The American Interest
Analysis by Walter Russell Mead & Staff
China’s Housing Market on the Rebound?

Through the gloom of so much bad news for the world economic picture shines a ray of hope: the Chinese real estate market may be picking up. The most recent survey shows prices are rising in China’s 100 largest cities, the first increase in nine months. Real-estate investment and property sales are also on the rise.

As the Wall Street Journal notes, these data are good news not only for Beijing but for the global economy as well:

An improvement in China’s property market would be important for the domestic and international economy. Real estate and property construction account for about 11% of the Chinese economy, according to GK Dragonomics, and about twice that share when accounting for other industries like appliances and furniture that are tied to real estate.

Internationally, steel, iron ore, copper and other commodities depend on the Chinese real-estate market for growth, as do construction-equipment makers in the U.S. and Europe.

From 2006 to 2010 house prices in major cities nearly doubled. Worried that the housing market represented a bubble that, if it burst, could deflate the entire economy, Chinese government officials introduced a range of measures to reel in property prices. While not faultless, those policies seem to have accomplished their primary goal and stabilized the market.

None of this means that there isn’t a huge real estate bubble in China, of course. But it does mean that the bubble may not burst this summer. That, given the world’s other worries, is good enough news for right now.

 

Published on July 3, 2012 2:33 pm
  • thibaud

    Chinese slowdown fears overblown, exports to Europe up, scorching weather in the US: looks like the best coal stocks (BTU, ANR) have hit bottom and are turning around.

    Probably also good news for Team Obama. Worst may be over, or at least, the “end of the beginning,” as Churchill put it.

  • Mrs. Davis

    How are prices doing in the empty cities?

  • http://facingzionwards.blogspot.com/ Luke Lea

    Are there any error bars on that data? No? Then take it with a grain of salt.

    I’ve just been reading the memoir of Zhao Ziyang. He was the guy — Premier actually — who helped manage economic reform in China in the 1980′s (before being relieved of his duties for siding with the students during the Tienanmen Square occupation). At the time he said there were two factions. One wanted rapid growth in GDP, the other wanted an efficient allocation of capital resources to make sure the GDP wasn’t being wasted making things nobody wanted or needed.

    I wonder if those same two factions aren’t still battling it out? We’ll know if more freeways and apartment towers start going up.

    Meanwhile, did you hear there is a worker shortage in the export zone? Apparently the reason is that real wages (after inflation) aren’t high enough to attract internal migrants from the interior. What is happening to their real standard of living, is it rising or falling? Nobody knows. But if capital isn’t being allocated efficiently there’s a good chance — in fact a certainty — that living standards aren’t rising as fast as the official statistics.

    You can’t trust anything the Chinese government says.

  • Ed

    Does the phrase”kicking the can down the road” apply here? Just sayin’.