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State Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012 pp 87–112Cite as

Conundrum with Distorted Urbanisation

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Part of the book series: Palgrave Studies in Economic History ((PEHS))

Abstract

This chapter reveals the negative impacts of distorted urbanisation, that is the excessive currency quantitative easing, the high-risk housing bubble and the recession in farming and manufacturing. All of our observations indicate that China has chosen an imbalanced growth model after material production lost its growth momentum. The rise of the real estate market has compensated to a great extent the decline in farming and manufacturing but with a heavy price to pay: firstly, there is a sack-in effect on liquidity that is channelled to the housing market; secondly, there is the heavy indebtedness among local governments and private households and, thirdly, there is an elbow-out effect on household consumption budgets due to a zero-sum game between food and shelter.

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Notes

  1. 1.

    Li, Liangliang, ‘Woguo Chao-e Huobi Gongjde Duliang Ji Chengyin Yanjiu’ (Quantities and Causes of China’s Excessive Money Supply), Master’s Dissertation of Harbin University of Commerce, 2014.

  2. 2.

    The concept of ‘compar ative advantage ’ has widely been misused as the ‘advantage of specific economic endowment possessed by an economy’, be it cheap ore, cheap capital or cheap labour. By the definition of the classical economics, however, internationally cheap or plentiful endowments are always qualified as ‘absolute advantage’. ‘Comparative advantage’ is a relative term, meaning that an economy may benefit from external trade despite more expensive ore, capital and labour at home.

  3. 3.

    Zhu, Fenggen, ‘Renminbi Huilü Zhidu Yanjin SanJieduan Tezheng Fenxi’ (Features of Three Stages of the Exchange Rates of Renminbi), Securities and Futures of China, 12 (2012), pp. 47-49.

  4. 4.

    Rural residents are permitted to build their homes on their allocated land plots. So, very few rural residents need to buy properties in cities. Therefore, the 2015 urban population figure serves as a proxy for urban home buyers.

  5. 5.

    See ‘Ji Zhe Da Jizhe Wen Shilu’ (Ji Zhe’s Replies at the New Conference of 20 January 2017), xinhuanet.com, vide: http://www.xinhuanet.com/talking/20170120z/index.htm, available on 20 January 2017.

  6. 6.

    See Anon. ‘Shangbannian Fangdichan Dui Jingji Zengzhang Gongxianlü’ (Contribution of the Real Estates to Economic Growth), CCTV.com, vide: http://news.cctv.com/2017/08/15/ARTIkxfzWShZQSjb2nihqHT6170815.shtml, available on 15 August 2017.

  7. 7.

    Zhou Tianyong, ‘Zhongguo Zhuzhai Kongzhilü Zai 20-25%’ (Residential Housing Vacancy Reaching 20-25%), China Real Estate Data Academy, vide: http://news.hexun.com/2016-08-17/185564009.html, available on 17 August 2016.

  8. 8.

    See Anon., ‘S*ST Qianfeng Maifang Shixian Niukui’ (S*ST Qianfeng Is Turning Business from Debt to Profit through Selling Properties), xinhuanet.com, vide: http://www.xinhuanet.com/2018-01/12/c_1122247905.htm, available on 12 January 2018.

  9. 9.

    See ‘Mai Liangtao Beijing Xuequfang, NiukuiWeiying’ (Selling Two Properties in Beijing’s Catchment Area and Turing Business from Debt to Profit), Hexun News, vide: http://m.hexun.com/news/2016-09-21/186123140.html, available on 21 September 2016.

  10. 10.

    See the speech of Chen Yuan, ‘China’s Economy Is Increasingly Debt-laden’, in the New Year Forum of Guanghua School of Management, Beijing University, vide: http://www.sohu.com/a/211665558_636050, available on 20 December 2017. Chen Yuan is the former president of National Development Bank of China.

  11. 11.

    Li, Xunlei, ‘Gao Fangjia Qishi Jiushi Gao Shuishou’ (High Housing Prices Mean High Taxes), fangchan.com, vide: http://www.fangchan.com/news/7/2017-06-25/6284534270157722495.html, available on 25 June 2017.

  12. 12.

    Ibid.

  13. 13.

    Jiang, Yunzhang, ‘Jiating Zhaiwu Huixiniu Yinxian’ (A ‘Grey Rhino’ Danger for Household Debts), Caijing Magazine 29 (2017), vide: http://magazine.caijing.com.cn/20171211/4375635.shtml, available on 11 December 2017.

  14. 14.

    Jiang, Chao, Gu, Xiaoxiao, and Bo Yu, ‘Zhongguo Jumin Fangdai Ganggan Zhende Budile’ (Household Mortgage Leverage Is Not Low Any More), wallstreetcn.com, vide: https://wallstreetcn.com/articles/264014, available on 21 September 2016.

  15. 15.

    Wang, Xiao’e, ‘Cong Guoji Bijiao Kan Zhongguo Yixian Chengshi Fangjia Mishi’ (Confused Urban Housing Prices in China’s Tier One Cities from an International Compar ison), wallstreetcn.com, vide: https://wallstreetcn.com/articles/234033, available on 27 March 2016.

  16. 16.

    In 2015, the per capita urban income in the United States, Japan and South Korea were $41,600 (259,000 yuan), 1515,0000 yen (79,000 yuan), 142,200,000 won (also 79,000 yuan), respectively. Their counterpar ts of Beijing, Shanghai and Shenzhen were 48,500 yuan, 49,900 yuan and 44,600 yuan, respectively, in the same year.

  17. 17.

    Jiang, Chao, Liang, Zhonghua, and Jinliu Li, ‘Jumin Jia Ganggan Haisheng Duoshao Kongjian’ (Leeway for More Debt Leverage), wallstreetcn.com, vide: https://wallstreetcn.com/articles/3027490, available on 29 August 2017.

  18. 18.

    Our own calculation, however, reveals 31 per cent contribution to GDP in China, ten per cent lower than the official data.

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Authors and Affiliations

  1. Beijing Enlightenment Institute for Economic and Social Research, Beijing, China

    Yazhuo Zheng

  2. London School of Economics, London, UK

    Kent Deng

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  1. Yazhuo Zheng
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Zheng, Y., Deng, K. (2018). Conundrum with Distorted Urbanisation. In: State Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012. Palgrave Studies in Economic History. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-92168-6_5

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