Is there anything to add to volumes of work in recent years on China’s residential property market? To my surprise, reading the paper highlighted this week, I found there is.
Researchers Edward Glaeser, Wei Huang, Yueran Ma, and Andrei Shleifer, writing in a National Bureau of Economic Research Working Paper, compare recent developments in China with the disastrous events in the U.S.
For most, it’s those events (in the U.S., and most of the rest-of-the-West) that color views of where China is heading. A boom must be followed by a bust; the evidence just played out in plain sight, no? Well, there are similarities; but there are also important differences.
The value of the researchers’ work is to make a measured comparison of China and the U.S.; and, while they don’t deny the possibility of calamity (only a fool would rule that out), they explain what differentiates the China experience.
In brief; Chinese home-buyers can take the comfort Americans never in reality had in the highly likely possibility of future home value appreciation; plus they enjoy a following policy wind from a deeply committed government with equal (or more?) skin in the same game.
Perma-bears will scoff ‘Tosh!’ and move on.
However for those with more open minds wondering why calamity, regularly predicted for this asset class, has stubbornly refused to show up this work provides useful illumination.
You can access the paper in full via this link A Real Estate Boom with Chinese Characteristics.
Happy Sunday.
[A good paper is marred by an error I’m compelled to highlight. There’s no proof Deng Xiaoping ever said ‘To get rich is glorious’. He may well have used the phrase 致富光荣 (zhìfù guāngróng) in private; but this is capable of a much wider interpretation i.e. to be in possession of ‘wealth’ is honorable or glorious; but wealth here could mean any number of forms of abundance. Yours, A. Pedant]