From UnHerd, August 12:
The CCP wants to turn peasants into scientists
With the imposition of his “three red lines” regulations in 2020, Xi Jinping called time on China’s epic real estate boom. For the previous two decades, real estate had played a huge part in China’s economy, matched only by exports to the West. But Xi brought an end to housing as an asset class.
For Xi China’s building binge had a single purpose: to urbanise the nation. And now China has enough. Since 2004, 12.7 billion metres of housing have been built in China. In 1999, 65% of China’s population was rural; by the 2020 census, that proportion had dropped to 39%. Hundreds of millions of people moved into new houses, sometimes in entirely new cities.
In pursuit of this state-mandated goal, vast private building companies emerged and made their fortunes, including Evergrande and Country Garden. China’s GDP soared, not only due to the building boom, but also because new urbanites started to spend money. Rural subsistence farmers generate virtually no GDP: they plant crops, consume them and occasionally buy fertiliser. By contrast, urbanites buy washing machines and TV sets, they take trains, work at companies and eat dinner in restaurants. As of 2023, Shanghai’s per capita GDP is 190,000 RMB (around 26,000 USD); the average for rural China, according to government statistics, is around 20,000 RMB (around 2,750 USD). By embracing modernity and turning peasants into urbanites, China created infinite reserves of GDP.
Now this process is almost complete.
China’s colossal property developers will suffer as a result. But in the eyes of China’s government, they are disposable. They’ve served their purpose. Before last month’s Third Plenum, some speculated that China would revive its housing market by inverting the three red lines and somehow giving investors cash from the magic money tree. No such luck. Although Chinese leaders do want to continue the process of urbanisation by, for example, reforming the Hukou system, they have no interest in pleasing property tycoons and investors. In an effort to prevent out-of-control urban growth along the lines of Tokyo or Seoul, the Chinese government retained the Hukou system — in which Chinese people are entitled to education or medical care only in their hometown — during the boom years. As urbanisation has slowed, the system is gradually being abolished, with the intention of encouraging a few more rural dwellers to move to the cities.
China officially plans to reach 75% urbanisation, so there are still more than 100 million people left to go. But Xi is keen to retain that rural population: they preserve the nation’s food security and traditions, and tend to China’s wild spaces. At the same time, the overriding goal of the CCP is to create the conditions for the optimum number of healthy, highly-educated, middle-class Chinese. When India’s population exceeded that of China last year, the Chinese Ministry of Foreign Affairs said that the quality of the individuals, not just their quantity, was relevant. This comment alluded to the sense that in the globalised economy, one highly-educated STEM engineer is worth 10, if not 100, peasants; while China’s total population isn’t growing, the population of middle-class urbanites is, and that is the population relevant to latest goal: turning China into a sci-tech superpower. And now, these new urbanites must start inventing semiconductors.
Some of the property developments that were unfinished or unsold when Xi blew the whistle will become affordable housing in line with the Singapore model. Housing values have stopped rising, leaving urban middle-class families whose assets are tied up in houses — which make up 59% of household wealth, compared to around 25% in the US — feeling hard done by. But despite the hit to China’s economy, Xi Jinping continues to insist that houses are for living in, not for speculation. If China’s middle class don’t like it, they can book a flight to Ecuador....
....MUCH MORE
....It's similar to the realization slowly sinking in for Ma & Pa Liu re: their Chinese residential nest-egg purchased in 2010: those days are done and gone and are never coming back.—outro from an August 19 post
