If this analysis turns out to be accurate - and there is every reason to believe that bubble, like others, will burst - China is going to be facing one of it's most significant challenges in decades. There has been regular political dissent and protests but with a growing economy there was always plenty of money to throw around at the problems. This time it may not be as easy. What makes any analysis complicated is that China is so secretive about the details inside the banking system. Some still believe that there is limited credit bubble risk but that assumes the government story about real estate being paid in cash is accurate. Bubbles eventually always burst.
China's property market is beginning a collapse that will hit the banking system, Kenneth Rogoff of Harvard University told Bloomberg Television.
Property transactions have dropped and prices are stagnating in the wake of steps in recent months by the central government to cool the market.
Xu Shaoshi, minister of land and resources, said at the weekend that he expected prices to start falling within a few months.
"You're starting to see that collapse in property and it's going to hit the banking system," Rogoff, a former chief economist at the International Monetary Fund, told the agency.
