Page 238 - 2017 White Paper
P. 238
7 White Paper on the Business Environment in China
2.4 Construction and Real Estate
Introduction nearly four million apartments standing empty” (BBC
News 2012).
For the purposes of this discussion, “construction”
encompasses the various processes involved If over-building is really so widespread, it hasn’t had
in raising structures—architecture, hardware, contracting, much of an effect on housing prices. Despite a slight
building materials and development. dip during the early days of the financial crisis (during
the week-long national holiday in October 2008, sales
Interestingly, the construction industry was not of residential properties in Beijing alone were 72
officially recognized as a discrete sector contributing percent lower than during the same period in 2007) (The
to GDP until 1983, following Deng Xiaoping’s making Economist 2008), as a whole property sales in China have
the case that the construction industry could be a remained relatively robust. It was estimated that in 2007
profit-making sector on its own and should be treated new and resold apartments in 70 cities across China were
accordingly (Lu and Fox 2001). selling for 12 to 15 percent more than in 2006 (Ansfield
2007), and China Daily reported in February 2010 that
Under the jurisdiction of the Ministry of Housing and “housing prices rose 9.5 percent in January [2010] from
Urban and Rural Construction, the industry in China has a year earlier in China’s 70 large and medium-sized cities
continuously performed well, with total gross output […] 1.7 percentage points higher than December [2008]’s
value reported as 6.75 billion yuan in 1985 growing to 3.75 housing price rise, or the highest increase in 21 months”
trillion yuan (growing year-on-year by approximately 33 (Zhao 2010).
percent) by the end of the third quarter in 2008; similarly,
in the first three quarters of 2008 the total income of the While those figures were encouraging during the
construction industry increased year-on-year by nearly 25 economic slowdown, the Financial Times’ beyond brics
percent to 3.43 trillion yuan and the total profit grew year- blog notes that “House price-to-income ratios in large
on-year by 26.8 percent to 83.5 billion yuan (The National cities such as Beijing, Shanghai and particularly Shenzhen
Bureau of Statistics of the People’s Republic of China have been rising steadily over the past two years”, with
2008). In 2009, output value of national construction was the qualification that “these cities make up less than 5
reported to have risen 22 percent year-on-year to reach per cent of new home sales in China… But the fact that
7.59 trillion yuan (The National Bureau of Statistics of China’s overall price-to-income ratio continues to fall –
the People’s Republic of China 2010) (no doubt helped even as it rises in these cities – suggests that this share
a great deal by the economic stimulus efforts of the PRC is not large enough to inflict serious damage on the
government against the global economic slowdown) and property market” (Lall 2011).
in 2010 the figure was reported by the National Bureau
of Statistics to have reached 9.52 trillion yuan (Ma 2011). The growth in home prices does appear to have
Total investment in the sector over 2010 was reported to slowed since reaching an apparent peak in April 2010.
be in excess of 52.2 trillion yuan (Ibid.). In January of this year, the State Council further “ordered
cities to better manage the supply of land, raise tax rates
More recently, an analyst writing for BBC News on the sale of apartments or houses held for less than
observed that, “construction has come to dominate five years and set price control goals for new homes”, in
China’s economy, accounting for roughly 25 percent of an additional effort to contain future growth (Barboza
all activity and about 15 percent of all jobs”, while also 2011). A Businessweek report on surging property prices
cautioning that “No one knows exactly how much over- in December 2009 noted that such increases were driven
building has taken place. But Beijing alone is said to have by “low interest rates, official encouragement of bank
238
2.4 Construction and Real Estate
Introduction nearly four million apartments standing empty” (BBC
News 2012).
For the purposes of this discussion, “construction”
encompasses the various processes involved If over-building is really so widespread, it hasn’t had
in raising structures—architecture, hardware, contracting, much of an effect on housing prices. Despite a slight
building materials and development. dip during the early days of the financial crisis (during
the week-long national holiday in October 2008, sales
Interestingly, the construction industry was not of residential properties in Beijing alone were 72
officially recognized as a discrete sector contributing percent lower than during the same period in 2007) (The
to GDP until 1983, following Deng Xiaoping’s making Economist 2008), as a whole property sales in China have
the case that the construction industry could be a remained relatively robust. It was estimated that in 2007
profit-making sector on its own and should be treated new and resold apartments in 70 cities across China were
accordingly (Lu and Fox 2001). selling for 12 to 15 percent more than in 2006 (Ansfield
2007), and China Daily reported in February 2010 that
Under the jurisdiction of the Ministry of Housing and “housing prices rose 9.5 percent in January [2010] from
Urban and Rural Construction, the industry in China has a year earlier in China’s 70 large and medium-sized cities
continuously performed well, with total gross output […] 1.7 percentage points higher than December [2008]’s
value reported as 6.75 billion yuan in 1985 growing to 3.75 housing price rise, or the highest increase in 21 months”
trillion yuan (growing year-on-year by approximately 33 (Zhao 2010).
percent) by the end of the third quarter in 2008; similarly,
in the first three quarters of 2008 the total income of the While those figures were encouraging during the
construction industry increased year-on-year by nearly 25 economic slowdown, the Financial Times’ beyond brics
percent to 3.43 trillion yuan and the total profit grew year- blog notes that “House price-to-income ratios in large
on-year by 26.8 percent to 83.5 billion yuan (The National cities such as Beijing, Shanghai and particularly Shenzhen
Bureau of Statistics of the People’s Republic of China have been rising steadily over the past two years”, with
2008). In 2009, output value of national construction was the qualification that “these cities make up less than 5
reported to have risen 22 percent year-on-year to reach per cent of new home sales in China… But the fact that
7.59 trillion yuan (The National Bureau of Statistics of China’s overall price-to-income ratio continues to fall –
the People’s Republic of China 2010) (no doubt helped even as it rises in these cities – suggests that this share
a great deal by the economic stimulus efforts of the PRC is not large enough to inflict serious damage on the
government against the global economic slowdown) and property market” (Lall 2011).
in 2010 the figure was reported by the National Bureau
of Statistics to have reached 9.52 trillion yuan (Ma 2011). The growth in home prices does appear to have
Total investment in the sector over 2010 was reported to slowed since reaching an apparent peak in April 2010.
be in excess of 52.2 trillion yuan (Ibid.). In January of this year, the State Council further “ordered
cities to better manage the supply of land, raise tax rates
More recently, an analyst writing for BBC News on the sale of apartments or houses held for less than
observed that, “construction has come to dominate five years and set price control goals for new homes”, in
China’s economy, accounting for roughly 25 percent of an additional effort to contain future growth (Barboza
all activity and about 15 percent of all jobs”, while also 2011). A Businessweek report on surging property prices
cautioning that “No one knows exactly how much over- in December 2009 noted that such increases were driven
building has taken place. But Beijing alone is said to have by “low interest rates, official encouragement of bank
238
