What are the key threats to Chinas economic growth?
Prof Wang Jianmao: The #1 threat to China’s economic growth is real estate speculation. Boosting growth by tolerating real estate speculation is like the saying “quenching thirst by drinking poison.” In China, because the government tolerated speculation, the downturn in real estate prices after the start of the global financial crisis was very short (see chart 3). In fact, during 2009, in monetary terms, China’s nationwide real estate sales rose by 75.5%, and by 42.1% in square metres sold, which imply a nationwide average rise of 23.5% in real estate price. These growth figures are the highest since 1993. But in 1993, the market size was about 5% the current size. So you see the problem. The real estate bubble is blocking the rise of consumption. Chinese families which are overly indebted with mortgage loans won’t spend money elsewhere. And the bubble will slow urbanization. When housing prices in cities are so high, rural people cannot move to cities. The bubble is also triggering i
