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Under the stimulus program, Chinese banks lent about $3 trillion mostly to state-owned enterprises to finance large infrastructure projects. But a lot of the money was siphoned off to purchase land and speculate in real estate, he said.

Now, the deflating housing bubble poses a significant risk of turning China’s economic slowdown into a crash landing, he said.

“Real estate has been the backbone of China’s economic growth,” with property construction alone accounting for 12 percent of economic output, he said. “By some estimates, half of China’s [output] is linked to real-estate-related activities.

“There is a worry that a fall in housing and apartment prices would have profound consequences for Chinese industry and investment, and lead to a rapid slowdown for the economy.”

Moreover, as seen in the United States and other countries whose economies are still struggling in the aftermath of huge real estate bubbles in the past decade, the boom in China was financed with trillions of dollars of debt, a portion of which could go bad. In China’s case, much of the debt was taken on by state-owned enterprises, local governments and individuals connected to them.

“A fall in prices could produce an overwhelming number of nonperforming loans,” said Mr. Sohn. “Many fear that a burst in the real estate market in China could lead to a banking crisis which would drastically undermine the Chinese economy.”

Chinese authorities privately acknowledge that the country has a “big property bubble” and the impending collapse could cause wrenching dislocations in the market. “You could see a sharp correction in prices in Beijing, Shanghai” and other major cities, though other areas likely would be less devastated, one top official said.

China is just plain overbuilt — a huge real estate bubble,” said Harry Dent, an economist and author of “The Great Crash Ahead.” “China has built luxury developments which stand empty because no one can afford to buy and move in.”

Spillover effects

Yiping Huang, an analyst at Barclays Capital, said global markets have been roiled by worries that a housing collapse in China would bring down the economy.

“For some investors, declines in house prices could be the beginning of a major meltdown, similar to those observed in Japan in 1989, Hong Kong in 1997 and the U.S. in 2008,” he said.

Moreover, many are worried about the collapse of a “shadow banking” system that emerged in recent years to fund properties that could not get financing through official channels. The existence of this murky and unregulated loan market raises fears of a kind of “subprime” debacle developing with the collapse of the housing market, he said.

Although the housing downturn is a “wild card” looming over the economy, it probably will lead only to slower growth, Mr. Huang said.

“Even if house prices drop by 10 percent before year-end, we would not expect to see a major problem in household financing and banking assets,” he said. “The reason is simple: Chinese households are simply not highly leveraged” like their American counterparts were in 2008, and most have substantial equity in their homes as well as savings.

“We view it as unlikely that a potential fall in house prices would lead to widespread” defaults and foreclosures as seen in the U.S. in recent years, he said.

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