Understanding how this came to pass means parsing the host of distortions and mind games that characterize China’s real estate market. Residential real estate construction now accounts for nearly ten percent of the country’s total GDP — four percentage points higher than it did at the peak of the U.S. housing bubble in 2005. Bullish analysts have long argued that large-scale urbanization and rapidly rising incomes warrant such an extraordinary boom.

Well, a more convincing rebuttal to this than a Chinese State Council official comes from Standard Chartered’s chief China economist Stephen Green.

From Bloomberg:

A local cash crunch had already limited the pool of available buyers, while concerns about the country’s local government debt problems persist. And that was before Saturday’s fatal train crash in Zhejiang province, which killed at least 40 people and is now being censored by the government.

BEIJING, July 12 (Xinhua) — China’s foreign exchange reserves rose 30.3 percent year-on-year to hit 3.1975 trillion U.S. dollars by the end of June, the People’s Bank of China (PBOC), or the central bank, said Tuesday.

(Reuters) - China will link local officials’ performance appraisals to the level of debt held by local governments, state media reported Monday, an apparent move to cap borrowing and address worries that possible defaults could damage China’s economy.

As widely reported this morning, the rating agency reviewed the National Audit Office’s report on local government debt and concluded that it underestimates banks’ NPL exposure.