China’s First Recession

       Economics states that China will contract. In every free market it is normal to have boom and bust cycles often. After Deng Xiaoping allowed China to institute capitalistic economy around 1979, the PRC has been growing at a miraculous rate. Boom and bust sequence. It is natural after a 30 year boom that there will be a relatively small bust compared to the overall growth. The housing bubble collapse in China is nothing less than a bust of a 30 year boom in China. It will be the world’s greatest bust because china has been the economic miracle of the century. 

        Boom and bust sequence principally goes up in the long term. The only thing interesting about China is that most countries in the past have had a bust along the way. China is long overdue for a bust, like an earthquake that is long overdue and the quake becomes quite large because pressure is not relieved. This is an excellent opportunity for foreign investors to short China’s real estate at the right time because, the Chinese people literally do not know that the economy can punish them with unemployment. Foreign investors are much different in that they are familiar with market collapses every few years. The Chinese real estate will not drop to 1979 levels, but it will drop significantly when compared to the top of the bubble. This bust is healthy and will be a short-term sickness for China. Booms with no busts are probably unhealthy.