Owning your own home is fast becoming the number one goal -- and fear -- of the working and middle-classes of China. Compounded by the fact that there are few modern public or private pension plans for retired workers, this "nation of frugal savers" has made the bet of a lifetime (literally) on already over-priced residential real estate -- often with accumulated family savings. If it turns out that foreign "hot money" and Party insiders have been the sellers (or more accurately, the "flippers"), while the workers have been the buyers, the potential for social unrest will soar. More importantly, confidence in Beijing's economic "Miracle" and its mandarins will soon shatter as investors around the world realize that Chinese policymakers learned nothing from the West's crisis of just a few years ago. Forget Chinese trade, the yuan, shoddy construction and manufacturing, the pollution, commodity demand, labor migration, or even $2.3 trillion in foreign currency reserves. The only Chinese political economy story that "counts" is the "Chinese Residential Real Estate Bubble."
Jim Chanos is the founder and Managing Partner of Kynikos Associates.