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Chinese Policy Current Event

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Submitted By sophielan88
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In a recent article from the Washington Post, the author discussed the risk of a real estate bubble in China. Given the financial crisis in the United States last year, there is a lot of fear that China is headed for a similar crisis. If the bubble burst, China’s economic growth is likely to slow or decline. Since the world is looking to China to lead economic growth, such down turn will have greater implication for the world economic recovery. The persistent real estate demand in China combined with the stimulus plans that were rolled out during the financial crisis have been boosting China’s economy, fueling the price growth in the Chinese housing market: this is one of the key reasons why China did not suffer significant loss during the financial crisis in 2009. Having learnt from the Asian Financial Crisis in 1997, the Chinese government has already begun to take actions to deal with the overheated housing market. At the end of last year, the Chinese government, central and local, imposed additional sales tax on homes sold within five years of purchase and raised the down payment requirements for families buying a second house or more with bank loans. The Chinese Central Bank had also raised the deposit reserve requirement ratio for banks for the second time in last month. Going forward, if the housing price growth persists, the Central Bank will need to take more drastic measures to control this growth, and reduce speculations.
The article points out that the biggest real estate problem in China currently is access to affordable housing. The recent increase in housing prices has outpaced wage growth dramatically. This is an area of concern for the current government. In his speech at the Meeting Marking the 30th Anniversary of Reform and Opening Up in 2008, Hu Jintao had emphasized the importance of social equality, where all Chinese people can live in a

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