Back before China was seen as an existential threat to European industry, it was engaged in a wild housing boom. As boom turned to bust, so a wave of corporate bankruptcies was unleashed, including the world’s most valuable real estate company, with shedloads of debt.
This was all quite gripping at the time. Today’s attention economy moves on so quickly it’s maybe forgivable to have memory-holed the whole shebang. But the shebang, as Kenneth Rogoff and the IMF’s Yuanchen Yang remind us in a newish paper for Brookings, is not done shebanging — despite the state’s best efforts. Far from it.
Housing is important to every economy. But to China, it’s extra important. According to the PBoC, 96 per cent of urban households own a home, and 41 per cent own at least two. The average household owns 1.5 properties. And as such, property constitutes around 70 per cent of China’s private wealth. The comparable figure for the US is around 30 per cent.