As I’ve been saying the Chinese state continues to control the “commanding heights” of the PRC economy, notwithstanding the large number of private enterprises and foreign firms operating there. In today’s New York Times, David Barboza takes a look at the role of state-owned firms in the Beijing real estate market:
“These are the ones that have the money to buy the land,” says Prof. Deng Yongheng at the National University in Singapore. “Because in China, it’s the government that controls the money supply and the spending.”
By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government’s effort to keep China’s real estate boom from becoming a debt-driven speculative bubble — like the one that devastated Western financial markets when it burst two years ago.
Of course you can have a speculative bubble without it being driven by debt. One thing I wish that reporting on China’s real estate boom did a better job of was distinguishing between increases in the price of land and increases in the price of homes or offices. It’s not unreasonable to think that land in or near the main cities of a rapidly growing country would escalate in value enormously. But there’s no particular reason the price of an apartment should skyrocket in a sustainable way — you just build more apartments to meet the demand.