Is China's property market a bubble?

After the global downturn and the lessons learnt from property bubbles there are suspicions of a property bubble occurring in China. A property meltdown in China would damage the global economic recovery as China becomes more and more important in the global economy with China accounting for almost a fifth of world growth this year, according to the IMF; at purchasing-power parity.

China’s economy rely’s on its property market is reaching a level close to the housing peaks in the U.S. and Japan, according to Citigroup Inc Shen Minggao. Micheal Pettis said, " Over the next few years if China can re balance its economy, and reduce its trade surplus, it will contribute real growth and employment to the rest of the world.” While China's GDP will likely rise 9% or more it is dependent on real estate investment. “Last year, fixed-asset investment accounted for more than 90% of China's overall growth, and residential and commercial real estate investment made up nearly a quarter of that.” According to Bill Powell continuing on to say that more investors are becoming speculators. This event has been seen before in the U.S that has and has had severe consequences on the economy in the global economy leading to a global downturn.

Chinese authorities are dealing with the bubble and are hoping to deflate it before the bubble burst like in the U.S and Ireland. Shen Minggao said that the country “may only avoid the bubble burst if current property tightening is effective.”