 Something has bothered me about the People's Congress sessions in Beijing and Shanghai. In both cities, skyrocketing housing prices are, as reflected in the Chinese language press, one of the biggest issues that local legislators complain about.
But frankly, in neither city can the municipal administration come up with a clear statement about what to do to effectively balance supply and demand. It is not because they don't want to. It's because they can't. Most of the things that the officials have done have been good, like banning wasteful luxury projects and building more apartments for low-income families, as well as cracking down on corrupt city planners and their unlawful connections in the real estate business. Yet these are small efforts on a case-by-case and city-by-city basis. They cannot match the big picture of the nation's demographic change. Namely, this is the tremendous migration from the countryside to the cities, and the even greater yearning for migration and off-farm jobs among people who still remain in their home villages.  To balance the housing pressure in Beijing, Shanghai, and a few other eastern cities, China must start, in a national effort, to plan its industry, population, and urban development in its entire east and coastal regions not just in separate cities.
Since migration is going to happen anyway, the key is to build more potential destinations for it, and therefore spread out the pressure on housing and other supplies and services. The new destinations will be larger industrial belts and cities with more advanced services. They have to be not too far away from the existing business centers, and connected with them by modern infrastructure. For the last couple of years, the fundamental cause of the strains has not really gone away despite numerous attempts by government officials, at both central and municipal levels, to somehow bring the housing market under control. In their report to municipal legislators, Beijing's statistical officials said while the city's 2020 population plan is 18 million, in 2006, its actual figure was already 15.8 million, based on a stunning growth of 430,000 in a single year and with only a tiny percentage of new-born babies. Shanghai is in a similar situation, according to an investigation by the local committee of the Chinese People's Political Consultative Conference. While population growth remained slow in its old central city from 2000 to 2005, Pudong New Area saw an increase of more than half a million new residents. The suburbs saw an increase of some 600,000. These are still conservative figures, as they do not include workers who are not registered with city administrators, and those who come and go frequently for business. Economic development is the driving force of the population growth, and thus the demand for housing, in China's megacities. If the nation ever reaches the level of more developed economies, its east coast may have to hold a much larger population. One-tenth of the Japanese population is concentrated in Tokyo and its nearby cities. In Taiwan, as much as one-third of the island's population is in the so-called greater Taipei area. If Beijing and Shanghai are jointly going to take a share of one-tenth of the population in the Chinese mainland, then each will hold 70 million people. It is a nightmarish number. But it is determined by the logics of economics unless something is done early on to smooth out the situation. If China will continue to develop with just one or two or a small number of megacities, it will always be faced by an unchecked demand for land and housing supplies, and therefore uncontrollable housing price rises, concentrated in those areas. (China Daily 01/29/2007 page4)
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