The Chinese government is much more focused on ensuring people are employed and that its economy grows at a more reasonable rate.
The last time China experienced such an economic downturn - when the Asian Financial Crisis hit in the late 1990s - the Chinese government cushioned the blow by providing favorable policies that were designed to stimulate more investment. But that’s not going to be the case this time.
Instead, says the Chinese Academy of Mathematics and System Sciences (CAS), the Chinese government is much more focused on ensuring people are employed and that its economy grows at a more reasonable rate. Following years of sky-rocketing prices, housing prices in 70 major cities fell .2 percent from January to February and 1.8 percent from last year. A researcher with CAS says prices are expected to dip another 10 percentage points this year, and in some of the big cities like Beijing and Shanghai, those numbers are predicted to be more at 15 to 20 percent.
But many agree this is not such a bad thing. China’s leaders have been trying for several years to get the cost of housing down. According to a consultant with the World Bank, prices had grown exponentially compared to the average income. In 2007, the Beijing Municipal Statistics Bureau figured the average annual income for Beijing residents to be about 40,000 yuan (around €4,200), while downtown Beijing apartments were selling at more than 10,000 yuan per m2.
As it stands now, there are 210 million m2 of unsold homes nationally which China’s Research and Development Institute says could take at least three years to sell. As well, nearly 145,000 homes remain unsold in Beijing alone, forcing developers to cut prices in an effort to get some cash flow in. But that is apparently not enough for consumers, who continue to hold out in hopes of bigger savings.
In its 2008 report titled “Blue Book of Urban Competitiveness,” the Chinese Academy of Social Sciences released that of the world’s 15 fastest growing cities, 10 were in China. These include Bautou and Hohhot of the northern Inner Mongolia Autonomous Region; the eastern Shandong Province’s Yantai, Weifang and Weihai; and Dongguan, Zhongshan and Huizhou in the southern Guangdong Province; and Wuhu and Heifi of the eastern Anhui Province.
At the end of last year, there were 2166.7 million m2 of residential buildings under construction. That’s up from 1864.5 million m2 in 2007. Meanwhile, there was a slight dip in m2 of residential buildings ready to begin construction (31,421 m2 in 2008, down from 34,217 in 2007). It was a similar story for Inner Mongolia. There were 34,322 residential projects under construction at the end of last year – up from 29,212 the same time in 2007. And for residential buildings set to begin construction, the numbers in m2 dropped from 16,255 in 2007 to 16,156 in 2008.
So while construction is down in China, as it is everywhere else, the Chinese economy is still faring better than most. As long as Chinese developers adjust profit margins and work to keep housing affordable, says one Chinese Academy of Sciences researcher, the market should stabilize and see improvements around 2012.
In the meantime, builders are sitting on about 1.9 billion m2 of land that is yet to be developed, and China’s growth continues at a pace unlike anywhere else in the world. By many indicators, China’s urban population is expected to reach 926 million by 2025, up from 562 million in 2005.