Just like the US in 2008, a perfect storm is building in China, and it may hit world markets soon. The overbuilding, cash-flow challenges and lack of demand in China all combine for an eventual major financial disaster.
Credit-worthiness was no longer relevant in the US and the volume of subprime loans exploded. The government had inserted itself in the mortgage business. Like most government initiatives, their plans were doomed. Americans lacking the ability to pay for mortgages were provided mortgages at teaser rates that when fully adjusted would never be paid. This ultimately climaxed in 2008 with the subprime crisis that sent shock waves around the world and put financial markets in a tailspin.
Another financial meltdown is in the works – this time in China
As China grew, it invested in its infrastructure and in addition it invested in large housing projects throughout the country. These efforts helped bolster China’s already fast growing economy.
There simply are not enough people in the area where these massive complexes were built that make enough money to afford living in these communities. It appears that the Chinese communists misunderstanding of supply and demand may be their downfall.