China thinks that America may be building the greatest economic bubble in history.
That's according to a Globaltimes editorial published on Wednesday, where China raised concerns about the blowing of a bubble in Wall Street.
How so? Because, corporate executives are selling shares, as equity prices soar, according to the editorial.
"A bubble is building in the US stock market, which is always an important indicator for the US economy," says the editorial. "The performance of the US equity market is usually considered to reflect on how well US-listed companies are doing. Executives usually sell their shares because they lack confidence in their companies. It is a negative signal for the US economy."
But that's hardly an indicator that American equities are in a bubble. While corporate executives may be better informed than the public about the financial of the companies they run than the average investor, history offers many examples of corporate executives buying and selling shares at the wrong time.
But since we're talking about America's equity bubble, China cannot hide its own house bubble, which is like no other in modern history.
China's house prices keep on growing bigger and bigger by the month and the year, as thousands upon thousands of apartments remain vacant.
Average prices of new homes in 70 Chinese cities rose by 8.8% annually in August 2019, following a 9.7%jump in the previous month, according to Tradingeconomics.com.
Among China's largest cities, Guangzhou, registered the largest increase (9.4% vs 10.2% in July), followed by Beijing (4.8% vs 4.3%), Shanghai (2.2% vs 1.9 %) and Shenzhen (0.6% vs 0.9%).
Meanwhile, vacant apartments have created two types of cities in the country- conventional cities crowded with apartment buildings occupied by people; and unconventional cities, crowded with buildings with vacant apartments.
They are called "ghost cities," and they are usually owned by land developers and speculators who count on selling them one day at sky high prices.
Soaring home prices and the rise of these ghost cities have divided the Chinese society into two classes. The modern landlord class, which usually own several apartments; and the modern proletariat class, which doesn't own an apartment, but is instead crowded into rental properties they barely can afford, even with a 9-9-6 working schedule.
China's new class divide is bad news for the future of the Chinese economy and society, as it undermines family formation and birth rates, as discussed in previous pieces here.
Sooner or later, China's leadership will have to make a stark choice: take measures to burst the bubble and make homes affordable to the masses, or continue supporting the landlord class and turn into a new Japan.
That means counting "lost decades."