China’s massive real estate bust has only just begun to unravel.
In light of that, it’s interesting to see the Chinese leadership take the exact opposite view to the US government’s regarding housing prices:
China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy.
The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing. At the same time, officials will seek “steady and relatively fast growth,” Xinhua News Agency said.
Premier Wen Jiabao’s officials may limit the scale of monetary and fiscal easing to support growth as officials grapple with elevated house prices and local-government debt burdens after record lending in 2009 and 2010. So far, the government has cut banks’ reserve requirements, while leaving interest-rates unchanged at a three-year high.
I don’t think I’ve heard a single US politician in any position of power even hint at the idea that maybe it’s not only desirable but necessary for home prices to come down in order for any meaningful recovery to begin.
The respect for concept prices as a steering and balancing indicator for entrepreneurs and capitalists in an economic system is one of the most basic pillars for understanding the economics of voluntary action, that is free market capitalism.
It’s a bit misleading for the Chinese leadership to say they are going to “bring down” property prices. Property prices are going to come down no matter what they do, the question is just how fast.
It’s possible the the Chinese have learned from the recent attempts of the US and European governments to support or stimulate housing prices and the not so recent ones next door in Japan, and figured if prices are going to come down anyway why not take credit for falling prices and even make it look like it’s them making this happen deliberately?