China Tells

Recently the property price in China has gone up in an agressive mode since beginning of 2009 (See Article from Chinatells).  Such a dramatic movement has aroused heated debate as to whether China’s property sector is entering a bubble. A particular interesting point is to compare the current Chinese property market to that of Japan’s in late 80s. After the property bubble burst in Japan, it has taken the country more than two decades to recover but still without much success. PIMCO issues an investor letter recently for such a comparison (Click here for PIMCO). According to PIMCO, there is no sign of property bubble in China yet and the current property sector could continue to grow at a healthy speed for the foreseeable future.

There are four main reasons for PIMCO to be optimistic: 1) China is experiencing a super fast growth period therefore there would be enough demand to absorb the house supply; 2) The price appreciation of China property is not as strong as that of Japan; 3) The size of credit relative to GDP is mild; 4) The banks are in good situation with a low level of leverage and NPL (See Graph from Chinatells).  Given above reasons, it is unlikely to see a property bubble burst in the near future in China as happened in Japan during the late 80s.

中国各大城市房价急速上升，引发大家对于房地产泡沫的争论。也有人将中国目前的房地产狂热和80年代的日本相比，众所周知日本房地产泡沫在80年代末破裂，从此进入‘失去的十年’，直到今天还没有恢复元气。PIMCO撰文指出，这种担心有点多余，目前中国的房地产市场还远没有到日本80年代的水平，因此不太可能发生泡沫破裂的情况，即使破裂其负面影响也要小得多。