China Property Market

[heifien91]

Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.

I do agree with your post, but one question.

Why FTZ policies have direct impact on China property market? Shanghai FTZ is an important test bed for financial market liberalization in China, but might has little direct impact on China property market...

If China were to open their doors, the ease of Chinese money would be able to flow out way more easily as compared to now. One of the major reasons why first tier cities are still seeing increase in property prices would be that the Chinese in second tier and less are still investing their money there, given the closed economy policy the Chinese government practises. Furthermore, as we all know how what the China stock market is like, the Chinese prefer to be buying assets that are more tangible. If China were to be as open as developed nations are today, it would mean average income households would be able to invest in stocks/property overseas, decreasing the demand for local housing significantly. That said, its probably not a very direct link, but still a key step to a somewhat bigger picture? haha.

The main purpose of new policies in FTZ, is to ease the flow of foreign money into China capital market.

Having said so, we will never know the impact of those new FTZ policies on China domestic market. It might be one of the scenario.

Haha I'm really looking long term like 10-15 years later I guess..hopefully by then China would be totally open without all the restrictions and better control on accounting frauds =/