Readying for Chinese Financial Bubbles to Burst

[Guest ajc]

Article about the projected fall in Chinese real estate prices.

As far as I can tell (I'm open to correction here), Caixin is to China what the Economist is to the UK, US and other Anglophone countries.

Sounds like they're openly calling a housing and financial crisis, but they're saying it'll be completely manageable as well (seem to remember the same thing being said about the US not too many years ago though if I'm not mistaken, so I guess we'll see).

 

Also, relatively interesting that they're firmly opposed to any kind of bailout action.

 

 

http://english.caixin.com/2013-07-29/100561990.html

 

"Some financial accidents, e.g., trust products defaulting, may occur in the coming months. Their impact on the real economy will be limited. As the land bubble deflates, the resulting reductions in production costs and consumer prices should support the real economy by boosting exports and consumption.

 

When a few financial incidents occur simultaneously, the sense of panic may spread. The impact, however, should be short-lived. China's land bubble has become almost entirely a financial phenomenon. Its problems should be contained within a small though vocal community.

 

To minimize the panic from a deflating land bubble, the central government should prepare contingency plans for unwinding trust products, property developers and local government financing vehicles.

 

The biggest mistake that the government can make is to, in a moment of panic, use taxpayer money to bail out all failing financial products or institutions. The resulting financial burden would limit the government's ability to pay for the forthcoming reforms to rebalance the economy and launch a new growth cycle."

[Aberhound]

http://www.bloomberg.com/news/articles/2015-09-08/china-just-killed-the-world-s-biggest-stock-index-futures-market

 

Futures trading limited to 10 contracts which has caused liquidity to dry up and trading volumes are now at record lows. Doesn't this mean that all the trades based on pairs will unwind with no buyers ie those closing shorts to support the market? Doesn't it mean that the markets will now plunge eventually like the collapse of a currency peg (which always happens in the end) with only government supporting the market until they realize that they do not have sufficient resources and give up?

 

A small investor might be able to trade the short by taking 10 contracts directly whereas you can't trade through ETFs also because of the trading limits. Seems like a good risk reward. Does anyone have experience how to directly trade these contracts and which brokerages allow you to do so?