Could A Real Estate Crash In China Cause A Global Credit Crisis?

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If the U.S. housing crash of 2008 caused a global credit liquidity crisis, could a similar crash in China have the same global impact on credit?  I saw an article in Forbes discussing the signs of a possible bubble bursting in the Chinese real estate market similar to what the U.S. saw in 2008.  Although their position of lending and adding liquidity to the global markets is completely different than the position of the U.S., a credit crunch in China could have a different, but heavy impact around the globe.  Without looking in depth, I would think the impact would be more on the investment side of where chinese money is invested and the potential impact of withdrawls of those investments would have.  Potential impact could be in hedge funds, stocks, MBS's, Treasuries, and other investments around the globe that could see Chinese investment liquidate rapidly.  I might just be imagining a pessimistic scenario, but I have to wonder what kind of ripple effect, if any, could be if a credit crisis hits China in the same magnitude that hit the U.S. in 2008.  Most of all, I have to wonder what effect that could have on the U.S. mortgage and real estate markets.  We all know what happens when we see the music stop in the musical chairs credit game domestically.

Comments (1)

Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I doubt that it would cause the type of crash that occured here in 2008.

For one thing, Chinese home financing, for those who even finance, is usually 20-40% down.  Not as much risk for the lenders or financial market. 

I suspect that the credit market in China is more towards commerical properties. 

Of course, I could be wrong.

May 21, 2014 07:16 AM