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Beijing Home Prices Plunge 31.4% Not too long ago, we experienced a serious decline in real estate prices, and the world suffered. Unfortunately, it looks like the contagion is spreading to China after all. Real estate prices in Beijing decreased by 31% over the last month, an abyssal drop, even for Chinese standards.
Compounding to that the fact that many loans are non-performing loans, a financial storm might blow over China soon. Remember that a drop in real estate and non-performing loans put a serious strain on the balance sheets of banks. Banks will therefore stop lending, which will hinder growth, fueling a further decrease in real estate prices, and so on. The vicious circle has been entered, without government assistance a steep decline can be expected.
On a regional scale, it is bad news for Asia in general, but more specifically so for Korea and Japan. Japan is already in a bad situation, if China goes south, Japan is beyond south...
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