Could China Spark the Next Global Financial Crisis?
China’s slowing property market has forced Beijing to put its foot on the policy gas pedal, worried as it is by the effects of a deepening slump. For a government whose legitimacy is based on economic growth, the consequences of the property bubble bursting could be far-reaching, threatening not only China, but the region and beyond.
Fuelled by cheap credit and a lack of alternative investments, China’s property market enjoyed a massive boom during the past decade that has only recently cooled. According to the McKinsey Global Institute, property prices increased by 60 percent from 2008 to August 2014 in forty Chinese cities, with residential property prices in prime locations in Shanghai now only about 10 percent below levels in New York and Paris.
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