Chinese homebuyers here are part of a global phenomenon. But the riskiest side-effect won't come on the Eastside.

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While Chinese money is undoubtedly distorting Seattle real estate, especially on the Eastside, the biggest problem is in China itself.

While there continue to be a few skeptics, most economists and other experts on the issue agree that a dangerous bubble is inflating on the mainland and in Hong Kong. As the New York Times reports, “China is in the midst of a dizzying housing bubble. Shanghai’s average housing price is up nearly one-third from a year ago, with prices in major cities like Beijing and Guangzhou not far behind. Chinese consumers are rushing to buy homes before the government steps in with restrictions.”

Last month, the head of the People’s Bank of China research bureau said action “must” be taken to prevent an excessive bubble. The price appreciation is especially pronounced in first-tier cities. But the property frenzy horse may be well outside the regulators’ barn door. American-style mortgages have become widespread. But a shadow credit market also operates. A 2014 Peking University report stated that 75 percent of the nation’s household wealth came from owning real estate (it also showed widening inequality).

Beijing watched the American bubble pop in 2007-2008. But the stakes are considerably higher for the Communist Party bigs, who essentially promise citizens prosperity if they go along with a one-party authoritarian state. U.S. real estate prices have mostly recovered to a normal trend, although the demand hole of the larger, leverage-and-rackets-driven recession lingers. Japan rode high on real estate in the 1980s, buying overseas trophy properties, too. Then it went into a lost decade when prices crashed.

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In China, the issues are considerably more complex. And the leadership’s fear of allowing market forces to operate may be as dangerous as being too late to implement effective curbs. As the world’s second-largest economy, a meltdown there would further dampen world trade. As for us, at its worst, a Chinese asset-price collapse might pull the demand out of price-rises here. But sorting out winners and losers won’t be quick or easy.

Today’s Econ Haiku:

Wal-Mart raised wages

Got cleaner stores, better sales

MBAs’ catch on