China’s leaders nod to the left, but look anxiously to the right

As the proletariat and middle classes increasingly cannot afford to own a roof over their heads, the CCP authorities look more and more like cronies of the biggie capitalist developers.

As the good premier has said, it is time to criticise the government. Only if the CCP cronies would listen.

I think part of the cause is that Chinese people will always buy houses weather or not it makes sense economically to do so. This is very similar Japanese people's propensity to save with the government no matter what inane things the government do with their money. In japan's case the outcome is an over valued yen and in china's case it is an over valued houses.

Partly the reason of high real estate price is the failed policy of blind believing high GDP. And partly because lack of reasonable public houses for ordinary earner. China is learning some bad policy from Hong Kong.

Partly the reason of high real estate price is the failed policy of blind believing high GDP. And partly because lack of reasonable public houses for ordinary earner. China is learning some bad policy from Hong Kong.

Hey, that’s a familiar street. What? One car, one pedestrian, day time, and blue sky? One lucky photographer!

"Avowedly socialist leanings mean that the party cannot easily ignore the complaints of the urban poor about the increasing difficulty of getting on the housing ladder. But most registered urban residents (barring migrants from the countryside, who rarely count in official statistics) own their own property. Few want to see prices drop. For them, the main concern is avoiding a crash."

This, in my opinion, is the most important passage of this article, because it symbolizes an on growing gap in China between the rich and the poor; A gap that does not only manifests itself in the ability to buy a house but in the ability to live properly.

Although the government is tightly connected with upper class Chinese people, it must consider the middle class: If people are working hard but are unable to buy a house or pay their bills, they will protest. The party needs to be worried that the economic growth does not reach everyone in the population equally.

I have recently written some interesting articles about China and the world in my blog: http://laowaiblog.com

I invite everyone to read and to comment

Thank you

China’s main concern at the time should be watching out for the middle class. As a previous comment mentioned, the gap between the rich and the poor is getting wider and wider as new policies and taxes make it more difficult for urban “middle class” chinese to own homes. The rich become richer and the poor become poorer as there is no balance in the distribution of homes. Although there have been some regulations as to how many houses someone is able to own this does not completely solve the problem. It is up to the government to step in and decide what to do with this on going widening gap because it is becoming neither communist nor democratic. This can be potentially dangerous because it can cause protests amongst groups that feel they deserve better, mainly the poor that are trying to move up but its becoming harder because of property taxes and such.

Housing is only a symptom of an underlying excess liquidity problem, caused in large part by China's choice to fix its exchange rate. While a drop in housing may be the pin that pricks the Chinese bubble, the bubble is fundamentally a liquidity/investment bubble, not just a housing bubble.

The government needs to greatly increase the taxes on non-owner occupied houses, and use the money on rent subsidies for the urban poor. Rental market needs serious regulation.

Another area needs urgent attention is consumer education. Most Chinese have antiquated concepts of property ownership, many think owning a house also means owning the land, and owning the land automatically owns the mineral rights. Modern concepts such as zoning, easement, environmental and heritage protection, and yes, the much-hated eminent domain, are all viewed with great suspicion. Here the government needs to re-learn of what Lenin said: ‘of the utmost importance is to educate the bumpkins’.

Don't underestimate the ability of one small specific pointy tax to burst a bubble that everyone was anticipating. I was in the real estate industry in 1987 in the UK when double tax relief was lifted - the market stopped dead overnight.

@happyfish18
A roof over their head is cheap, the expensive part is their pride and desire. A rented bed fit the bill for a place to sleep. Need privacy? rent a room. Need more privacy, rent a house. Don't want to be a sucker who pay rent for the rest of his lives? Buy the house. Want a ego boost? Buy a bigger house. This list can on.

The basic need of shelter, or a roof over your head is cheap. Keeping up with the Joneses is expensive, and trying to outdo them cost more. Whose job is it to fulfilled your desire?

Like any country, the miidle class biggest enemy is the govt itself. No business, thief or individual has taken more property than the govts of the world.

The protection of the middle class is essential for the development of China. China does have a very stable and powerful economy, however, the Chinese society has ha huge gap between the rich and the poor. In many Communist nations in the past, the parties in power always supported the rich and the powerful , and in return gained funds and support in politics. And as a result of those negotiations, most of the people in those nations were poor, and the standard of living was horrific. These conditions led to the failure of those states, and the deterioration of the Communist system in the world. For China to continue as a Communist state, it must lessen the gap between the rich and the poor, which can only be accomplished through the middle class.

I find it interesting that all governments must appease a majority of its population in order to remain in power, even if they are not democratic. I also find it interesting, though not surprising, that the Chinese government wants to promote local democracy. Democracy makes regimes more stable…but how effective is fake democratic process at appeasing the citizenry? How much influence do participants in local democracies have in politics? My belief is that it is minimal considering in the end, the government is still authoritarian...so then, either the populace is satisfied with its lot or is afraid to speak, or a combination of both. I guess the idea I’m getting at here is the novel (to me) realization that democracy isn’t the only government that can flourish in the modern world. Authoritarianism seems to be a lot more work for the bureaucrats, but it’s also more efficient and can be just as stable if the people in charge are intelligent. Overall the measures the article talks about seem to be positive, and it will be interesting to see how successful China’s heavy interventionism in the economy will be in attaining its end goals.

I think Chinese citizens invest in real estate because there are few other investment vehicles available to them. The financial system in China is still by and large under developed. For example, do most people have an IRA or 401k account to save for their own retirement? Are these accounts well established and well managed by trustworthy investment management firms? What are these funds mostly invested in, stocks and bonds? REITs? How trustworthy is the Shanghai index? How much accounting scrutiny is each listed company subjected to?

As an American investor, I do not trust the companies listed in China. I have heard about their dubious accounting standards, with each company keeping 3 sets of books, 1 for the government, 1 for the investors, and 1 for themselves.

Ironically, Jim Rogers, the famous investor, is now hording the RMB because he believes that currency can only appreciate in the long term. Seeing how everyone thinks Chinese real estate is heading for a bust, perhaps the best thing for Chinese citizens to "invest" in these days is their own currency, especially considering most foreigners can't even buy the RMB.

Were China a "true communist state," housing would not be an issue, but it isn't. Like many countries that have adopted more capitalist economic policies in the past, China must address the issues of the middle class lest the government lose legitimacy. However, a property tax that will address this issue directly contradicts the government's hope of appeasing the middle class. There is no single solution to this problem. One solution would be to implement a property tax and hope that property owners will not protest to the idea of stabilizing prices. Another would be to allow prices to fluctuate to keep property owners happy. In this case, the government must choose one solution and prioritize one or the other.

... testing...

... Again the testing...Gee what's wrong with the area broadband ??

What the ...? Will try once more ...