3 Issues Affecting Leveraged China ETFs

Source: tradingeconomics.com

Furthermore, debt has been used to finance state-run companies that have produced little to no tangible effects for the country–an issue that can only be exacerbated should trade wars negatively impact the economy.

“China’s growth has been highly credit intensive,” said Gerard Burg, Sydney-based senior economist at National Australia Bank.

Real Estate Bubble Ready to Burst

The U.S. is all too familiar with what the byproducts can be if a real estate market goes sour. The Great Recession of 2008 saw real estate values reach exorbitant levels and in conjunction with low interest rates, as well as lax lending requirements, the housing market experienced a bubble burst it will never forget.

As for China, Aidan Yao, a senior emerging markets economist at AXA Investment Managers, said the real estate market “appears to be showing come cracks.” Similar signs to the 2008 recession in the U.S. are making a reappearance in China’s housing market–skyrocketing real estate prices as a result of a supply shortage coupled with low lending rates.

“It is only a matter of time before the market cools,” Yao added.

For more market trends, visit ETF Trends.