Rising house prices put China in a bind


New home prices in China's four major cities rose at the fastest rate since January 2011 last month, again highlighting the economic dilemma that the government finds itself in.

Price jumped 20% on year in the southern business centers of Shenzhen and Guangzhou, 17% in Shanghai and 16% in Beijing. Overall, prices rose in 69 of the 70 cities that the government tracks.

On average, prices increased  8.19% vs 7.48% in August and 6.7% in July, the WSJ calculates.

"Home prices, especially in big cities, are a bit out of control," says economist Liu Li-Gang, adding that China faces a property bubble.

Another economist, Xu Gao, gives the flip side. "If home prices fall, the economy will certainly slump. The government is trying to find a balance," says Xu.

The Shanghai Composite is -1%.

ETFs - Stocks: FXI, GXC, PGJ, YAO, FCHI, PEK, CAF, YXI, XPP, FXP, MCHI, YINN, YANG, TCHI, CHXF, KFYP, HAO, ECNS. Bonds: DSUM, CHLC. Currency: CNY, CYB, FXCH

From other sites
Comments (1)
  • User 353732
    , contributor
    Comments (5158) | Send Message
     
    Chinese local government debt is collateralized by land values. The higher home price and land values the more local public debt can be issued. If prices fall much of this local debt will become manifestly bad creating a financial calamity for holders of this debt.
    Local governments have a huge vested interested in perpetuating and inflating the bubble.
    22 Oct 2013, 06:38 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs