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Totalitarian State Has Caused an Economic Crisis in China

Niu Dao, a popular commentator on real estate and finance in China, stated in a blog at that the totalitarian Communist regime is bringing about an unprecedented economic crisis in China and that the five year real estate bubble will burst soon. 

 “In totalitarian economy countries … as long as the economy has few problems, the government will find ways to cover things up so that the crisis will not break out. The government’s mentality is that they do not want the economic crisis to spread and become a social crisis. So large bubbles mask small bubbles, and, due to such a cover-up, small problems grow into big conflicts that cannot be resolved. Finally the situation evolves into a full crisis, leading to the disintegration of the government or the dictator stepping down.” Niu cited the examples of former Soviet Union, Romania, Albania, Khmer Rouge, and East Germany. He stated that the upcoming crisis in China will be an unprecedented crisis in history. 
To support his analysis, Niu discussed several factors, including the following: 
In the past three consecutive years, investment accounted for 40 percent of China’s GDP. Investments and exports combined accounted for over 70 percent of China’s GDP. The government has created the housing bubble. Once the bubble bursts, a massive number of developers will go bankrupt. 
The drastic appreciation of the Chinese yuan in a short period of time is extremely rare in history. The real purchasing power of one million yuan today is less than that of 10,000 yuan 30 years ago, and has decreased by 300% compared to 5 years ago. The current housing market does not reflect the true market price; it represents what the government created only to wipe out the wealth of several social levels. 
The current value of real estate in China exceeds 40 percent of the GDP. Further, the number of vacant housing units has reached an astronomical figure. Take Beijing for example. It alone has over 3.80 million vacant housing units, and Shanghai has over 5 million units standing idle. Shenzhen and Guangzhou have even more. 
Source: Blog at, September 29, 2013