More than 60 percent of investors surveyed by Bloomberg on Jan. 19 said they viewed China as a bubble, and three in 10 said it posed the greatest downside risk.  Read full report here.

Every recession is different, so is every bubble. Here are some thoughts I wanted to share:

1. China's real estate bubble will burst; government stimulus only delays the day of reckoning, but won't be able to prevent it;

2. The impact will not be great enough to slow down China's long term economic growth. This is because,
    a) China has high savings rate, and the household balance sheets are not highly leveraged;
    b) China is a developing country — it grows at a much faster pace than developed economies;
    c) China's huge population and its demand for urban housing will mitigate the impact.

3. Similar to Japan, China's real estate bubble was fueled by currency appreciation expectation.  In China's case, the fixed exchange rate system coupled with the fastest economic growth in the world simply invite currency speculation and attract short-term capital inflows.  A big chunk of these short-term money found its way into real estate market, although China has tight capital control.