Impressed by the "scale of change" he saw in China on a recent trip, BBC business editor Robert Peston writes in his blog that optimists have reason to believe China will overcome its challenges -- even as the country has a tendency to "to take adverse trends close to the brink of disaster."
Peston lists some of China's problems, including "the widening gap between rich and poor, a rapidly ageing population, the tension between growth and environmental protection, and growth still too dependent on investment rather than domestic consumption."
Another is the growing property bubble, created by the increasing size and prosperity of the middle class. Thanks to low interest rates and restrrictions placed on their investing abroad, China's well-off have been largely investing in apartments. The strange this is that instead of renting them out, these owners leave the apartments uninhabited, resulting in properties across China that have been bought but are unoccupied.
This is because the Chinese believe that once someone moves into a property, its value falls, because it is now "used" as opposed to new. So they keep them empty in the hopes that they will yield capital gains in a thriving market.
But of course, if the market goes the other way, it could pose huge problems for investors. "[I]t would be myopic or dim to deny that a bubble - and potentially a highly dangerous one - is the inevitable consequence of a historically unprecedented mass movement of personal enrichment combined with severe restrictions on how and where the newly enriched can invest their cash," Peston concludes.