In case there hasn’t been enough bad news for you recently ($2bn loss at supposedly the world’s best managed bank, Greece heading for financial collapse, the UK back in recession, stubbornly weak employment data in the US) the evidence is growing of a serious property downturn in China. This blog brings together the data to show that a major sector of the Chinese economy (accounting for more than 10% of GDP) is now probably contracting. That will also hit demand for steel, aluminium and copper, all imported from countries like Australia and Brazil, so look out for the secondary effects.

Whenever I have interviewed potential students in China I ask them about the housing market. Virtually all of them express the view that the market won’t get too bad because either i) there is such a large underlying demand for housing; and/or ii) the government won’t let it happen.

We used to hear similar stuff in the UK in the late 1980s: the supply constraints, the UK is a crowded place so there can’t be a surplus of houses, it’s a great long term investment etc. Then in the early 1990s the housing market fell by a third in real terms.