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S. prior to the collapse of prices. As real estate accounted for 6.1% of all of China's GDP growth last year. This is the same level as the U.S. during 2005 and Japan during the 1980's. Commenting about what was taking place Citigroup analysts observed, "It's evident that property prices are no longer sustainable once the residential investments achieve above 8% of nominal GDP, and China may not be an exception." ("China Housing Market Nears U.S. And Japan") This is significant, because this information supports the hypothesis that a real estate bubble is developing in China. As prices could be in the process of rolling over, this will have an adverse effect on the economy.
The article that was written by Silverstein (2011), talks about the possible negative impact of the real estate bubble bursting. As he believes, that this could plunge the world into another deep recession. Once this occurs, it means that consumer spending will decline and the standard of living in the country will fall. as, China will experience similar challenges that: the U.S. And other countries around the globe were going through in 2008. This will make it difficult for the Communist government to maintain power. The information from this source is useful, because it helps to provide specific insights about the lingering effects of the real estate bubble bursting in China. As this is discussing various scenarios and how this could have an adverse impact on the economy. (Silverstein)
The basic approach that we will take is to use qualitative research. This is when you are looking at a variety of sources, to examine the overall impact that it will have on the subject. In this case, this style will help to identify possible trends and it will allow us to understand other outcomes. Once this occurs, it means that the overall quality of research and analysis will be as objective as possible. ("What is Qualitative Research")
Limitations and Key Assumptions
The limitations of the research are that we could be taking is of a more pessimistic view. As this kind of growth rate could be indicative of strong underlying demand, which could sustain the current level of prices. At the same time, we are assuming that the real estate market is centralized. However, in reality there will be pockets that will not follow the trend of what is occurring. When you put these two factors together, it could mean that the conclusions drawn, are taking a worst case scenario into account vs. A real world perspective.
Clearly, the research indicates that some kind of real estate bubble is developing in China. As asset prices have been encompassing a larger percentage of economic growth and many consumers are effectively priced out the markets. Once this occurs, it means that the odds increase dramatically that some kind of bubble will take place. This is important, because it shows how the strategy that we are using will be able to corroborate the underlying hypothesis. However, there are limitations, as we could be taking a more pessimistic view of these events. As a result, we will need to conduct more research and look at variety of sources. This will help to provide specific insights about: the recent events in China's property markets and the long-term implications.
"7 Ways of Shorting." Business Insider, 2011. Web. 2 Apr. 2011.
"China GDP Growth Rate." Trading Economies, 2011. Web. 2 Apr. 2011.
"China Housing Bubble." The China Expat, 2011. Web. 2 Apr. 2011
"China Housing Market Nears U.S. And Japan." Bloomberg, 2011. Web. 2 Apr. 2011.
"Over Supply of Home and Land." Bank Foreclosure, 2011. Web. 2 Apr. 2011.
"What is Qualitative Research." QRS International, 2011. Web. 2 Apr. 2011.
Dalamia, Shikha. "China's Looming Real Estate Bubble." WSJ, 2010. Web. 2 Apr. 2011.
Perrin, Christine. "China's Slowing Economic Growth." IB Times, 2011. Web. 2 Apr. 2011.
Silverstein, Lars. "Economic Forecast for 2011." Radio 86, 2011. Web. 2 Apr. 2011.
Wagener, Wieland. "Chinas Real Estate Bubble." Speigel, 2010. Web. 2 Apr. 2011.
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