The cement wall of China

A very bleak piece by Will Hutton in the Observer last Sunday contained a remarkable claim that I’ve seen before but I hope is misleading. Apparently, China manufactured more cement from 2010-13 than the US had produced over the entire 20th century (perhaps they used more timber, bricks, natural stone etc. in the urbanisation and suburbanisation of the US or it’s literally an urban myth?). His conclusion is that the Chinese boom could not last and that so it is proving. Whether his diagnosis is overly pessimistic or not (he’s been sceptical on China for at least a decade), a slowdown in China seems to be happening. It’s amazing to think that China hardly featured in the Asian financial crisis of 1997.

It seems very likely that global real estate markets – and the UK (well, London) is debateably the most globalised major real estate market – will be adversely affected.   No-one really knows how bad it is and, as ever, there are competing narratives. If there’s a currently slow-burning but full-blown financial crisis originating in Asia, I suspect that it would make a Brexit or the prospect of one seem trifling for real estate investors. I can imagine the ‘hard landing’ v ‘soft landing’ discussions that have been occurring among real estate strategy teams. The last Global Financial Crisis originated in the US mortgage markets and affected US and European commercial real estate markets much more severely than the Asia-Pacific markets. It seems that this time it could be Asia-Pacific that will be most deeply affected – but European and the US real estate markets will almost certainly ‘correct’ to some extent if there are problems. It’s the scale of the problems that seems so uncertain.

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