A Paper Bubble: The “Wealth Effect” and the Chinese Housing Market

Connor Ryan

Abstract


This paper argues that, contrary to popular opinion, the Chinese housing market has not created a particularly excessive bubble, and that the ongoing correction will have a very limited effect on the Chinese economy.

Keywords


China; Housing Market; Financial Markets; Bubble

References


“‘A Universe Beneath Our Feet’: Life In Beijing’s Underground.” NPR, December 7, 2014. Accessed February 1, 2015. http://www.npr.org/2014/12/07/368760646/a-universe-beneath-our-feet-life-in-beijings-underground?sc=tw.

Barth, James, Lea, Michael and Li, Tong. China’s Housing Market: Is a Bubble About to Burst? Milken Institute, 2012. Accessed March 29, 2015. http://www.milkeninstitute.org/publications/view/543.

Bell, Stephen and Feng, Hui. The Rise of the People’s Bank of China. Cambridge: Harvard University Press, 2013.

Central Intelligence Agency. “The World Factbook.” Accessed February 10, 2015. https://www.cia.gov/library/publications/the-world-factbook/fields/2212.html.

“Chart of the Week: Chinese House Prices Falling at a Faster Rate than in the US Pre-Recession.” Thomson Reuters, February 23, 2015. Accessed March 29, 2015. http://alphanow.thomsonreuters.com/2015/02/chart-week-chinese-house-prices-falling-faster-rate-us-pre-recession/?.

“China Housing Slaves Helping Property Rebound: Mortgages.” Bloomberg News, February 19, 2013. Accessed February 1, 2015. http://www.bloomberg.com/news/articles/2013-02-19/china-housing-slaves-helping-property-rebound-mortgages.

“China’s Local Debt Swells to 17.9 Trillion Yuan in Audit.” Bloomberg, December 30, 2013. Accessed March 12, 2015. http://www.bloomberg.com/news/articles/2013-12-30/china-s-local-debt-swells-to-17-9-trillion-yuan-in-audit.

“China Newly Built House Prices YoY Change.” TradingEconomics. Accessed February 09, 2015. http://www.tradingeconomics.com/china/housing-index.

“China Tightens Mortgage Rules as Home Prices Keep Rising.” Bloomberg, March 2, 2013. Accused March 13, 2015. http://www.bloomberg.com/news/articles/2013-03-01/china-tightens-mortgage-rules-as-home-price-increases-continue.

Chow, Daniel. The Legal System of the People’s Republic of China in a Nutshell, 2nd Edition. St. Paul: West, 2009.

“Defusing a bomb.” The Economist, March 11, 2015. Accessed March 12, 2015. http://www.economist.com/blogs/freeexchange/2015/03/china-s-local-government-debt?fsrc=scn/fb/wl/bl/defusingabomb.

Elwell, Craig. Rebuilding Household Wealth: Implications for Economic Recovery. Congressional Research Service, September 13, 2013. Accessed May 6, 2015. https://www.fas.org/sgp/crs/misc/R43228.pdf.

“Ending Apartheid.” The Economist, April 19, 2014. Accessed March 1, 2015. http://www.economist.com/news/special-report/21600798-chinas-reforms-work-its-citizens-have-be-made-more-equal-ending-apartheid.

Evanoff, Douglas D., Kaufman, George C. and Malliaris, Anastasios G. “Chicago Fed Letter: Asset price bubbles: What are the causes, consequences, and public policy options?” Federal Reserve Bank of Chicago, November, 2012. Accessed March 29, 2015. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CEMQFjAE&url=https%3A%2F%2Fwww.chicagofed.org%2F~%2Fmedia%2Fpublications%2Fchicago-fed-letter%2F2012%2Fcflnovember2012-304-pdf.pdf&ei=J1QYVfrJCYuuogSDwoCoCA&usg=AFQjCNFJc4mxvjGBdROdP7FF9qCQIjEafQ&bvm=bv.89381419,d.cGU.

Fawley, Brett and Wen, Yi. Economic Synopses: The Great Chinese Housing Boom. Federal Reserve Bank of Saint Louis, May 3, 2013. Accessed February 10, 2015. http://research.stlouisfed.org/publications/es/13/ES_13_2013-05-03.pdf.

Financial System Review. Bank of Canada, December, 2012. Accessed March 29, 2015. http://www.bankofcanada.ca/wp-content/uploads/2012/12/fsr-1212.pdf.

“Flawed Incentives Fuel China’s Addiction To Land Sales.” Forbes, September 9, 2014. Accessed March 12, 2015. http://www.forbes.com/sites/ckgsb/2014/09/09/chinas-undue-dependence-on-land-sales/.

Fung, Esther. “Kaisa Defaults on Interest Payments on its Offshore Debt.” The Wall Street Journal, April 20, 2015. Accessed May 6, 2015. http://www.wsj.com/articles/kaisa-defaults-on-interest-payments-on-its-offshore-debt-1429535130.

Fung, Esther. “More Than 1 in 5 Homes in Chinese Cities Are Empty, Survey Says.” The Wall Street Journal, June 11, 2014. Accessed March 1, 2015. http://www.wsj.com/articles/more-than-1-in-5-homes-in-chinese-cities-are-empty-survey-says-1402484499.

“GDP growth (annual %).” The World Bank. Accessed February 8, 2015. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/1W-CN?display=graph.

Gerth, Karl. As China Goes, So Goes the World. New York: Hill and Wang, 2010.

Hornby, Lucy. “China’s ‘affordable housing’ numbers don’t quite add up.” Reuters, February 28, 2012. Accessed March 1, 2015. http://www.reuters.com/article/2012/02/29/us-china-housing-idUSTRE81S0BA20120229.

Hornby, Lucy and Lee, Jane. “In China’s Urbanization, Worries of a Housing Shortage.” The New York Times, March 31, 2013. Accessed February 13, 2015. http://www.nytimes.com/2013/04/01/business/global/in-chinas-urbanization-worries-of-a-housing-shortage.html?pagewanted=all&_r=0.

“HSBC (China) Home Mortgage Loan Base Rates.” HSBC, 2015. Accessed May 5, 2015. https://www.hsbc.com.cn/1/2/misc/loanlending.

House of Cards. Directed by James Jacoby. 2009. DVD.

Huang, Yukon. “China’s Property Market Is No Bubble.” The Wall Street Journal, July 24, 2014. Accessed March 13, 2015. http://www.wsj.com/articles/yukon-huang-chinas-property-market-is-no-bubble-1406220282.

Jim, Clare. “China February new home prices fall at fastest rate on record, add risk to growth target.” Reuters, March 18, 2015. Accessed March 29, 2015. http://uk.reuters.com/article/2015/03/18/uk-china-property-prices-idUKKBN0ME05920150318.

Johnson, Ian. “China’s Great Uprooting: Moving 250 Million Into Cities.” The New York Times, June 15, 2013. Accessed March 1, 2015. http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?pagewanted=all&_r=1&.

LaForge, Clayton D. The Silver Lining in the Red Giant: China’s Residential Mortgage Laws Promote Temperance Among the Surging Middle Class. University of Richmond School of Law, 2011. Accessed March 29, 2015. http://scholarship.richmond.edu/cgi/viewcontent.cgi?article=1028&context=law-student-publications.

Li, Gan. “Findings from China Household Finance Survey.” Texas A&M University and Southwestern University of Finance and Economics, January, 2013. Accessed March 29, 2015. http://econweb.tamu.edu/gan/Report-English-Dec-2013.pdf.

Liu, Li-Gang. Is China’s Property Market Heading Towards Collapse? Peterson Institute for International Economics, August, 2014. Accessed March 29, 2015. http://www.iie.com/publications/interstitial.cfm?ResearchID=2656.

“Location, Location, Location.” The Economist, August 29, 2014. Accessed May 4, 2015. www.economist.com/blogs/dailychart/2011/11/global-house-prices.

Makin, John H. “The global financial crisis and American wealth accumulation: The Fed needs a bubble watch.” American Enterprise Institute, August 29, 2013. Accessed March 29, 2015. http://www.aei.org/publication/the-global-financial-crisis-and-american-wealth-accumulation-the-fed-needs-a-bubble-watch/.

Man, Joyce Yanyun. Affordable Housing in China. Lincoln Institute of Land Policy, 2011. Accessed March 29, 2015. https://www.lincolninst.edu/pubs/dl/1871_1184_LLA110104.pdf.

Mann, David, Narayanan, Chidambarathanu, Caparusso, John and Chandra, Prabhat. Asia Leverage Uncovered. Standard Chartered, 2013. Accessed March 29, 2015. https://www.sc.com/jp/_documents/jp/reports/economist-reports/Scout-Asia-leverage-uncovered-01072013.pdf.

“Moving on up.” The Economist, May 22, 2014. Accessed March 1, 2015. http://www.economist.com/news/china/21599397-government-unveils-new-people-centred-plan-urbanisation-moving-up.

Mui, Ylan Q. “Americans saw wealth plummet 40 percent from 2007 to 2010, Federal Reserve says.” The Washington Post, June 11, 2012. Accessed March 29, 2015. http://www.washingtonpost.com/business/economy/fed-americans-wealth-dropped-40-percent/2012/06/11/gJQAlIsCVV_story.html.

“National Data.” National Bureau of Statistics of China. Accessed March 12, 2015. http://data.stats.gov.cn/english/easyquery.htm?cn=A01.

Pettis, Michael. The Great Rebalancing. Princeton, Princeton University Press, 2013.

Picker, Les. “How Do House Prices Affect Consumption?” The National Bureau of Economic Research, 2015. Accessed May 6, 2015. http://www.nber.org/digest/feb06/w11534.html.

Rapoza, Kenneth. “Real Estate Oversupply Becoming Bigger Problem For China.” Forbes, August 3, 2014. Accessed May 5, 2015. http://www.forbes.com/sites/kenrapoza/2014/08/03/real-estate-oversupply-becoming-bigger-problem-for-china/.

Reich, Robert. Aftershock. New York, Alfred Knopf, 2010.

Sanderson, Henry and Forsythe, Michael. China’s Superbank: Debt, Oil and Influence. Singapore: John Wiley and Sons, 2013.

Shih, Victor. Factions and Finance in China: Elite Conflict and Inflation. New York: Cambridge University Press, 2008.

“The auditors’ footnotes.” The Economist, January 3, 2014. Accessed March 12, 2015. http://www.economist.com/blogs/freeexchange/2014/01/chinas-debt.

“The Great Transition.” The Economist, May 22, 2014. Accessed March 1, 2015. http://www.economist.com/news/leaders/21599360-government-right-reform-hukou-system-it-needs-be-braver-great.

“United States Home Prices and Values.” Zillow. Accessed February 8, 2015. http://www.zillow.com/home-values/.

Wang, Xinyuan. “Banks see slower growth in assets.” Global Times, January 27, 2014. Accessed March 1, 2015. http://www.globaltimes.cn/content/839765.shtml.

Yu, Jeanny. “China changes Budget Law to relax rules on local government bond sales.” South China Morning Post, September 1, 2014. Accessed March 12, 2015. http://www.scmp.com/news/china/article/1582512/china-changes-budget-law-relax-rules-local-government-bond-sales.

Yu, Yongding. China’s Policy Responses to the Global Financial Crisis. Australian Government Productivity Commission, 2009. Accessed March 29, 2015. http://www.pc.gov.au/news-media/snape-lectures/yongding/2009-yongding.pdf.

“Z.1: Financial Accounts of the United States.” Federal Reserve Board, December 11, 2014. Accessed March 29, 2015. http://www.federalreserve.gov/releases/z1/current/accessible/b100.htm.


Full Text: PDF

Refbacks

  • There are currently no refbacks.