We were recently in Hong Kong and it is apparent that the crackdown on corruption in China is causing an acceleration in capital flight

We were recently in Hong Kong and it is apparent that the crackdown on corruption in China is causing an acceleration in capital flight. Mainland Chinese are taking assets out of China, as unexplained wealth held in China is coming under increased scrutiny. Domestic Chinese property is no longer an attractive asset class for three reasons. Firstly, it is too visible and easy to find an individual's assets held in China. Secondly, assets held offshore are hard to confiscate and may provide a residency option. And finally, if the marginal investor in Chinese properties is a corrupt official, then prices have been unsustainably bid up. Because property development has also been fuelled by massive credit growth, the risk of a disorderly correction is not trivial. We are bearish on Chinese property prices, and becoming more bearish on Chinese growth, and hence things like demand for iron-ore. (VIEW LINK)