Sunday, July 8, 2012

China Housing Price Manipulations

China must firmly maintain its property tightening measures to cool housing prices, Premier Wen Jiabao was quoted as saying on Saturday.

According to CNBC, Wen made his remarks after the central bank cut interest rates again this week, fuelling fears of renewed housing inflation amid signs the vast property sector is warming up.

"Currently, the property market adjustment is still at a crucial stage and we must unswervingly continue the work and make the fight against speculative property investment demand a long-term policy," the official Xinhua news agency quoted Wen as saying during a trip to the eastern province of Jiangsu.

Wen repeated his longstanding pledge to achieve "a reasonable pull-back" in housing prices, but did not elaborate.

"We must not allow housing prices to rebound that will waste all of our previous efforts," he was quoted as saying.

It is not completely clear what Wen means by controlling housing prices, but any restrictions on prices and house buying simply will result in distortions in housing markets, in an economy that already suffers from many central planning distortions. In other words, whatever Wen has in mind, it will make a bigger mess out of things.

It also probably means that the Chinese central bank, the People's Bank of China, will be very cautious before accelerating money printing. This will mean the current structure of the Chinese economy can't be supported and the developing downturn/crash in the economy and stock market will continue.

1 comment:

  1. Sure China has problems,
    but you seem to spend a good amount of energy distracting from our problems here. Maybe do a piece on how they will destroy us beyond our own wrong doings. I love your blog but sometimes you appear out of focus and maybe I am not grasping the big picture but I do not see how China is the root of our problems.