China’s State Council’s Think Tank: The Property Bubble Is Bursting

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China’s property bubble has become an unpredictable factor
for it’s economic growth, and is the concern of many.
Recently, Li Wei, director of the Development Research
Center of the State Council (DRCSC), confirmed that
the real estate bubbles in third and fourth-tier cities
were initially bursting now.

At the World Industrial & Commercial Organization Forum
on Oct. 29, DRCSC director Li Wei said that according to
the DRCSC survey report, risks in Mainland China’s
real estate market continue to accumulate.
Not only are differences between real estate markets
in different regions becoming more obvious, property bubbles
in oversupplied third and fourth-tier cities are bursting.

For example, the property prices in Wenzhou
and Ordos City have begun to fall now.

Mr. Li says more data is needed to determine the total number
of cities affected and the extent of the severity.

Li says, “most of the time it’s not easy to access the real data.”

Professor Xie Tian of Aiken Business School of University of
South Carolina: “In fact, signs of China’s bursting property
bubble emerged around one or two months ago.

At that time, many property investors in the south of China
started to sell properties.
Property prices in many areas are dramatically dropping.

Moreover, the phenomenon of few buyers on
the property market has also been reported on many times.”

An online Forbes article published on Oct. 28 titled,
“In China There’s Not One City Sans Terrifying Stretches
of Empty Houses”, says many Chinese cities have many
empty apartments and a serious oversupply of housing.

It says China’s property bubble “will burst”

U.S.-based news website Business Insider posted a satellite
photo of Zhengdong District of Zhengzhou City.
The picture shows “massive new construction projects
that sit forlorn and empty after completion”,
which might be the largest Chinese “Ghost City”.

As the final sign of the property bubble,
the “Ghost City” crisis is spreading among
Chinese third and fourth-tier cities.

Not long ago, the DRCSC issued the “383 Reform Plan”,
which involves housing and land system reforms.
The plan suggests that the property tax
should be fully implemented after the pilot trials.

Chinese economist Mr. Zheng: “Everyone in the world knows,
and the officials have long known,
why the property price needed to be regulated,
the previous price regulation policy shows
the abnormal fast-inflating price will impact other industries
and ruin a positive economic cycle.”

Li Wei says the property bubble in the first-tier
Chinese cities is inflating further.

Xie Tian: “China’s property bubble has soared to
a level far beyond the affordability and
the purchasing power of Chinese people.

These properties are more likely traded among
the Chinese Communist Party (CCP) elite circles,
the wealthy, and the state-owned enterprises.

Once there are no more ordinary people investing
the property by their accumulated wealth or bank deposits,
then the bubble will be no way maintained.”

The bubbles of Chinese real estate have been predicted and
warned by the financial field across the world.
George Soros, investment guru and creator of
Soros Fund Management Company, says investing in China’s
property market now will be a major risk.

Economists say that China’s property bubbles would burst,
and the consequences were more severe than
the Japanese property collapse in the 1990s.

Professor Xie Tian says that once large scale
property bubbles emerge, a series of chain effects
will be triggered, which will deal a heavy blow
to the confidence of property investors and ordinary people.
As a result, once they see the dramatically dropping prices,
they will not buy and will keep watching.
Many who will have just made purchases will also regret it,
or even default and scrap their contracts.

These will intensify the bubble’s bursting.

The DRCSC says that it could be expected to
see a long-term price regulation mechanism in the upcoming
Third Plenary Session of the 18th CCP Central Committee.

Xie Tian: “The collapse of Chinese property market will
spread from third and fourth-tier cities into
first and second-tier cities, which might happen
in the following one or two months.
So this is a very seriously catastrophic result.

What is the solution for this?

Under the current CCP regime, basically, there is no solution. ”

Xie Tian says the CCP is unwilling to punish all corrupt
officials, as this directly involves the issue of how to dispose
of the property assets stolen by corrupt CCP elites.

Xie says the bigger issue is the bursting property bubbles,
which will encumber the banking industry, and hence
a greater crisis is impending for China’s banking industry.

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