Building China too Fast and the Struggle to Slow Down

August 18, 2011

Andrew Thomas of Aljazeera English reported from Chuzhou, China July 13, 2011.  He tells us about real estate agents in Beijing canvassing the traffic during rush hour, which happens to be most hours in China’s capital.

In the U.S., we might see homeless people going car to car offering to clean windows for a dollar but in China, the odds are those people going car to car will be real estate agents handing out flyers urging people to buy homes.

During most of the day, one can get around Beijing faster on foot or using the subways than driving a car or taking a taxi, which usually results in sitting dead in traffic breathing fumes from other cars.

Thomas reports that the real-estate agents will do just about anything to sell apartments hitting the market. The reason is that the Chinese are building more new apartments than any country on earth.

In Chuzhou, three hours from Shanghai, Thomas takes us on a tour of what he calls an “unremarkable town” and says this level of housing development is happening all over China.

Thomas says, between 2009 and 2010, there was a 41% rise in housing construction as prices soared. He then questions if Chinese speculators are driving this housing bubble.

In addition, he says China’s electricity authority, last year, reported that over 65 million homes use no power because they are standing empty as prices keep going up.

Thomas says China’s government is worried and wants to avoid a real estate bubble bursting so they have raised interest rates and increased the minimum down payment people must pay for second homes.

Stephen Joske of the Economist Intelligence Unit says, “We are not looking at a bubble burst resembling anything like what’s happened in the U.S.—probably a short correction.”

Therefore, for economists in the West that keep predicting China’s housing bubble will burst and slow China’s growth, think again.

As for aspiring home buyers, many in China are waiting to see what happens and are hoping prices go down. Thomas says a price drop could hurt many overseas markets that depend on China’s growth and development.

If a real estate bubble bursts in China, the odds are that the shock waves will be felt worse outside China in countries still recovering from the 2008 global financial crises caused by the private banking and financial sector in the United States, and Thomas explains why that may happen.

The reason for this speculation may be the central government’s plans to move a few hundred million more rural Chinese into newly built urban cities and new homes in older cities as China transitions from an economy dependent on exports to one driven by middle class consumption.

These property speculators are betting on the future.

Discover more from The “What if” Housing Bubble in China


Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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