Every Chinese knows real estate in China is a fiasco. And then it's uncomfortably tied to the sustainability, and therefore almost the legitimacy, of China's economy growth. Watching the recent video interview with Hu Shuli, the editor of Caijin magazine, makes it easier to explain why that tie exists. (For more on Hu Shuli and the Caijin magazine, please refer to New Yorker's Jul 2009 article on the journalist)
According to Miss Hu, the housing privatization in 1989 created craves for home-owning (not just an American dream after all). With China's main economic model being manufacturing and production, the newly created demand was then naturally supported by the productivity of the building-related industries.
Which are the now notoriously polluting and energy-demanding steel, glass and aluminum factories. If the heavy industries had started out nicely obeying internal demands, something almost laudable by the believers of the market, excess production of building materials, spurred on by speculative property trading, is now wasting resources (tearing down and re-building of condos at breakneck speed), stuffing export and destroying the environment. What a pity that the Chinese has a tendency to take a good thing too far (but that's a different topic).
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