To preface, let me say one positive thing about China: I have yet to be fearful at night. That is to say, I am not worried about my physical safety while walking the streets at night. And the same thing can be said with my time in Korea, Japan and Taiwan as well.
Now on to the show. One common myth espoused by some misinformed analysts is that Chinese policy making is done by a meritocracy. That ironically redundant as it sounds, central planners in China are somehow better at central planning than central planners elsewhere.
This of course is obtuse: if socialism cannot work due to its inherent inability to rationally allocate resources (e.g., all distribution methods are arbitrary, lacking an organic pricing mechanism), then central planning cannot work in China as well.
Thus, at least one notable financier has gone on record saying, not only has no real estate bubble, but that there is little government intervention in the property marketplace.
Well after large amounts of their own 2008 stimulus funding ended up in various asset classes including property, real estate prices rose markedly (and then fell), and rather than allowing the free market to clear the path towards more affordable housing, something funny happened.
Or as Mises or Robert Higgs might say, interventionism begets further interventionism:
- China starts construction on 5.8 million low-income housing units (Xinhua)
- China’s Housing Plan Hits Local Hurdles (WSJ)
This will end well.
Tim Swanson is a graduate of Texas A&M University. He has worked in East Asia for more than 5 years and currently lives in China. He is the author of Great Wall of Numbers: Business Opportunities & Challenges in China
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