- December 1, 2014: Vol. 8, Number 11

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Perfect timing? A property crash in China need not be all bad news

by John Tsui

Because commerce and capital are now so globally interconnected, a property implosion and credit tightening in China may trigger contagion whose tremor could cause a global double dip. Though less likely, potential consequences could include a 15–30 percent drop in the Dow and Asian bourses, insolvencies among China’s property and property-dependent industries, a dramatic retrenchment of foreign inbound direct investment into China, recession in Brazil and south-east Asia, prolonged QE money printing in the United States and Europe, and plunging capital and property values.

Asia’s most recent depression occurred back in 1997 with the Asian financial crisis, when a Thai company defaulted on its corporate bond. Unlike that Asian crisis and the Lehman Bros crisis of 2008, the contagion was contained regionally. With almost 16 years of unprecedented boom, a correction in China is imminent, and the trigger could be as benign as an Asian corporate bond default to en masse

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