Since 2013, economic and trade relations between China and Europe have grown significantly. In this article, the authors look beyond conventional economic indicators, like trade, and political issues, like human rights, instead focusing on transport infrastructure, real estate and tourism to show that a new page is unfolding in the history of China-Europe relations.
A kindergarten at a demolition site in the city of Xi’an, Shaanxi province. The photo was taken by China Stringer Network and published by Reuters on 8 December 2014.
According to the local government, the kindergarten has been running without a license and will be forced to shut down. The owner of the school signed the 20-year lease agreement three months before the demolition work started. On 8 December, the mother of a 2 and a half year old toddler went to the school to ask for a fee reimbursement. Apparently, she had not payed attention to the surrounding area when registering her infant and actually quite liked the environment.
On December 5th, World Chinese Economic Forum was held in Chongqing. City officials, experts and representatives from Chongqing, London, Hong Kong, Sydney, Melbourne and other cities had a discussion about urbanization and real estate development.
Chen Chengwei, an expert from Australia, ,believes that, judging from the current real estate market and the government’s control measures of the housing market, the real estate prices in some Chinese cities have more space for contraction, especially in the investment housing market. “Due to China’s new urbanization, the real estate market will be released; although the price slump of ordinary housing is unlikely, investors should do some research and analysis before buying and selling and be more cautious in investing,” said Chen.
How the new urbanization construction can be carried out and promoted is another topic that concerned the participating experts and scholars. Former mayor of Melbourne, Su Zhenxi has been committed to researches in sustainable development of world cities. He believes that the reason way China is proposing a “new” urbanization is that the Chinese government will implement measures and policies different from what had been implemented in the past, and that the key is to strike a balance between moderate stable economic growth and environment protection.
« Ambiguous Rights: Land Reform and the Problem of Minor Property Rights Housing », paper written by Karita Kan (2012). China Perspectives, 2012/3.
Minor property rights housing (xiao chanquan fang 小产权房) is an unofficial term referring to illegal residential structures built on rural, collectively-owned land that is sold or rented to non-local urbanites. Its controversial legal status stems from the dual ownership structure in China’s land regime. According to Article 8 of the Land Administration Law, the state claims ownership of urban land, while land in rural and suburban areas is owned, unless otherwise stipulated, collectively by rural residents represented by peasant collectives. Rural collective land is theoretically reserved for the exclusive use of villagers, and should be not sold, transferred, or leased to non-rural residents. The real estate boom and successive hikes in property prices have nevertheless provided strong incentives for rural landowners to capture the monetary benefits of urban development through selling and leasing land and houses to urbanites looking for affordable accommodation.
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Annual meeting of the Association of American Geographers (AAG) 2015, Chicago, April 21-25
Call for papers : Special session ”Understanding China’s urbanization from the perspective of the real estate industry “, sponsored by the China specialty group
Organized by Natacha Aveline (CNRS/University Paris I-Panthéon Sorbonne) and Thierry Theurillat (University Neuchatel, Switzerland)
China’s real estate industry has become a major pillar of China’s economy. The past decade has seen a widespread increase of land and real estate values, followed by downward trends in some cities. This has raised discussions amongst scholars on the possibility that China was experiencing a property ‘bubble’ (see for example Zhou, 2005; Liu and Sun, 2009; Jianling, 2010; Wu et al., 2012).
However, this scholarship tends to favor a macro approach based on data analysis of property prices at city level, ignoring the complex mechanisms that are at work in the process of land development and building construction. Such mechanisms include: financial channels to the real estate industry; institutional and organizational arrangements underlying property development; differentiated access to primary resources for building construction (especially land and finance) according to the developer’s status. Starting from the assumption that these aspects play a significant role in the formation of property prices, this special session intends to shed light on the various processes of value creation in China’s cities, while contributing to the debate on the so-called ‘speculative bubble’ (or more precisely, ‘bubbles’. (Aveline-Dubach, 2014).
During the 2000s, China’s urbanization was clearly identified as an economic model based on land income for local government and related to the political and institutional changes since 1978 (Aglietta and Bai, 2013; Keith et al., 2014). With decentralized decision-making processes often based on interpersonal relations (Zhu, 2005 ; Li and Li, 2011), many scholars emphasized the role of the state and debated about the nature of the “emerging neoliberal urbanism” in China (He et Fu, 2005 et 2009 ; Cartier, 2011 ; Zhu, 2011). The ‘entrepreneurial’ approach of the local state and the formation of “local growth coalitions” (Zhu, 1999) with local developers, some of them being state-owned enterprises, have been identified as key features of local real estate dynamics in China (He et Wu, 2009; Wu, 2010; Cartier, 2011 ; Zhu, 2011). However, the institutional and cultural specificities of the demand for property have seldom been addressed (Hu, 2013) as scholars have focused on public finance (Gaulard, 2013; Wong, 2013).
In order to have a more integrated and transversal approach of the mechanisms involved in China’s urban production, this special session would welcome papers dealing with the following topics: real estate and urban production (e.g. role and business models of development and construction groups in China; evolution of national and local regulatory frameworks regarding land development and building construction), urban financing both on domestic and international levels (e.g. banking finance, trust financing, foreign direct investment, financial markets and stock exchange) and the role of the households for the urban property/ownership (residential and non-residential property).
Abstracts of 250 words (maximum) should be submitted to Natacha Aveline-Dubach (email@example.com) and Thierry Theurillat (firstname.lastname@example.org) by October 30. Please remember to include your name, institutional affiliation and contact details on your submission.
Ren, X. (2014), The Political Economy of Urban Ruins: Redeveloping Shanghai. International Journal of Urban and Regional Research, 38: 1081–1091. doi: 10.1111/1468-2427.12119
This essay analyzes the political economy of the urban ruins captured in Greg Girard’s photo album Phantom Shanghai. Rather than being marginal, irrelevant or merely objects for nostalgia, the ruins of buildings produced by real estate speculation offer crucial insights into the workings of the urban political economy and reflect wider trends of urban governance. Examining how building ruins come about in the first place and how they are represented in visual media can help us better understand the processes of urbanization and place making, and the central role of destruction in contemporary Chinese urbanism. This essay illustrates this point by analyzing the economic function, political legitimation and cultural significance of demolitions and ruins in urban China.
Full article available in the International Journal of Urban Research. (pdf)
A commercial sign in a luxury residence in Pudong, Shanghai. May 2013. Real estate commercial ads often lure potential buyers with messages and photos depicting a fantasy world of affluence, where social life revolves around glamorous soirées such as the one in the photo. When reading this ad one cannot also help but wonder what sort of influence the developer is referring to and how it can be gauged. This is especially puzzling when contrasting the photo where the models are all Western whereas target buyers are surely not. In any case, they must be running short of influential people, as sales have stagnated lately. However, this does not seem to be an isolated case but a general trend in large cities. This could indicate that the real estate market is losing momentum. The interesting (or troubling) point here is that the decrease in sales can be solely attributed to the invisible hand of the market, for there are no government tightening to control prices currently in place, nor plans to implement any.
Hu, Richard1 (2013) Drivers of China’s urbanisation and property development. The Australasian Journal of Regional Studies, 19:2, pp.156-180. [accessed 19 November 2013].
The mainstream scholarship that seeks to explain China’s urban development tends to favour a macro discourse that focuses on institutional factors, such as globalisation, economic growth, and national policy reforms. These are important contributing factors, but they do not necessarily suffice to capture the complexities and interrelations of the immense magnitude of China’s urban development. In this article, I approach the endogenous factors to explain China’s urban development through the lenses of urbanisation and property development. I posit a dichotomy of institutional drivers and noninstitutional drivers. I argue that the dichotomy of institutional and noninstitutional drivers provides an integrated framework to explain China’s urban development, and fills the gap of missing non-institutional drivers in the mainstream scholarship. Discussions through this dichotomy reflect progress, identify problems and suggest further research agendas for both institutional and non-institutional drivers.
Hu, Richard (2011). Property, Wealth and Law Reforms in China’s Urban Revolution. In J.Garrick (Ed.), Law, Wealth and Power in China: Commercial Law Reforms in Context. London and New York: Routledge, pp. 199-217.
- Rougier-Brierre G. and Jeannet, Guillaume (2009). Urbanisation et investissement immobilier en Chine = Ubanization and real estate investment in China. Paris : IFRI, 20 p. (Asie visions ; 22). Download PDF (French and English editions)
1. Associate Professor, Faculty of Business, Government and Law, University of Canberra, Bruce, ACT, 2601, Australia
According to an article published by Bloomberg, housing prices are still rising in the main Chinese cities.
In 2011, the central government implemented measures to control real estate prices, but municipalities did not always enforce them as they financially depend on land sales.
May the new administration ease restrictive measures and increase the marketisation of real estate? But in this case, there is a risk of real estate bubble and social discontent.
Urban villages have proliferated in almost every Chinese city as consequence of the urban sprawl commanded by local governments, sometimes with the purpose of financing their budgets. They expose the imperfections of the double property system, where the government has a monopoly of the primary land market. The term “urban village” (chengzhongcun – 城中村）refers to the situation where the city ends up encircling the village. Most of the farmland has been expropriated and urbanized, and only the villagers’ original homesteads remain. Soaring real estate prices in the surrounding city reduce the possibility of an eventual expropriation and redevelopment of the area.
In the meantime, the original residents make a good profit from renting rooms, mostly to migrant workers who have restricted access to urban formal housing, due to the high prices, and the lack of stable jobs and tax returns. Housing conditions are precarious and villagers are not keen to invest much money, hoping for an eventual expropriation. Buildings like the one in these photos date from the 1950s. They are made of mud bricks and have dirt floors, water leakages are frequent, and some lack running water. The average rent is around 50€ for a 15 square meter room. Migrant workers adrift on the fringes of citizenship.
数据来源: 《北京市人民政府办公厅贯彻落实”国务院办公厅关于继续做好房地产市场调控工作的通知” 精神进一步做好本市房地产市场调控工作的通知》、《昆明市人民政府办公厅关于继续做好房地产市场调控工作的通知》、《上海市人民政府办公厅关于继续做好房地产市场调控工作的通知》、《重庆市人民政府办公厅关于继续做好房地产市场调控工作的通知》
In December 2012, the National Academy of Economic Strategy, at the Chinese Academy of Social Sciences (CASS) published the China Housing Development Report (2012-13), edited by Ni Pengfei, an UrbaChina member and Director of the Urban and Real Estate Economy Research Unit in the Institute of Finance and Trade Economics at the Chinese Academy of Social Sciences.
During the online press conference for China Housing Development Report (2012-13), Professor Ni summarized the report in five key points:
- In 2012, investment growth in Chinese real estate fell behind that of 2010 and 2011. The growth rate in housing investment between January and October 2012 was 15.7%, whereas the 2011 rate was approximately 30%. In 2012, there was a 7.7% increase in the macroeconomic situation in China. In other words, despite a 15% decline in housing investment, China’s economy, on the whole, rose by 7.7%. This suggests that the macroeconomic situation in China was temporarily released from its overdependence on the real estate market.
- Unlike the country’s per capita income, which steadily increased, property prices dropped significantly in 2012, which shows that, compared to the progressive overall economy, housing prices experienced a downward trend.
- Generally, the 2013 housing market is tipped to progress smoothly despite some small oscillations. However, macroeconomic management must be carried out satisfactorily, lest housing prices in some cities continue to rise while those in other cities fall, which would put the country’s economy on the edge of a collapse.
- The goal of the real estate sector in 2013 is to avert a sharp rise, followed by a severe plunge, in the housing market.
- The 2013 the real estate market must be strictly regulated.
At the end of the report, Professor Ni made some recommendations. Among them were: inflicting harsh punishment on those responsible for rumours and speculation in the housing industry, enforcing a policy for setting purchase quotas, ending the pre-sale system in housing and stemming the excessive increase in what were, previously, low housing prices.
Reference: Ni Pengfei 倪鹏飞 (2012), Zhongguo zhufang fazhan baogao中国住房发展报告 , Social Science Academic Press.
袁志刚教授近期出版书籍包括: «城乡统筹劳动力市场建设与国家竞争力研究», «中国居民消费前沿问题研究» 等书，其他有关袁志刚教授的著作请点击此连结
Last September, Leon Berkelmans and Hao Wang published an interesting working paper for Australia’s central bank on urban residential construction in China up to 20401 . Since China is the number one importer of Australian iron ore, possible fluctuations of the real estate market in China cause concern in Canberra.
According to this study, residential construction in China will remain high for the next thirty years, with a peak in the next few years, but the annual construction growth rate will slow down. The authors note that China’s construction boom results from the economic growth the country has enjoyed for twenty years. To conduct their research, the authors used sets of data issued by official Chinese agencies and looked at similar experiences in Japan, South Korea and Taiwan. They noticed that Chinese data on urbanisation underestimate the extent of urban residential construction.
- For Berkelmans and Wang, demand for residential construction will be sustained by the path that urban development is following in China. Based on United Nations projections and their own calculations, the authors argue that China will be even more urbanized, with more than 70% of total population living in cities, by 2040. Further reforms to the Hukou system may increase this trend.
- Another factor for future residential construction growth is the increasing demand for floor space. According to the authors, as incomes increase, Chinese urban dwellers will be more likely to demand larger residential units. According to their study, urban floor space per capita may almost double between 2010 and 2040.
- However, Berkelmans and Wang believe that demolitions of dilapidated buildings will gradually decline as a result of the higher quality of the new constructions and the higher costs of expropriation (due to improving property rights for residents).
According to the authors, the GDP for residential construction will gradually decline from 9% in 2010 to 6% in 2020 and 2% in 2040.
Berkelmans and Wang stress the importance of steel in China’s construction boom, and argue that demand for steel will not increase in the short term. With continuous urbanisation and larger residential units, China will still require high amounts of foreign steel. Moreover, steel intensity may even increase in newly built residences, because of higher quality construction standards, higher buildings, and higher demand for underground car parks.
However, Berkelmans and Wang also note that, although demand for steel will still grow in the next few decades, steel recycling (resulting from demolition) will be more developed and will partly offset iron ore imports. But in the authors’ opinion, new opportunities will appear, and as a result more steel will be demanded to develop infrastructures in the new urban areas.
The authors clearly note that their forecasts on China’s GDP and urban development rates are assumptions. . However, their calculations give us some hints about China’s urban trends up to 2040, as do the UN studies . But, external factors, such as political and social reforms, may affect these trends. Furthermore, the historical comparison with other countries presented by the authors may not be very accurate, since concern for sustainable development is now progressively increasing in China. For example, the relation between income and floor space may not be verified if there is a political will to “save” spaces and control urban sprawl. Nevertheless, the authors’ assumptions will undoubtedly prove right on China’s high demand for steel.
The growth of China’s demand for steel is surely good news for Australia, a major iron-ore producer. With this interesting study, we can understand that the process of urban development occurring in China must be considered a global phenomenon that may affect the economy of foreign countries (in our case, Australia) and reshape international relations.
- Leon Berkelmans, Hao Wang, Chinese urban residential construction to 2040, Reserve Bank of Australia, Economic group, Research Discussion paper 2012-04, September 2012. 31 p. Full text available on line
Last month, the New York Times published an article written by Bettina Wassener on China’s real estate sector. This article, entitled “ In Rush to Build, Property stumbles ”, points out the issues that China may face as a result of the “construction rush” and the fragility of the real estate sector; but unlike in her usual articles, this time the author has not adopted a dramatic note; she has put this real estate boom into perspective, and has formulated long term hypotheses.
According to Wassener, construction projects have been mushrooming all over China for the last five years, not only in great metropolises, but also in second tier cities. Construction and real estate have become major sectors of the Chinese economy. In order to avoid real estate speculation and bubble bursts, the central government launched several measures to cool down the market in 2010; consequently, real estate prices tended to slow down. Although, these control measures were necessary, they may have had side effects on the overall economy. Wassener has noticed that the property sector varies greatly from one city to another: whereas demand for housing and office space is still high in large cities such as Beijing and Shanghai, with no drop in prices, some of the smaller cities have begun to suffer from oversupply, causing real estate prices to decrease. All too often, construction projects in second tier cities fail to match the demand: priority has been given to eye-catching properties (described by Wassener as vainglorious projects) instead of affordable housing units. Because of housing restrictions, investment in construction projects has moved from top cities to provincial cities: but demand for luxurious housing units and CBDs is much lower there. Developers and local governments that have invested in such projects may shortly face financial weaknesses. Wassener stresses that for 2012 developers may suffer “ record-high debt maturing ”.
For the author, Beijing is trying to achieve equilibrium between developers who need to secure their investments, and the local population who can hardly afford to purchase property, due to high prices. Thus, real estate also influences social issues.
Wassener has, however, raised an interesting issue by pointing out that China is a country undergoing a strong urbanisation movement. China is not Spain: there may be an oversupply in the housing market, especially in second tiers cities, but China’s urbanisation process has not yet ended. More and more rural migrants will become urban dwellers in the next decades, and Beijing will “ undoubtedly implement measures to develop central China’s cities” . For the author, the housing market may also benefit from the cultural trend in China that favors real estate ownership – the desire for home ownership seems to be more widespread in China than in Europe.The author has also succeeded in demonstrating that China is not undergoing a uniform urbanisation process: differences still remain among Chinese cities and the construction market is not as mature in central China as it is in coastal China. This is also why it is important not to stereotype Chinese cities, a rule which we, at UrbaChina, must strictly follow.
We regret that the author has not examined the shady connections between real estate developers and local governments. Many large real estate projects have been ordered by local governments, who in turn may have to face financial issues in case of oversupply. This may ignite social protests among the locals. When local governments own housing developments, we may well wonder if conflicts of interests are not involved.
The phenomenon of oversupply in housing described in this article may also result from bad planning on the part of the local authorities. They may not have been able to foresee the urban trends in their cities, or they may have favoured construction as an important short term financial resource. In some cities, construction oversupply may partly result from the fiscal policy adopted by Chinese local governments.