Essay about The Chinese Bubble

3988 Words Oct 31st, 2013 16 Pages
Agenda
1. Introduction ............................................................................................................................ 2
2. The Chinese Property Market................................................................................................. 3
3. Chinese Housing Bubble 2005-2011...................................................................................... 3
4. Development of Ghost Cities ................................................................................................. 5
5. Current Situation of the Housing Market ............................................................................... 8
6. Conclusion
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As China measures its GDP in what is built, unlike the US, which measures what is bought and sold, high GDP targets pressure China’s property market (Editors, 2013). To reach GDP targets, party officials were evaluated on their contribution to the GDP growth. This put local governments under pressure and encouraged overinvestment and rising housing prices (Guilford, 2013). Overinvestment in the housing market lead to increase of property building, which in turn lead to job creation but also the development of plenty of uninhabited cities. The reason for those cities remaining empty is the great inefficiency in China’s housing market. In the metropolises of China, housing prices are very high and for the most people just not affordable. According to a study by Credit
Suisse (Figure 5) the top five most expensive cities, measured by the IMF house price to wage ratio, are located in China, Beijing being the most expensive. This creates huge disparities in
China’s society, as on the one hand people can barely afford space to live and have to share rooms with several people in the Hutongs, whereas plenty apartments remain unoccupied, as their rental or selling prices are too high for the average Chinese citizen.

3. Chinese Housing Bubble 2005-2011
In the years 2005 until 2011, the housing prices have risen tremendously in the Chinese real estate market (Figure 3).

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