With China continuing to project a 7.5% annual growth target, questions continue to arise regarding the sustainability of the CCP’s model of political legitimacy. Although the announcement additionally called for a targeted inflation rate of 3.5%, the economic slowdown is likely to have wide-reaching economic consequences beyond the nation’s borders. Of particular concern is the growing property bubble, a consequence of China’s modernization policy over the past decades, which has seen housing prices climb by 10% since last year in major metropolitan areas. Although the property bubble has shown little sign of decelerating, the government maintains significant influence over the domestic economy and may draw upon its residual authority as a command economy to dampen the bubble, which has been identified as a major source of potential socioeconomic issues.
1. We’ve been hearing of a property bubble for 15 years, at least in Shanghai. How can you gauge appropriate prices under a combination of (i) rapid urbanization and (ii) rapid income growth? Real estate prices ought reasonably rise faster than average incomes.
2. We’ll look at growth models in Week XII — how long / fast can China grow? More on that in our last week of class!