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China’s real estate is like a bubble set to burst: Meir

Keywords: Tags  China real estate, American Copper Council, Edward Meir, INTL FCStone, Andrea Hotter

WASHINGTON — China’s property market is increasingly looking like a bubble about to burst, with potentially negative consequences for metals, according to INTL FCStone Inc. senior analyst Edward Meir.

China’s economy has a "few shaky pillars," particularly housing, something the government has also recognized, he said.

"It could be very nasty for metals like steel, zinc and copper (if this bubble bursts)," he told delegates April 25 at the American Copper Council meeting in Washington.

China is the world’s largest consumer of metals, which it has used to fuel its exponential growth.

China has imposed new taxes on property sales for second homes and increased down payments on homes in order to address the problem of its overinflated real estate sector, Meir noted, pointing to dozens of "ghost cities" built in China that aren’t inhabited, as well as questionable loans in an unregulated wealth investment sector.

"On the plus side, the Chinese government has money to throw at the problem," he said.

But Meir noted slowing growth in China and easing demand for commodities.

"The new Chinese leadership is sounding almost liberal in its desires, but what will be the impact of trying to increase competition, closing down state-owned enterprises, reducing excess capacity—and will it work?" he asked.

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