evidence is similar for Beijing, the increase is more spectacular in Shenzhen….In general, the bubble is more pronounced in the special economic zones and the south-eastern coastal regions. Overall, the size of the bubble is 20% in 2008 and 25% in 2009, regardless of whether GDP or population weights are applied.

If their numbers are correct, the Chinese housing bubble isn’t as bad as the American housing bubble of the aughts. What’s more, it’s not fueled by borrowing as strongly as ours was. And what’s even more, Chinese borrowing has largely been to buy actual property, not to finance home equity loans.

All of these things together suggest that China’s property bubble might not be that bad. On the other hand, it’s pretty bad in certain areas, and if the Chinese economy starts to go south it could touch off a vicious cycle of slowing domestic demand and plummeting house prices. It’s still something to keep an eye on.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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