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The Sunday Paper – Inside Job: Evidence From the Chinese Housing Market

There’s research that shows U.S. Senators are suspiciously talented stock traders. Finding that government officials, anywhere in the world, use inside information for their own benefit then should surprise only the very young .

In the paper highlighted today though Yongqiang Chu from the University of North Carolina (et al.) set out to see if government officials in China used inside information in less transparent ways i.e. to perhaps to inform themselves about good times for buying real estate?

Their analysis covers only Beijing but the wider implications are obvious. The work is possible due to a major policy initiative promulgated in 2010 to stop home prices soaring following the massive stimulus of 2008.

Specifically, on April 30th 2010 the government announced that Beijingers henceforth (the policy was nationwide) would only be allowed one more property purchase per household. The net effect of the policy was to trigger a surge of demand in an already white-hot market (not what planners were hoping for!) .

Anybody aware of the policy in advance would then most likely have accelerated a contemplated purchase; and guess what? That’s exactly what Beijing government officials did. How do we know this? The researchers gained access to the Beijing Housing Provident Fund which facilitates finance for property purchases and applicants have to provide details about themselves including their job and rank.

Not only were government officials surprisingly gifted timers of purchases ahead of the new policy they also managed to process their paperwork faster than ordinary citizens and achieve much better deals on a price/sqm basis (because chummy developers were making inventory available at ‘special’ prices? The paper is mum on this but hey, whadyathink?).

As the researchers wisely chose to I’ll also leave it here. Let’s hope this work makes it way into official government circles and closer watch is kept in future on individuals who’ve exhibited a pattern of, how shall we call it, serial perspicacity? Their names are, after all it seems, a matter of public record.

You can access the paper in full via the following link Insider Dealing

Happy Sunday

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