Chinese households' concentration of wealth in real estate is magnifying the danger to the world's second-largest economy of any property bust, as the nation grapples with the consequences of its record credit surge. Mortgage debt as a share of disposable income rose to 30 percent from 18 percent in 2008, according to estimates by Nicholas Lardy at the Peterson Institute for International Economics in Washington. The buildup raises the stakes for any slide in property prices amid China's efforts to head off defaults by local governments and developers that propelled a run-up in borrowing that now amounts to more than double the size of the economy, according to Goldman Sachs Group Inc. A hit to household wealth could impair consumer spending, rebuffing policy maker efforts to rebalance the economy toward domestic demand. "A fall in housing prices could have significant knock-on effects on private consumption," said Eswar Prasad, a former chief of the International Monetary Fund's China division and now an economics professor at Cornell University in Ithaca, New York.
via Business News - Yahoo Finance http://ift.tt/1cU4Fv0
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