China's credit expansion and rising real estate prices are serving as “danger signals” that point to a near end to the country's growth period, says investor guru Marc Faber.
Rising foreign-exchange reserves and, according to Faber, a bubble in the real-estate sector, means the red-hot Chinese economy is due for a cooling.
“From here on, the China economy will slow down regardless. Whether it will crash this year or later, I don’t know,” says Faber, Bloomberg reports.
China has taken measures to slow development of new real estate, such as curbing loans for third- home purchases and hiking down-payment requirements.
But the economy remains hot.
“Excessive credit growth in January, and 11.7 percent increase in property prices in one month alone” are “danger signals,” says Faber.
“The lending rate in China should be at least twice as high as it is now.”
China's decision to cool the lending market sent stock prices in Shanghai taking their biggest plunge in eight months and analysts pointing out that the government is finally paying attention to the sector.
“This time, it seems that the government determination to cool home prices is bigger than before,” Mao Nan, a strategist for Oriental Securities in Shanghai, tells the Associated Press.
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