How sustainable is China's real estate bubble

Now, observers believe, the pendulum is swinging in the other direction again: the economy is becoming more robust, but house prices are rising again. "That could be a disaster for China," says Yi. The analyst even believes that growth and thus the risk of a bubble rose significantly more in the fourth quarter than the 7.9 percent reported by the statistics office. Yi believes the value has been corrected downwards - and he is not alone with his doubts. These figures should pave the way for the new government to serve its increasingly critical and frustrated population solid growth figures in its first year. Because the current figures are the comparative values ​​for the future. The lower they are, the better for the next round of statistics. "It's always like this after a change of power," he says.

Like Yi, other observers are also skeptical as to whether the latest upswing is sustainable. Economist Tan Yaling from China Forex Investment sees China's growth model at an impasse. "Eighty percent of bank credit and 65 percent of steel production go to the real estate sector, but 80 percent of people can't afford a home because the prices are too high," says Tan. There is no country in the world that can rely on the real estate sector as a driving force for growth in the long term. A rethinking of the new top management is urgently required, away from growth solely from investments towards more efficiency. Companies should become more innovative and citizens should consume more.

This has been talked about for years, but economist Tan recognizes the opposite development: state-owned companies from the steel sector, for example, try to invest as investment firms in order to generate profits instead of developing new, high-quality products.

The problem is homemade. In China's nepotism, there are few brave people who are willing to forego their own profits. Instead, they are looking for alternative business models to spice up their own balance sheets, which in turn can mean huge bonuses.

The managers' calculation is that right now, as long as there is money in the market, they can make a profit from financial transactions. After months of soaring, inflation fell below the two percent mark in the fall and encouraged the government to increase the money supply. But analysts expect inflation to rise. Some fear four and five percent in the next two years. Tan Yaling does not want to commit, but is certain: "Inflation will be a major concern and challenge for China in 2013." In the medium term, the government will have to turn the money off again. Perhaps that is an incentive for companies to devote more time to urgently needed innovations.

Link tip: For the first time since 2005, the statistical office published the state of financial justice in the country. There has been no data on this hot topic for years because it was not officially methodologically possible. Statisticians measure equality with the Gini coefficient - the higher, the more unevenly wealth is distributed. In China, the value was 0.474 in 2012 - from 0.4 onwards, inequality is considered dangerous for social peace. Reuters has analyzed the Chinese statistics report here.