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China's Real Estate Bubble Bursts -- Good or Bad?
The latest outlook from the Organization for Economic
Co-operation and Development (OECD) says
China's real estate market fluctuations are a major threat to
its growth next year.
China's growth will fall from 9.3% in 2011to 8.5% in 2012.
Along with the decline of the average price for real estate
in large and mid-sized cities, some experts believe China's real estate bubble is bursting.
Its way out is to return to real economy.
OECD's report on Nov. 28th, says depression in the
real-estate market will increase the banks' bad debts.
OECD predicts China's inflation in 2012 will decline
from this year's 5.6% to 3.8%.
China's export increase rate next year will decline to 7%.
The average price of a new house in 70 large and mid-sized
cities declined in October for the first time in more than 2 years.
Chinese vice Premier, Li Keqiang, in charge of
the real estate regulation, said on Nov. 25th that China's real estate market is at a critical stage.
even with a decline in real estate transactions,
the government is continuing to cool down the housing market.
Professor of Economics at the City College of New York,
Chen Zhifei, thinks the Beijing Authority may really want to control the housing market.
[Chen Zhifei, Professor of Economics, the City College of
New York]: "If the real estate market is too strong,
other areas of the Chinese economy will be taken away.
Real-estate brings many negative impacts,
with the largest being social issues,
such as wide gaps between the rich and the poor,
and dissatisfaction from people in different social classes.
If the real estate market is down, it might solve inflation.
So it is beneficial in certain aspects."
According to a New York Times report, 1/6 of luxury houses
in Shanghai, 1/4 in Beijing and 1/3 in Shenzhen are empty.
The ratio of empty houses in China has surpassed the
international warning standards.
The New York Times questions whether China's real estate
bubble has burst.
UK's Financial Times columnist, Ye Tan, published an article
on Nov. 29th saying that
China's control over its real estate has loosened,
while the effects are visible in the adjustments.
The Financial Times says: Nanjing's highest amount of
public debt loan returned to its former level;
Hangzhou's first house purchase received 200,000 RMB
in credit;
Beijing adjusted the favorable policies on the prices and tax of
average housing;
and Changzhou and Chongqing cities introduced different
credit policies on real estate, etc.
Ye Tan says the decrease in real estate investment
will accelerate the decline of an investment built economy.
China's www.cb.com.cn published a commentary article,
stating that some local government policies aimed at saving the housing market are like playing with fire.
The policies weaken the central government's adjustments to
the market and stops house prices from declining —eventually resulting in a loss of public trust.
Economist Xie Guozhong said on Nov. 11th during the
Caixin Conference, that the real estate bubble had burst in the second half of this year.
The re-organization of the Chinese economy started with
adjustments to the real estate, causing high prices, a rich government and public poverty.
It is not possible for this economic model to achieve a
balance in wealth.
Professor at the Aiken Business School, University of South
Carolina, Xie Tian, says the real estate bubble will cause the local government—
who depends on land for its source of income—to suffer
huge losses, worsening the local government's debt issues.
[Professor Xie Tian, Aiken Business School, University of
South Carolina]: "In fact the bubble-burst has emerged. It is ongoing.
In this case, real estate developers and state-owned real estate
enterprises, and state-owned banks need to spit out the huge profit they made before.
It is actually a battle for profits
between those groups and the people.
Regardless of the policies the Chinese Communist Party
introduces, it is not possible to resolve the issue."
The Wall Street Journal quoted China's Vice Premier
Li Keqiang's speech on Nov. 26th, saying China must change its economic development model;
otherwise its progress will not last, and it will be hard to
maintain the current relatively fast rate of growth.
Xie Guozhong says China's bad economic situation in
recent years has been down to real estate issues.
When China's real estate enterprises close down over the
next few months, if the government would save the enterprises,
this would impact China negatively in the long run, once again,
confirming that China's money-making model is stealing money away from the government and the banks.
The current economic model offers China no way out.
NTD reporters Liu Hui, Li Yuanhan and Xiao Yu
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