Ghost cities full of empty apartment blocks are evidence of the central government’s failure to slow booming house construction in the People’s Republic of China.

Conflicting incentives for local government officials, and a lack of alternative investments in China, have meant even the toughest of restrictions haven’t been able to stop developers building ever more houses.

The housing industry is a big part of China’s economy. Real estate accounts for one-sixth of its GDP, a quarter of total fixed asset investment, 14% of urban employment, and 20% of bank loans.

Research done for the Asian Development Bank Institute finds that the central government has maintained a firm hand on the sector for the 20 years or so since widespread property ownership was first permitted.

Xiaping Cao of Lingnan College, Sun Yat-sen University, Bihong Huang of the Asian Development Bank Institute, and Rose Neng Lai of the University of Macau argued such a policy loosens or tightens various control measures depending on whether the government wants more or less growth in the sector.

Read the transcript

https://bit.ly/2GXTvrb

Read the report

https://www.adb.org/publications/impact-exogenous-demand-shock-housing-market-evidence-prc

About the authors

Xiaping Cao is associate professor of finance at Lingnan College, Sun Yat-sen University.

Bihong Huang is a research fellow at the Asian Development Bank Institute.

Rose Neng Lai is a professor of finance at the University of Macau.

Know more about ADBI’s work on housing

https://www.adb.org/adbi/research/housing-policy

https://bit.ly/2seqsuK