That's what the Chinese government is thinking. China's current leader Wen Jiabao is in his last few weeks in his position as premier of China and is determined to make his time count. Wen is the 6th premier of China and has served ten years in his current position but now Xi Jinping is being primed to take over his position. Xi Jinping was recently elected head of the Communist Party of China during the 18th National Congress in Beijing right around Thanksgiving (also the reason I wasn't allowed to take a bus to the airport and had to hire a taxi to drive me four hours to Beijing... thanks!). As Xi is being phased into power in China Wen is being phased out. Recently Wen has been making a lot of speeches about his view on many aspects of the country, a big focus include China's military, poor, and the growing gap between the rich and the poor. Wen wonders if he did enough for his people during his time at the top, it's obvious this wonder comes form a guilty place. If you think politics in America are bad don't move to China. Wen has the ability to do even less in office than Obama does and these speeches are reminding the people of all the Chinese government doesn't do for them.
It's possible China is learning from America's mistakes. Though the Chinese people are in a bubble of their own, not being allowed to watch main stream media they have no clue about the housing bubble or the detrimental effects that occurred when it burst, in fact most of them don't really understand the financial crisis occurring all over the world. And we thought you'd have to live under a rock to not know that information... Of course the Chinese government saw the American housing bubble and the detrimental effects of its burst. The average Chinese person doesn't get up in arms about, well, anything but most people in China are very worried about the price of real-estate right now, which they should be. One of my co-workers said to me, "I'm glad I only have a daughter. If I had a son I don't know how I would pay for him." She was referring to paying for an apartment for him. Though Chinese people will not admit to the terminology the dowery system is still alive and well in China. Yet it is tradition in China for the parents of the boys to pay more than the parents of the girls. Chinese boys must have their own apartment before they are able to marry, or they had better hope they have one or else they are not really a viable candidate which can be an issue in a country with more men than women and a traditional system that makes you a social outcast if you don't get married and have kids. A friend of mine told me the other day that she dismissed a male suitor because he had the nerve to ask her to try to obtain a loan with him to get an apartment, this was unthinkable to her.
With a fixed currency there aren't many ways for Chinese people to invest, the only thing in money that is guaranteed is real-estate. In a country where more than half the population lives in urban centers much bigger than our cities in the US, buildings are never made to last, construction occurs almost over night, everyone is forced to own real estate due to social stigmas, and urban populations are rising real estate is really the way to go. If it's buying an apartment and turning it over in a few years when the value has double or if it's sitting on apartments in old buildings that you predict will be destroyed so you are guaranteed apartments in the new high rise that will take the buildings place, real estate in China is a lucrative business.
Even in the small city of Qinhuangdao where I live the real estate prices are rising dramatically When I asked an older friend about investing in China he said forget about the stock market, invest in real estate. The boss at a local English school said the worth of the apartment he purchased only three years ago has already doubled. Though you are not guaranteed that the property value on your apartment will rise that quickly right now in China you can guarantee that it will happen within ten years. Starting to sound familiar? To me it sounds too good to be true, just like housing in the US a few years ago. Yet, in China continued growth like this is possible. In China developments go from early stages of construction to ready to be rented in a matter of months. If building happened that fast in America I think people would die of surprise, but it's reality in China. Old apartment complexes get torn down for more and taller buildings to replace them. These are the apartments you really need to get. Pieces of these properties turn you from living in a ratty old one bedroom apartment in a building that might have existed when Mao did to owning four or five brand new apartments in a new and modern building. Rags to riches - literally. But that's not what's happening anymore. People are buying these old apartments out from under the old people who have been living in them for the last few decades just waiting for them to get tour down so they can become mini-moguls. Just another ironic turn for the country who used to treat business men as pariahs. Other lucrative investments happen by luck. Buying in a new apartment building before dozens pop-up around it or before it becomes the new happening part of town. But there is one thing you know for sure, buying an apartment will make you money.
The people are worried because buying real estate has become a game and the average Chinese person who makes way less than the American minimum wage can't afford to play. Most of the workers at my school including officials in high positions make less than I do here and I make less than the minimum wage. If you think buying a house in America is out of reach imagine trying to buy an apartment in a market where 30 or 40 square meters can cost you upwards of $400,000 usd.
The government just administered a new property gains tax in China. The tax would take 20% of any profit made from the sale of property. Other effects of the government on property is making it more difficult for homeowners to get loans for a second residence. Though I think it's just about time the Chinese people are outraged. The real estate market is the only real investment strategy that currently exists in China and the government is threatening it, so much for capitalism. I think this is just the first step for the government. If they don't want an economic crisis within China then they need to act stronger and faster to stop people taking over the real estate market making it impossible for the average person to buy property any more. The Chinese government says it's trying to ratify the move of rural populations to urban areas in hopes of developing the country further but with housing prices so high and migrant worker wages so low I don't see this being possible without a large ghetto system arising in China which just defeats the purpose of the country's urbanization in the first place.
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