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The billions in wealth that have been created through years of overleveraging are unlikely to last.
After minting 32 new billionaires during the surge in the highly leveraged Chinese economy, Beijing has eclipsed New York for the first time as the so-called "billionaire capital of the world," winning the dubious contest 100 to 95. The publication that announced the finding, Hurun, attributed China’s explosive wealth creation to Chinese stock market deregulation, enabling a flood of new initial public offerings.
Beijing’s claim to the throne may have a short expiration date. As Hurun founder Rupert Hoogewerf noted, "had the calculation been made at the market’s peak last summer, the number of Beijing billionaires would have been nearly 150."
In fact, these numbers may drop precipitously in years to come in light of analyst reports that the Chinese stock market has an addiction to American-style derivatives products and overleveraging. Using these derivatives products, including mortgage backed securities (RMBS) and commercial mortgage backed securities (CMBS), the Chinese have built entire cities said to rival Manhattan, but with one big problem – they are entirely uninhabited. That means the underlying loans will fail, but it gets worse.
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