Going Over Niagra Falls in a Barrell

... will be similar to the upcoming crash in the Chinese housing market. Dig this.

China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.

Is this a realistic scenario?

China’s property market is beginning a “collapse” that will hit the nation’s banking system, Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund, said July 6.

Average prices may fall as much as 20 percent over the next 12 to 18 months, with declines of up to 40 percent in “big bubble” cities, Nomura Holdings Inc. said in a July 2 report. The impact on banks’ asset quality will still be “limited” as long as borrowers have adequate income to keep paying their mortgages, Nomura said.

That last caveat is a real howler. The damage will be about as limited as it was here in the US. Yikes.