Essay on The Chinese Bubble

3984 Words Nov 9th, 2013 16 Pages
Agenda
1. Introduction ............................................................................................................................ 2
2. The Chinese Property Market................................................................................................. 3
3. Chinese Housing Bubble 2005-2011...................................................................................... 3
4. Development of Ghost Cities ................................................................................................. 5
5. Current Situation of the Housing Market ............................................................................... 8
6. Conclusion
…show more content…
Moreover, the Chinese government relies heavily on the sale of land to finance its debt. In 2009, the numbers conclude that around 50 percent of the local governments revenues came from land sales (Cohen, 2012). Again, this strategy gives
3

incentive for investing in the development of real estate and is thus driving up the prices.
Furthermore, the Chinese average salary keeps increasing, but the Chinese population cannot invest their money properly; the Chinese bond market is underdeveloped, foreign investments are limited to people who already invest overseas, the interest rates are just a little above inflation and returns on the stock market go down as well (PWC, 2013). However, since the change to private home ownership, the housing prices have risen almost continuously, with only minor drops, which have been seen as opportunities to buy. Basically, the most common available investment opportunity of Chinese citizens is, to invest in real estate, especially to hedge against the risk of inflation of the Yuan (Network B. O., 2012).
There are two sides in the discussion whether these enormous increases in housing prices are creating a bubble. Experts, who say that a Chinese housing bubble is present, usually cite high price-to-income and price-to-rent ratios for

Related Documents