China Reins in Credit
China has built huge new infrastructure, mainly financed by state and city government borrowing. This is, in part, to goose growth, jobs and therefore social harmony at any cost. This borrowing has steadily increased as the Chinese economy has slowed down. China wants to rein in and reduce this borrowing.
Who has financed all this vacant Beijing Real Estate?
Any cursory examination of Beijing’s skyline in 2008-2009 will reveal that commercial buildings such as general office, retail space and hotels have been sprouting up like weeds. As the Olympics wound down and the Global Financial Crisis deepened, it was clear to all that the vacancy rate for these mamoth buildings is very high. Beijing is oversupplied with commercial real estate by an estimated 14 years of optimistic growth. One needs to wonder who financed these buildings and how will they recoup their investment. It seems like the heard mentality has prevailed.