Chinese housing overbuild may erode support for Xi Jinping


What was once a thriving Chinese housing market has now become a liability. According to He Keng, a former deputy head of China’s National Bureau of Statistics, there is now enough excess inventory in the country that it could house its entire population of 1.4 billion people. China’s largest privately-run property developer, Country Garden, is in survival mode.

Straight Arrow News contributor Peter Zeihan explores how China’s staggering debt-fueled overdevelopment is only one component of the nation’s larger economic collapse — and what it all means for Xi Jinping.

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Excerpted from Peter’s Sept. 27 “Zeihan on Geopolitics” newsletter:

Trying to predict what the Chinese system will look like as it collapses would be a fool’s errand, but exploring China’s housing market in this context could be fruitful.

China has an investment-based economic model, which means resources and capital go towards infrastructure development and construction. As Japan and Korea have shown us, this economic model isn’t sustainable; diminishing returns will settle in, and the economy will grow stagnant.

Japan and Korea had private enterprises to help the economy balance out, in addition to international investment opportunities. In the case of China, capital flight is restricted, so citizens look to speculative bubbles for investment opportunities…and housing is the most problematic of the bubbles.

And so Chinese citizens dumped their life savings into housing, generating the world’s most massive overbuild. As China collapses and people’s money is tied up in this useless real estate, it doesn’t take much to imagine what happens next. Let’s just say Xi might be losing some of his fan base.