Beijing's Iron Grip Fails to Fine-Tune China's Economy

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The Chinese economic super-bubble is currently all about real estate which is vehemently refusing to follow the direction set by the omnipotent hand of the central government. WhatIf surmised in an earlier post that such attempts are likely to fail. And true enough, the situation appears quite dire as Xinhua reported yesterday that

Commercial property sales in China's booming Zhejiang province fell sharply in 2011 following tough government curbs. The total floor space sold slumped 20.5 percent year-on-year

This slump has also had a devastating impact on the highly leveraged smaller developers, as the article goes
on to say that

Earlier several local developers in Zhejiang were reported to be in a liquidity crisis or unable to pay back debts

With the snowball continuing to gather momentum, Beijing is likely to find itself in a quandary. Should they raise rates to continue fighting inflation, or lower them to prevent the economy from slowing further and arrest the drop in real estate prices.

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