Can an empty city be a house of cards?

I wrote about China’s potential real estate bubble and the NYT’s coverage yesterday (and the bright lights at GM who are getting in on it).

Today Alexandra Zendrian at Forbes reports on the potential overbuilding (You know, like an empty city!):

Gary Shilling, president of A. Gary Shilling & Co. and editor of the Insight Newsletter, is shorting Chinese stocks because he considers China a “house of cards,” saying, “there aren’t enough people in China yet that have middle-class discretionary spending power,” he says.

Shilling is also concerned that real estate in China suggests a high level of froth in the economy. Overbuilding is setting China up for a big fall. Shilling wonders what China will do with its excess capacity when China hits the inevitable peak in its real estate market.

Simple and complex economics say China can only grow so fast for so long but when people start shorting them, this scares the crap out of me.

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3 Responses

  1. Is Schilling betting on general/all Chinese stocks when he shorts or specifically construction/real estate related? The empty city video would seem to indicate just a lil over buildinng, no?

    • good question. i would think he is just shorting that sector.

      Its funny you post this now Tom, because i saw a piece today that claims that employers are having a hard time finding people to work for them, which strikes me as odd in a country of over a billion people.

      But yeah, an empty city is not a good sign.

      on the plus side, there is this. Maybe that is a weird leading indicator. No one ever is there to defend the cows or chickens are they?

      http://www.cnn.com/2010/WORLD/asiapcf/03/09/china.animals/index.html?hpt=Sbin

  2. What kind of employers? Are they having trouble finding anyone, or just qualified people?

    Cows can take asylum in India. Chickens, well, they’re pretty much out of luck I guess.

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