China’s Real Estate Development Bubble

Auditors in China yesterday reported that local governments there owe $1.6 trillion. We don’t really know what the focal point of all that debt is, but a large part of it must be speculation in real estate development. That’s the same problem that is causing so many bank failures and bailouts in the United States and Europe. Bailouts may be called for too in China, to prevent the banks from failing, and it could end up with many of the same economic consequences we are seeing in countries like the United States and Ireland.