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Foreign Policy: How lonely single men created China's dangerous real estate bubble

December 24, 2017

 

BEIJING — When Xiaobo Zhang got married in the early 1990s, he and his bride, like millions of other couples across China, were given a small room to live in by his danwei, or work unit. At the time a lecturer at Nankai University in Tianjin, Zhang’s room was utilitarian and unremarkable, virtually indistinguishable from the ones inhabited by his colleagues. In a word: average.

 

In the China of the 1990s, which was characterized by a pubescent limbo between the economic reforms of the 1980s and the last decade’s explosive growth, Zhang recalls that mostly everyone was average. People were neatly packed into work units, generally laboring under the same conditions, eating in the same canteens, and sleeping in the same blocks of industrial-looking housing provided by their employers. There was little disparity in salaries, and few cars and luxury handbags to spend those salaries on.

 

During these times, Zhang explained, occupants paid minimal rent for their work-unit housing — which was issued based on seniority, family size, and rank — and could essentially stay in it forever. There was no legal market for buying and selling property in China, even in rural areas without employer-provided housing, where families built their own homes. Then, in 1998, the Chinese real estate market was born. It began with a decision by the Chinese State Council to monetize housing in an attempt to develop a commercial private market for real estate. In other words, instead of just providing apartments for lifetime occupancy, companies, nonprofit organizations, and government agencies began to give their employees the option to purchase the housing they lived in. Fourteen years and a serious housing construction boom later, China’s property market has allowed for one of the world’s largest accumulations of real estate wealth in history, valued at $17 trillion in mid-2010 by HSBC Global Research and worth some 3.27 times China’s GDP. (To better understand the scope of the construction boom that precipitated this massive accumulation of wealth, it’s worth noting that between 1998 and 2008 alone, 14.4 billion square meters of residential housing space were constructed in China, according to China Statistical Yearbook figures. That’s equivalent to 160 times all the residential space on the entire island of Manhattan.)

 

This is where the definition of "average" in China starts to go a little wonky.

 

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