Ask Prof Wolff: China’s Housing Market & GDP

A Patron of Democracy at Work asks: "China is having some problems, specifically with their housing market. What's the reason for this and does this mean China may not surpass the United States in nominal GDP?"

This is Professor Richard Wolff's video response.

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“Marxism always was the critical shadow of capitalism. Their interactions changed them both. Now Marxism is once again stepping into the light as capitalism shakes from its own excesses and confronts decline.”

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[rastoferi]

Prof Wolff, you might be forgetting to add that the developers who over leveraged are now being punished because of the new debt servicing ratio that the central government has implemented. In other words, this so called “crisis” is completely manufactured by the government to root out the extreme speculators. Housing is to live in, not speculation - according to the CPC. Seems reasonable to me

[cathearts]

Thank you, Prof Wolff, for shedding light on this issue

[l.lokman]

It is always a pleasure to listen to Professor Wolf talk. Factual, unbiased, sincerity, no propaganda news and professional comments and highlights. Very educational.

[hoongliew]

Thank you professor Wolff for your profound professional programme, its beneficial, educational and informative, keep going .

[emiebex]

I always enjoy listening to the differences between The US & China economy. Especially since China has pulled a large number of people out of Poverty, while The US complains we're not giving Billionaires enough money. 🙄

[richardgoh]

Since coming into power in 1949, the Chinese Communist Party has been on trials and errors on many national policies.
They have grown from a totally inexperienced country pumpkin into the world second largest economy.
Along the way many serious mistakes were made resulting in millions of lives lost and billions of $ went into the drain.
One thing the Communist Party has learned is never go to war unless it’s absolutely necessary.
So in 1951-53 they fought the US in the Korean War; in 1962-63 they fought with India in the border war and in 1979 they fought with Vietnam forcing Vietnam to withdraw from its incursions into Cambodia and Laos.
China had had fought numerous civil wars since 2000 BC till 1949. They are damn damn good at war.
But they do know wars bring misery to people and nation.
On the other hand, a young nation called America had had fought hundreds of wars since its independence in 1776.
Americans don’t know much about war, just simply thinking that incessantly bombing will bring victory.
Hence they lost in Korea, Vietnam and recently, Afghanistan.
Now US is enticing China to attack Taiwan which has been China’s territory since time immemorial.
US is foolishly thinking that by pre supplying vast amounts of weapons to Taiwan who will then be able to withstand the PLA and better still, greatly reducing PLA strength.
This is just wishful thinking simply because very few Taiwanese are prepared or dared to fight the PLA; US is being gravely misled by a few corrupted DPP party officials.
How wonderful would this world be if US can change its antagonistic stance against China and cooperate friendly together.
But until and unless a wise and prudent politician is born in US, the aforesaid is just my wishful thinking.

[JenHope]

Good analysis, as always, thank you professor.

[juliahenriques]

Professor, of all your comments, this one would have definitely benefitted from double the time so you could talk about it in detail and anticipate some retorts. Such as: Chinese culture of house ownership; the relationship between developers and local governments; the specifics of government intervention in insolvent developers; rural exodus containment policies and how they've affected projected housing demand in cities in the last 10 years. And so on. This is a really complex topic that deserves to be commented on at length.

[gunsumwong]

Here is someone able to explain economics by facts, figures and data. He is a rarity in America at the height of the bashing China policy.

[michael]

The Chinese housing market only started in the year 2000 after the Housing Reform to step up its development program towards a market economy, large scale private homes constructions began in Beijing. Before that most every one worked at State Owned institutions which owned the apartments, rent and utilities were collected from their salaries. There were few big private companies at that time except foreign investments; it was before Alibaba, Huawei was in the stage of nurturing. Employee could pay a lump sum to "buy" their homes when they reach retirement age, typically at age 58 for men and 55 for women. But they do not owned the homes as freehold estates, the government has primary ownership of the land. When people buy homes in China they get 70 years or 99 years leasehold, as called in the US. The definition of US freehold estate is that the homeowner owns their land from the center of the Earth to the air space above it. Well, there are no individual oilmen in China who can dig from their yards or receive C-band satellite sports games from the air space. During the first 10 years or so there were lots of speculators who struck riches, home prices soared 5 to 10 folds while the RMB also appreciated 20% against the dollar. By 2012 there were a rush of overseas speculators buying up homes in Canada, Australia and the US. Vancouver and Toronto, Sydney and Melbourne, Los Angeles and New York are popular destinations among Asians. By 2017 it was said that 120, 000 Chinese moved to Vancouver as Canada promoted investment immigration. Someone made a soap opera and movie about them called Crazy Rich Chinese. Home prices in those cities also went up a couple hundred percent for a few years before coming back down, less so for US cities due to the size of the market. For most cities in China, new and old, the housing boom ended around 2017-2019, no more easy profit. Unlike the US in the past where home prices went up and down following the cycle of interest rates, China is having its first ever decline in the housing market. For almost two decades people believed home prices would always go up. Now it is stagnant and dropping somewhat, which is anything but abnormal. Over the years China has taken various measures to curb speculation such as homeowners could buy only one home and foreigners and people from another city or province were not allowed to buy unless they work or study in that city, something like that. By doing so the government was able to make plans for city developments according to potential; some cities have oil and metals, some have fisheries, and some have factories and agriculture millions or actually hundreds of million have moved from coal burning mud walled homes to modern apartments with all Made in China appliances. Different segments have huge differences in home prices. Beijing homes are 10 times the prices of remote provinces of western China. But on a whole they all are thriving in economic growths so no complaints but cheers for the government. Also there is no mortgage companies in China, no Fannie Mae and Freddie Mac, people borrow from State Owned Banks so there are no incentives from bankers to rip them off for profits. There are hardly evictions in China and homeless people sleeping on the streets is almost non-existent. Family relationship are tighter in China that young people would received gifts from parents regarding buying a home, and parents would usually move in to live with their children when they get very old. Together they seldom have financial problems regarding shelter.

[georgekelmeris]

When you take care of your people first and foremost, the people will prosper, therefore, your nation will prosper,

When you impoverish your people, the people will not prosper, therefore your nation will not prosper...

Common sense...

[SirSilversilk]

Love you Professor Wolf. May I please offer one correction? There is no "Chinese Communist Party" also referred to as CCP. It is the "Communist Party of China" or CPC.
The renaming of non-western organizations or countries by western countries is a bad habit. Cheers!

[魏子茗-qc]

One needs not to be too nice about Chinese housing policy and situation here.
As a local mainlander i'm 100% sure that Prof. Wolff is only focusing on analysis of the macroeconomics while ignoring the basics that the Chinese government has OWNED all the lands since the Land Reform. The loaning and building have proven to be an astonishingly efficient way to earn the "extra taxes" from petite bourgeois in the city; however, as the housing market has become a speculative commodity for urban economics it has been quickly financialized and entered the "real-estate bubble" since the 90s. Combining with a drastic decline of government owned business which provides basic social cares and housing distribution welfares / a skyrocketing rise of urban private business which mostly disregard the Labor Law brazenly, the diverging petite bourgeois population and rural emigrant workers -- which consist of more than 97% of the urban population -- have been maelstromed into a deteriorating economic status as renters who are drained by high house rent / health care / education cost in the urban area.
Meanwhile, the government has yet to show any strong intention of limiting the real estate speculation of the urban housing market and bourgeois by executing property tax (though some tier 1 cities has been reported to test some new policies last year), this inclination away from the working class is very disappointing

The birth rate of China has been superhero-landed in the past decade and is now negative according to this year's latest census, as a 26yr male urban citizen who is in his "birth age", i'm pretty sure my peers would all agree on that "housing, education and health" is our new "three mountains on the shoulders of the proletariat" in our time. If our government is still possessed of play the macroeconomic big games while ignoring these factors, I do not know if there are any chances that we could avoid the economic crash after this real estate bubble blow up like what happened in Japan 1990s

[carinalundstrom]

❤️🌞👍🥇
Well explained, thanks Mr. Wolff, you are expanding our sphere of knowledge something that is needed in these days when the dark forces of the unipolar world order are trying to manipulate our ability to think.

[GhostOnTheHalfShell]

Municipalities in China derive their funding from development. They need to build housing to keep their own lights on. This is not much different in effect than US municipalities addicted to housing development to paper over financially unviable suburbia.

[chew]

@ 3:00 Countries in the ASEAN have this practice as well. Buyers are invited to view plans/showroom of the project. After choosing a unit, they have to put down an initial deposit. The construction of the project has not even started but will be completed in a year or two. I do not know why China is criticised for this practice of advancement payment for a property yet to be built. Why the West does not criticise the same practice in ASEAN, and probably in other countries as well.

[stephenramos]

Ask Prof Wolff: How do you analyze the change in the Patagonia Corporation? All profits are designated to go to the planet, etc.; this is not the same as worker controlled/decision making enterprises.

[lowcc]

U r great always. Fakes narrative must be stopped from the sources.

[radhakrishna]

Food.. Shelter.. Basic
Needs... For... All...
Foresight into.. Future
Needs... Very.. Unique..

[marcosmith]

I rode high-speed trains in China in 2013. and I saw many clusters of high-rise buildings being constructed, seemingly in the middle of nowhere. Usually, the clusters totaled 12 buildings, sometimes up to 20, all going up simultaneously. I had previously read in the South China Morning Post (Hong Kong) that the Chinese government planned to move 200, 000, 000 people from rural to urban environments, so that China could bulk up its domestic economy. Did this ever pan out? Did these high-rise clusters become ghost cities?