In the last month the Dragonbeat blog (affiliated with the Financial Times) and the Economist Magazine (both publications owned by Pearson) have featured articles that have argued China is not suffering a property asset bubble. The Dragonbeat article offers the sobering calculation:

China’s cities can probably sustain very vibrant housing markets based on a relatively small and affluent segment of its total urban population, even if the majority of urban residents find it hard to afford new housing.

Dragonbeat calculates about 50 million affluent families in China suspending the bubble. That correlates well with their being about 74 million Communist Party members. Of course, not all Party members are home owners; and  not all homeowners are Party members. I submit there is a strong correlation between the entitlements of Party members and the gravity-defying feats of the real estate market here. After all, on the ground, with residential and commercial vacancy rates plainly as high as eighty- and even ninety-percent in vast swathes of many cities, and housing costing as much as eight to fourteen times annual salary, the “fundamentals” of a healthy marketplace in which capital is efficiently allocated are missing.

The Economist article figures the warped real estate market is not yet a bubble, but will become one if the central government does not quickly act to normalize the price of the yuan. Neither article mentions the point that real estate is the only alternative to the stock market the newly monied have to park their gains. Once FOREX restrictions on Chinese citizens are lifted, allowing the nouveau riche to send their money overseas, we’ll hear just how loudly a bubble with Chinese characteristics pops.