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How Real Estate Drives the Chinese Economy, and its Dire Consequences
By He Qinglian
Last Updated: Oct 4, 2010
Are GDP figures and growth numbers sustained by real estate sector ?
Since the Chinese regime made the decision to drive its economy through real estate development, researchers, including myself, have been cautiously observing for how long it would last, or, in other words, when the regime’s land dependent financial policy come to an end.
According to a 2007 survey by Peking University professor Ping Xinqiao, the land along China’s coastal region would sustain real estate development only for the next three to five years. That a portion of the land needs to be left out for food production restricts further the amount of land available.
The government would, one expects, honor the contracts made with the real estate developers.
In China, the developer can use the land only for 70 years.
The deal, after all, affects the real estate developers as well as the millions who invest their lifetime savings on such homes.
Lands Sold Twice[/B]
The Chinese regime, however, has a different way of thinking about economic growth. Many provincial governments take an approach of expropriating land before the 70 year lease expires in the name of the “public interest,” regardless of whether it is residential or industrial.
The land is then re-sold to make a profit on the land-value increment.
An Economy at a Dead End
A recent hot topic has been comparing the economy of China and Japan. In fact, the only thing that could be compared is the GDP scale.
There is a major difference between the two economies. Since Japan’s economy took off, its development has been driven by technological innovation and progress. It has created renowned brands such as Toshiba, Hitachi, Sanyo, and Sony.
However, in the past 30 years, the Chinese economy has relied on extensive growth based on land and mineral resource consumption, sacrificing the ecology in pursuit of so-called “economic growth.” China’s industry has not created a single brand, and “Made in China” is now synonymous with inferior products.
The regime continue to employ real estate development to drive the Chinese economy. The Chinese economy grew because of real estate, and will shrink because of real estate.
To satisfy the regime’s financial needs, 80 million farmers have already lost their farmland, nearly four million household urban residents have already lost their homes, and China’s garbage dumps have been ever growing.
If one follows the thinking of the regime, it is not difficult to foresee that on the road of China’s future economic development, many Chinese people will lose their home a second time.
Such “development” is best captured by the old Chinese saying “a blind man on a blind horse, near a cliff at midnight.”
He Qinglian is a noted Chinese author and economist currently based in the U.S. She wrote 'China's Pitfalls' about corruption in the economic reform process, and 'The Fog of Censorship: Media Control in China', about manipulations of and restrictions on the press.
By He Qinglian
Last Updated: Oct 4, 2010
Are GDP figures and growth numbers sustained by real estate sector ?
Since the Chinese regime made the decision to drive its economy through real estate development, researchers, including myself, have been cautiously observing for how long it would last, or, in other words, when the regime’s land dependent financial policy come to an end.
According to a 2007 survey by Peking University professor Ping Xinqiao, the land along China’s coastal region would sustain real estate development only for the next three to five years. That a portion of the land needs to be left out for food production restricts further the amount of land available.
The government would, one expects, honor the contracts made with the real estate developers.
In China, the developer can use the land only for 70 years.
The deal, after all, affects the real estate developers as well as the millions who invest their lifetime savings on such homes.
Lands Sold Twice[/B]
The Chinese regime, however, has a different way of thinking about economic growth. Many provincial governments take an approach of expropriating land before the 70 year lease expires in the name of the “public interest,” regardless of whether it is residential or industrial.
The land is then re-sold to make a profit on the land-value increment.
An Economy at a Dead End
A recent hot topic has been comparing the economy of China and Japan. In fact, the only thing that could be compared is the GDP scale.
There is a major difference between the two economies. Since Japan’s economy took off, its development has been driven by technological innovation and progress. It has created renowned brands such as Toshiba, Hitachi, Sanyo, and Sony.
However, in the past 30 years, the Chinese economy has relied on extensive growth based on land and mineral resource consumption, sacrificing the ecology in pursuit of so-called “economic growth.” China’s industry has not created a single brand, and “Made in China” is now synonymous with inferior products.
The regime continue to employ real estate development to drive the Chinese economy. The Chinese economy grew because of real estate, and will shrink because of real estate.
To satisfy the regime’s financial needs, 80 million farmers have already lost their farmland, nearly four million household urban residents have already lost their homes, and China’s garbage dumps have been ever growing.
If one follows the thinking of the regime, it is not difficult to foresee that on the road of China’s future economic development, many Chinese people will lose their home a second time.
Such “development” is best captured by the old Chinese saying “a blind man on a blind horse, near a cliff at midnight.”
He Qinglian is a noted Chinese author and economist currently based in the U.S. She wrote 'China's Pitfalls' about corruption in the economic reform process, and 'The Fog of Censorship: Media Control in China', about manipulations of and restrictions on the press.
