Is China Trapped Inside A Property Bubble?

There's lots of great English language articles at Caixin, Hu Shuli's new venture. A lot of good truisms about China that one doesn't hear much in most coverage of the country. In this article, for instance, Andy Xie repeats a point also made by Xu Xiaonian about why land prices are high in China. Trapped Inside A Property Bubble
The biggest risk to China's economy is the desire to maintain past economic growth rates by maximizing investments in property -- an unproductive asset. It supports short-term growth by sacrificing long-term growth as capital's average productivity declines over time.

Local government performance in China is measured according to GDP and fiscal revenue. Property development can achieve high numbers for both quickly. This is why property's share in China's capital allocation is rapidly rising as prices appreciate and volumes increase. This is a politically driven bubble -- and it's already massive. Unless the trend is reversed by reforming incentives for local governments, China's property bubble could mushroom in two years from what's now a dangerous level. The burst could happen in 2012, endangering social and political stability.
Andy Xie also comments on Chinese consumption:
China has been trying to promote consumption for a decade. However, consumption's share of GDP has declined annually. The reason is the policy environment has been squeezing China's nascent middle class through high property and auto prices along with high income tax rates. China's disproportionate dependency on exports and withering consumption components are results of national policies, not the peculiar characteristics of Chinese households.
Although this article and the two linked to in my two previous posts contain some contradictions, the underlying themes of government interference in the economy are consistent. Intervention can be successful for a time, but eventually even the most intelligent and nimble central planner runs into problems.

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