|
The Chinese property market is undergoing a correction after two years of investment mania. During this time, the consumer price index, a barometer of inflation, soared 7.9 percent in the first half of this year and now hovers at a high level of over 7 percent. Ren Yuling, a renowned economist and an adviser to the State Council, argues that property is the root cause of this round of inflation. In an interview with Dongfang Daily in early July, he called for commercial and residential developers to immediately reduce high property prices.
Dongfang Daily: This round of inflation has lasted since the middle of last year, and consumer prices have been climbing monthly. What are the major reasons for the year-long inflation?
Ren Yuling: As many scholars have agreed, the inflation has been caused by both internal and external reasons. From the international perspective, the U.S. subprime mortgage crisis, the consumer price surge in countries like Britain, the United States and Japan, international crude oil price hikes, Viet Nam's economic crisis and the hot money influx into China have all contributed to China's inflation. Domestically, Chinese currency appreciation, local government investment sentiments, resource shortages, the impact of natural disasters and rising home prices have been major triggers.
Of all the reasons, the property industry is the culprit in this round of inflation. The property industry is large in scale and has a far-reaching impact on other industries. Property industry development pushes 65 industries from steel to painting materials. For instance, rising steel prices are closely related to real estate market development. Our country's iron and steel output soared four times to more than 400 million tons in the past decade, which lifted the demand for iron ore whose price naturally increased because of enormous demand.
There is no industry that can be as influential as the real estate industry. The surge in home prices unavoidably brings about a price surge in raw materials such as coal, electricity and oil.
When home prices become increasingly expensive, houses become hot investment products. In recent three years, people who invested in properties in Shanghai, Beijing or Guangzhou could get two or three times more profit. The high yields quickly lured domestic and international speculators. When I visited Australia and New Zealand in recent years,
|
