china's housing bubble

Economics
1

I know china has a housing bubble and this can be blamed on their government’s credit policies and subsidies

a)

I was wondering if anyone had some austrian economics articles/books suggestions to learn more about china’s housing situation?

b

If China’s government is to blame, how do you explain Hong Kong’s housing bubble when they are freest economy in the world according to Herritage Freedom Index?

2

If China’s government is to blame, how do you explain Hong Kong’s housing bubble when they are freest economy in the world according to Herritage Freedom Index?

  • One cannot use those types of indexes as indicators of specific sectors within an economy. Hongkong’s government – even pre-takeover – has controlled housing more than other sectors of the economy. It’s a tiny country and the government has controlled how much land can be developed. They also have a large amount of public housing.
  • Hongkong’s monetary policy – pre-takeover and now – is not a commodity-based standard, nor any type of market-determined standard. The HK$ is pegged to the US $. Check out FRED for a chart. Since 1984, Hongkong’s dollar was US currency, in all practical respects, and remains so (except for the crucial fact that ti can stop being so tomorrow if their authorities change their minds). Austrians usually trace booms and busts to the interest rate. The only way to keep the HK$ pegged to the US$ is for the Hongkong monetary authority to influence interest rates somewhat in parallel with the Federal reserve. So, an Austrian would probably say that it is no surprise that Hongkong’s property market shows the same level of boom/bust as the property markets in some U.S. cities
  • I suspect that Hongkong’s size and it’s position vis-a-vis China does make a difference. One cannot view it the same way one might view – say – South Korea. Even in the years leading up to the takeover, Hongkong was basically a Chinese entrepôt. For instance, when China wanted to take over, China’s weapon was not just that the People’s Army would walk over. Everyone in Hongkong realized that their wealth depended on business with China. Hongkong’s multi-millionaires had huge assets in China and their local assets were mostly geared to doing business with China. As a result, China’s policies have a huge impact on Hongkong. Before the take-over, illegal immigration, fears about what would happen in a takeover, money coming in prior to takeover (when fears had quelled) … all these could sway asset prices. Post takeover, Hiongking is a part of China and mainland money can flow there to create bubbles.
  • Finally, bubbles pre-date the Fed: South Sea bubble, Railway speculation, etc.
3

software nerd, thanks so much for the reply

do you have any hong kong econ book reconomendations?

I’m thinking of buying stocks on Hong Kong Exchange, I want to avoid ones that own land

4

do you have any hong kong econ book reconomendations?

Sorry, I don’t know enough to make any recommendation. Here’s a paper that came up via Google. I guess you can find a few like that.

I’m thinking of buying stocks on Hong Kong Exchange, I want to avoid ones that own land

A while ago, I owned some mutual-fund shares in the Third Avenue family of funds. The head honcho is a guy named Marty Whitman, who is probably close to retirement now. He used to be quite enthusiastic about Hongkong. Even if you end up disagreeing with him, he is a smart guy and the first few pages of his Quarterly letters are worth reading.