The source of the Chinese housing bubble stems back to the 1990s
when China began privatizing housing. The government began to
sell citizens their homes for cheap and virtually overnight
increase the homeownership rate from 50 percent to 80 percent.
Since then, with few other investment options, the middle class
has poured capital into housing. But investment has not only
come from the wealthy elite or middle class families, but
governments across the country. In fact, local governments own
many property developers. In many places around the country land
has grown so expensive that private developers have pulled back,
leaving state owned enterprises as the main investors in real
estate. The national and local developers are able to operate
largely apart from budgetary constraints, and are funded by
state owned banks. This has left local governments exposed to
potentially unsustainable debts. While a full-on collapse of the
Chinese housing bubble may be a while off, there are warning
signs emerging now. For in