The surge in China’s stock market & real estate prices

Photo by *L*u*z*a*
Photo by *L*u*z*a*

Investors are rightfully worried about the formation of asset bubble after the revelation that Chinese banks lent out US$670.9 billion, a full 91.6% of the country’s lending target for the year in the first quarter. Most are wondering if it was being directed into areas conducive to a long-term recovery. With such a huge sum of money flowing around, coupled with lax regulation and tracking by the banks, it is not difficult to guess which are the likely places the money will end up in. For answers, look no further than the China stock market and prices of real estate.

Not long ago, Beijing, worried that hot money flowing into unwanted sectors could cause bubbles rather than sustain economic growth, has warned mainland banks against using wealth management funds to directly invest in secondary markets of A shares, managed funds and pre-IPO companies. The warning come ahead of the revival of mainland initial public offerings and after an estimated 50 percent of bank lending has been poured into surging stock and real estate markets. Read more…

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