Lot Lines: Evergrande and China’s real estate turbulence

 Lot Lines: Evergrande and China’s real estate turbulence

J. David Chapman

I had the opportunity to be a guest on the KRMG radio show Senior Class, hosted by Rusty McMurray, this week. The topic was the turmoil in the Chinese economy. Long thought of as a shining star in terms of global economies, China is now facing a test of its financial system. China has become very dependent on housing for growth. Real estate has been the target for stimulus after the global financial crisis.

Sound familiar? Nearly every country has leaned on real estate to pull its economy out of financial recession; however, none did so as much as China. Real estate products and services account for 29% of GDP in China. Ireland and Spain may have come close to those levels, but the U.S. at its peak was at 15%.

The whole Chinese growth model is dependent on producing real estate. This has been the strategy for years. It is now estimated that in order to get real estate from 29% GDP to a more reasonable…

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