http://www.TheForexNittyGritty.com - Chinese Real Estate Crash - Many who follow the real estate market on the mainland would not be surprised to see a Chinese real estate crash. Although some still think of China as an unstoppable juggernaut, the nation has its share of problems. For example the large number of IPO’s of Chinese stocks last year were mostly unsuccessful. The US Securities and Exchange Commission is looking into the limited transparency of and poor data available for many Chinese stocks. A likely recession in Europe could not only create problems such as a run on French banks but would certainly reduce exports from China as well. Both the EU and United States are printing money in order to avoid a depression. Cheaper dollars and Euros will make European and North American products more competitive and Yuan denominated products harder to sell. Then there is the issue of skyscrapers and a possible Chinese real estate crash. Building booms often precede bad economic times. The “see throughs” in Atlanta and Houston years ago were silent testimony to the hubris of overbuilding during times of loose credit and excessive optimism. (A “see through” is a skyscraper that is largely unoccupied. At sunrise and sunset one can “see through” the many empty floors.) China is said to have over half of the skyscrapers in the world in construction with more on the drawing boards. Even for a large and growing economy that is a lot, especially when financing may be questionable. Property developers in general are pessimistic while construction firms express optimism. One group might be expecting a Chinese real estate crash while the other does not. However, when a construction company finishes the job it gets paid and moves on. It is the developers and investors who suffer when the real estate market crashes. At such times predicting Forex trends can be profitable. There are three more issues that relate to the danger of a Chinese real estate crash. One is that in an effort to stimulate the economy the Chinese government has built many public projects with hundreds of billions of dollars creating their own artificial boom. The second is the nature of financing in China. Similar to Japan before the bust two decades ago, China has all too many “off the books” loans or at least loans that are not apparent to the general investor. If things go bad they could do so in a hurry with shaky financing. The third aspect is that the Chinese real estate market is already heading down hill. Residential property sales are down substantially in major Chinese cities and sellers are dropping prices in order to get out before things get worse. As the China current account surplus falls so might property values throughout China. So, what would a Chinese real estate crash mean to the average Forex trader? The global economy is interconnected. Problems in Europe lead to problems in China and problems in the USA lead to problems virtually anywhere

2. MANY WHO FOLLOW THE REAL ESTATE
MARKET ON THE MAINLAND WOULD NOT
BE SURPRISED TO SEE A CHINESE REAL
ESTATE CRASH.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

3. ALTHOUGH SOME STILL THINK OF CHINA
AS AN UNSTOPPABLE JUGGERNAUT, THE
NATION HAS ITS SHARE OF PROBLEMS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

4. FOR EXAMPLE THE LARGE NUMBER OF
IPO’S OF CHINESE STOCKS LAST YEAR
WERE MOSTLY UNSUCCESSFUL.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

5. THE US SECURITIES AND EXCHANGE
COMMISSION IS LOOKING INTO THE
LIMITED TRANSPARENCY OF AND POOR
DATA AVAILABLE FOR MANY CHINESE
STOCKS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

6. A LIKELY RECESSION IN EUROPE COULD
NOT ONLY CREATE PROBLEMS SUCH AS A
RUN ON FRENCH BANKS BUT WOULD
CERTAINLY REDUCE EXPORTS FROM CHINA
AS WELL.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

7. BOTH THE EU AND UNITED STATES ARE
PRINTING MONEY IN ORDER TO AVOID A
DEPRESSION.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

8. CHEAPER DOLLARS AND EUROS WILL
MAKE EUROPEAN AND NORTH AMERICAN
PRODUCTS MORE COMPETITIVE AND YUAN
DENOMINATED PRODUCTS HARDER TO
SELL.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

9. THEN THERE IS THE ISSUE OF
SKYSCRAPERS AND A POSSIBLE CHINESE
REAL ESTATE CRASH.
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10. BUILDING BOOMS OFTEN PRECEDE BAD
ECONOMIC TIMES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

11. THE “SEE THROUGHS” IN ATLANTA AND
HOUSTON YEARS AGO WERE SILENT
TESTIMONY TO THE HUBRIS OF
OVERBUILDING DURING TIMES OF LOOSE
CREDIT AND EXCESSIVE OPTIMISM.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

12. (A “SEE THROUGH” IS A SKYSCRAPER THAT
IS LARGELY UNOCCUPIED. AT SUNRISE AND
SUNSET ONE CAN “SEE THROUGH” THE
MANY EMPTY FLOORS.)
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

13. CHINA IS SAID TO HAVE OVER HALF OF THE
SKYSCRAPERS IN THE WORLD IN
CONSTRUCTION WITH MORE ON THE
DRAWING BOARDS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

14. EVEN FOR A LARGE AND GROWING
ECONOMY THAT IS A LOT, ESPECIALLY
WHEN FINANCING MAY BE QUESTIONABLE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

15. EVEN FOR A LARGE AND GROWING
ECONOMY THAT IS A LOT, ESPECIALLY
WHEN FINANCING MAY BE QUESTIONABLE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

16. PROPERTY DEVELOPERS IN GENERAL ARE
PESSIMISTIC WHILE CONSTRUCTION FIRMS
EXPRESS OPTIMISM.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

17. ONE GROUP MIGHT BE EXPECTING A
CHINESE REAL ESTATE CRASH WHILE THE
OTHER DOES NOT.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

18. HOWEVER, WHEN A CONSTRUCTION
COMPANY FINISHES THE JOB IT GETS PAID
AND MOVES ON.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

19. IT IS THE DEVELOPERS AND INVESTORS
WHO SUFFER WHEN THE REAL ESTATE
MARKET CRASHES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

20. AT SUCH TIMES PREDICTING FOREX
TRENDS CAN BE PROFITABLE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

21. THERE ARE THREE MORE ISSUES THAT
RELATE TO THE DANGER OF A CHINESE
REAL ESTATE CRASH.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

22. ONE IS THAT IN AN EFFORT TO STIMULATE
THE ECONOMY THE CHINESE GOVERNMENT
HAS BUILT MANY PUBLIC PROJECTS WITH
HUNDREDS OF BILLIONS OF DOLLARS
CREATING THEIR OWN ARTIFICIAL BOOM.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

23. THE SECOND IS THE NATURE OF
FINANCING IN CHINA. SIMILAR TO JAPAN
BEFORE THE BUST TWO DECADES AGO,
CHINA HAS ALL TOO MANY “OFF THE
BOOKS” LOANS OR AT LEAST LOANS THAT
ARE NOT APPARENT TO THE GENERAL
INVESTOR.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

24. IF THINGS GO BAD THEY COULD DO SO IN A
HURRY WITH SHAKY FINANCING. THE
THIRD ASPECT IS THAT THE CHINESE REAL
ESTATE MARKET IS ALREADY HEADING
DOWN HILL.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

25. RESIDENTIAL PROPERTY SALES ARE
DOWN SUBSTANTIALLY IN MAJOR CHINESE
CITIES AND SELLERS ARE DROPPING
PRICES IN ORDER TO GET OUT BEFORE
THINGS GET WORSE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

26. AS THE CHINA CURRENT ACCOUNT
SURPLUS FALLS SO MIGHT PROPERTY
VALUES THROUGHOUT CHINA.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

27. SO, WHAT WOULD A CHINESE REAL ESTATE
CRASH MEAN TO THE AVERAGE FOREX
TRADER?
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

28. THE GLOBAL ECONOMY IS
INTERCONNECTED.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

29. PROBLEMS IN EUROPE LEAD TO
PROBLEMS IN CHINA AND PROBLEMS IN
THE USA LEAD TO PROBLEMS VIRTUALLY
ANYWHERE IN THE WORLD.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

30. THE COMING YEAR COULD BE ONE OF
EXTREME VOLATILITY OF FOREIGN
CURRENCY RATES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

31. THE GENERAL CONSENSUS IS THAT THE
EURO WILL FALL DUE TO A RECESSION IN
EUROPE OR A RECESSION AVOIDED BY
PRINTING MONEY.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

32. THE SEEMINGLY IMPERVIOUS CHINESE
YUAN COULD FALL AS WELL, OR AT LEAST
LEVEL OFF DUE TO DECREASED EXPORTS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

33. IT COULD GET WORSE IF THE SCENARIO OF
A CHINESE REAL ESTATE CRASH TURNS
OUT TO BE THE CASE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

34. THEN THERE IS THE ISSUE OF SOCIAL AND
POLITICAL UNREST.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

35. THE ARAB WORLD IS NOT THE ONLY PLACE
WHERE PEOPLE HAVE GROWN TIRED OF
HEAVY HANDED AUTOCRACIES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

36. PEOPLE OFTEN PUT UP WITH BAD
GOVERNMENT WHEN THEY CAN PUT FOOD
ON THE TABLE AND RISE UP WHEN THE
ECONOMY TURNS BAD.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

37. FOR MORE INSIGHTS AND USEFUL
INFORMATION REGARDING THE FOREX
MARKETS AND FOREIGN CURRENCY
TRADING, VISIT
WWW.THEFOREXNITTYGRITTY.COM.