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China Struggles to Assist the Young Generation

A story in the FT on an interesting currency fad in China’s property market touches on a much more important subject towards the end of the article: China’s young professionals and their struggle to afford a home.

Soaring property prices, along with food inflation, have soured the mood of China’s young and previously politically disinterested urban middle class.

“Our government’s economic policies are no longer good enough to help us improve our lives,” said Lei Jin, a young Beijing woman who graduated from university two years ago and is dissatisfied with her badly paid job as an office clerk. “It looks like I will never be able to buy a flat of my own.”

“Nationwide, the average price for a flat is now seven times the average annual household income but in Beijing and Shanghai it is more than 17 times,” said Du Jinsong, an analyst at Credit Suisse in Hong Kong. “That compares with about three times in the US.”

China’s young professionals are an important pillar of urban life, and they are growing in number. If they can’t afford to buy a home, chances are they don’t have the means to start a family. With young college grads having trouble finding the kind of jobs they have been told to expect, young urbanites are feeling increasingly pressured.

Meanwhile, Beijing – led by Li Keqiang, widely tipped to be the next PM – has embarked on a campaign to push local governments “to build unprecedented quantities of social housing for the urban poor”. As the Economist reports,

Pressure from Mr Li looks, on the surface, to be paying off. Official statistics suggest that in recent weeks, local governments (not normally known for their enthusiasm for spending money on the poor) have been racing to meet their quotas for the year. On October 10th the central government declared that a target of starting work on 10m social-housing units this year was 98% complete. In September alone, work began on 1.2m units—more than twice the number of private homes America began building last year.

The numbers may be inflated by overeager local officials, and the new housing units are typically given to city residents over migrant workers, who struggle to find housing even in the midst of such booming construction. More than half of China’s population still lives on the land and the large majority of those, especially the young, will likely be moving to the cities in the next few decades: finding homes and jobs for this population will keep China’s authorities busy for the next generation.

Unemployed and underemployed college grads unable to launch their careers or buy homes and start families and economically marginal migrant workers looking for and not always finding a foothold in urban life: this is an explosive mix and the Chinese authorities know it.

China’s long boom is creating a host of social imbalances and political tensions; while growth is close to ten percent per year these seem fairly manageable but more and more people here are asking what happens when the music stops?

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