Opinion / You Nuo
Not wise to restrict real estate sector
By You Nuo (China Daily)
Updated: 2007-04-30 06:45
An economy with its per capita GDP in China's current range - around
15,000 yuan, or $2,000 - is in an era of building new houses.
So it sounds absurd for scholars from an ivory-tower research office in
Beijing to have reportedly proposed last week that real estate
development should no longer be given the status as a pillar industry of
the economy.
The purpose of this proposal, as I can figure out from the context of the
report, was to restrict investment money, which is in oversupply, from
moving about in the marketplace and jacking up the prices of stocks and
housing units in big cities.
But instead of simply restraining the real estate business, Beijing
should make a better use of it and embark on some massive city building
projects in which private investors can participate, on various levels,
under the supervision of some central government committee.
This would serve to open up new investment channels in an economy
featuring too much investment money and too few worthy projects and
increasingly so with the stock market index surging more than three times
since the beginning of 2006.
A stock market that "defies the law of gravity," as Gao Xiqing, a top
executive of China's social security fund, said last week, when combined
with a heavily restricted real estate business, can only work in such a
way as to either push the stock index over the edge or drive away
domestic funds to overseas investment markets, and perhaps both, more
quickly than China could able to manage.
Houses are what people need after all. And those who own houses will in
time need better ones. There are still millions of people in rural China
waiting to move to urban jobs and homes, and some of them, who already
have jobs, are still waiting for homes.
The problems in the housing market cannot be attributed to the very
existence of this demand, but to the poor and often corrupt relations
between the developers and municipal officials.
Efforts should concentrate on revamping some of the rural towns nearby
such large cities as Beijing and Shanghai and converting them into
residential areas for low-income families, connected to the cities by
decent and free transportation services.
Such New Deal-like plans can never work when they are carried out by
officials in just one or two cities, and can only be properly managed and
supervised when in the hands of the central government. And only when the
central government takes the initiative, can such projects be attractive
enough to divert part of the money that is being wasted in the
"irrational exuberance" game in the stock market.
Actually, naming or not naming a business as a pillar industry has been a
pretty boring game in China since the era of the planned economy.
During the 1960s, when this columnist was still in primary school, almost
daily, official radio broadcasts would be blasting out announcement of
seemingly exciting records from the iron-and-steel industry. But when
compared with the amount that China either produces or consumes today,
those numbers pale into insignificance.
In one straightforward example, Chinese media managers have all learned
about the real estate industry's importance. In 2006, developers forked
out a total of 160 billion yuan ($20 billion) for advertising, and were
by far the largest source of media revenue.
Many media products, the increasingly popular "city papers" in
particular, depend to a great extent on real estate advertising for their
lively format and reporting.
So both in reality and in logic, the call for pure control and
restriction of an economic activity, especially such a massive one as
real estate development, makes poor sense indeed.
E-mail: younuo@chinadaily.com.cn
(China Daily 04/30/2007 page4)
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