Where The Chinese Liquidity Tsunami Is Going

Where The Chinese Liquidity Tsunami Is Going

Unlike their American counterparts in the world of “what to do with all the easy money sloshing around the market,” it appears the Chinese learned their hard lesson in the collapse of stocks in 2007/8. As the following charts make abundantly clear, the (hidden) inflation that trillions of dollars worth of central bank largesse is creating has piled into real estate markets in China and not in stocks – a problem for the central planners who know the potential for social unrest from a nation unable to afford housing (especially in light of its reform policies). Chinese stocks are -13% YoY, while Chinese real estate is +20% YoY. In the US, of course, we have an always-willing-gamble public more than happy to throw their marginal dollar at all-time high equity and real-estate prices.

2007/8 appears to have taught Chinese investors a harsher behavioral lesson…

Than Americans…

As The Chinese are piling everything into real estate…

So what next? Does the PBOC (and Fed) really think they can dis-inflate these bubbles with no untoward consequences?

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