Saturday, August 21, 2010

Real-Estate Bubble in China

The Wall Street Journal carries an opinion piece describing a real-estate bubble in China. Written by economists of the Reason Foundation, it argues:
Beijing is in a dilemma. It can cut spending and rein in its monetary expansion, releasing over time capital for more productive endeavors (especially if it opens up hitherto closed investment options) and putting the economy on a healthier footing. However, that would mean slower growth, lower home values, rising unemployment and potential political unrest. Alternatively, it can buy a few more years of faux-growth and stability by propping up the real-estate market—and risk making the day of reckoning far worse when it arrives.
An interesting dilemma for the world's second-largest economy; particularly since it to some degree remains a command economy.