Iti s obvious that you are not knowledgeable of the Chinese realtiy, especially regarding the newly surged middle class, a small percentage of the population, but numerically huge.
The speculation there, which has no relation with the subprime problem here other than people buying what they cannot afford, is more often than not (there iare many other variants):
- such a middle class family (often an extended one) pool their cash reserves and buys one, two or three non government price-controlled apartment, at an outrageaous price even for US standards, even if the salaries of the workers are about 15 times lower and also the basic construction material somewhat cheaper.
- eventually uses one oapartament for their own use, the other are rented at prices far below of the monthly mortgage and maintainment costs.
- they have the cash to afford, together with the rent, for one or two years the captioned mortgage and maintenance costs, and after this peiod, as the prices have risen 30, 40 or 50%, sell them (or partially so) with a huge profit
Now imagine that the prices do not rise any more, or begin to fall. Immediately, they will try to sell and a the chinese are very panic prone, as the latest laughable SALT PANIC related to the Japanese radioactivity shows, a total collapse follows.
Obviously, the governemnt knows all that and therefore does not take the really necessary measures to stop such speculation, except some timid band-aids, letting the problem inflate even more. Forbidding two buy more than 2 apartments is useless effort, aseachone is bought by another member of the family.
The consequences can be really terrible.
And if the buyers are not niddle classfamilies, but wealthy speculators with political influence, as nearly all are, they would declare immediately bankruptcy with no question from the affected State banks
