China's top long-term economic problem is probably not what you have seen dominate social media recently. It is not the ongoing trade war with the United States. It is the rapid rise of housing prices. Soaring new home prices are lining landlords pockets, while young people's dreams of forming a family are deteriorating. The average price of new homes in China has increased for 44 straight months. These increased prices are making homes just too expensive for the average citizen of China. This in turn hurts the country's long-term growth prospects. In fact it hurts much more than the current trade war. The article states that unlike the trade war, housing affordability constraints could be here to stay. The author notes that the middle-income trap and the Lewis point could be factors impacting this issue. It also is noted that this is a product of deliberate land policies that favor rich landholders over the average citizen. China has done this by creating "ghost cities". These are cities full of vacant buildings and apartments that are too expensive for the average worker. They are merely viable because landlords expect to sell them one day at higher prices. Meanwhile this creates a housing shortage that subsequently pushes prices up in the rest of the housing market. This is bad news for young families looking to start a family. Could this explain the drop of marriage rates by 30% the past five years? Low marriage rates are not good for China's long-term economic growth. This could lead to lower birth rates and a shrinking labor force. Not something China wishes for as it tries to compete with labor-rich countries. Soaring new home prices are a grave concern for China going forward. If they hope to continue to grow economically, it is imperative that they fix this problem.
https://www.forbes.com/sites/panosmourdoukoutas/2019/02/17/chinas-top-problem-isnt-the-trade-war/#6f137479ecfc
1 comment:
It is also pretty sad if we consider how Chinese housing works as well. It's technically not yours, even if you can sell it or not. It's more like a long term rental permission, because technically every property is owned by the Socialist party of China. They should implement a policy to help out the ones that have difficulties affording housing, and mostly the young generations are the ones dealing with it, since they would have to be independent after their mandatory schooling is over (or after undergrad courses).
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