China's toughest task: balancing real estate
- Source: Global Times
- [04:34 April 21 2010]
- Comments
Property prices in China are taking our breath away. Will the latest government regulatory actions cool down the overheated market?
After the release of a series of new guidelines from the central government aimed at curbing speculative purchasing of housing and the illegal hoarding of unsold apartments, the market seems to be showing some hesitation. The Shanghai Stock Exchange responded with a significant drop, closing yesterday at its lowest point in a month.
In China, nothing is so important to everyone as an apartment. For young couples, an apartment is a home in which to start a new family of their own. For seniors, owning property can be a guarantee of financial security.
For both individuals and corporations, real estate can serve as investments. And to the Chinese economy more broadly, the housing market is often seen as a bellwether of the nation's economic health.
All of this leaves the government with the nearly impossible task of balancing the disparate interests of these various stakeholders.
A dramatic drop in housing prices, which seems unlikely, might sound attractive, but apartments would still be priced beyond the reach of many people. Plus, a serious price drop could trigger loan defaults that would endanger the entire banking system.
Considering the share of the overall economy the property market constitutes - not to mention the many jobs the sector provides - it is clear China's government has little choice but to protect against steep fluctuations in the price of housing.
Low income among ordinary citizens and limited investment opportunities for the wealthy have creat-ed China's biggest policy dilemma. The government has a fine line to walk in both ensuring fairer wealth distribution and maintaining the stable growth of the Chinese economy.
But housing is different from other commodities. Ordinary Chinese are entitled to a place to live. The government has the responsibility of helping lower-income people achieve their dream of having a place to call their own.
