1/8
Under the principle that "houses are for living in, not for speculation," according to a meeting held jointly by the PBoC the CBIRC, "housing should never be used as a short-term stimulus for economic growth".
news.cn/english/2021-0…
Under the principle that "houses are for living in, not for speculation," according to a meeting held jointly by the PBoC the CBIRC, "housing should never be used as a short-term stimulus for economic growth".
news.cn/english/2021-0…
2/8
This seems to me to be a very clear statement that while in the past property investment has contributed a great deal to economic activity, and thus to China's reported GDP, the regulators do not believe that it has contributed an equivalent amount...
This seems to me to be a very clear statement that while in the past property investment has contributed a great deal to economic activity, and thus to China's reported GDP, the regulators do not believe that it has contributed an equivalent amount...
3/8
to China's real economy – or else why distinguish between its short-term stimulative impact and its longer-term impact? This simply reinforces Xi Jinping's recent distinction between "fictional" growth and "genuine" growth.
to China's real economy – or else why distinguish between its short-term stimulative impact and its longer-term impact? This simply reinforces Xi Jinping's recent distinction between "fictional" growth and "genuine" growth.
4/8
But if we accept that part (a substantial part, in my opinion) of Chinese economic activity in the past several years contributed to China's GDP but not to real underlying growth in the economy, what does that tell us about future growth?
But if we accept that part (a substantial part, in my opinion) of Chinese economic activity in the past several years contributed to China's GDP but not to real underlying growth in the economy, what does that tell us about future growth?
5/8
Most analysts are now willing accept (very belatedly in many cases) that there has been a meaningful amount of "fictional" growth embedded in China's recent GDP growth numbers, but they implicitly assume that this creates no cost or burden for future growth.
Most analysts are now willing accept (very belatedly in many cases) that there has been a meaningful amount of "fictional" growth embedded in China's recent GDP growth numbers, but they implicitly assume that this creates no cost or burden for future growth.
6/8
I think this is clearly wrong, and reflects the fact that economists don't know how to model "fictional" growth – or its reversal. The fictitious wealth created through "fictional" growth must be amortized over time, and just as this added to GDP growth...
I think this is clearly wrong, and reflects the fact that economists don't know how to model "fictional" growth – or its reversal. The fictitious wealth created through "fictional" growth must be amortized over time, and just as this added to GDP growth...
7/8
as it was being created, it must subtract from GDP growth as it is amortized.
One potential problem with all this is the way the benefits and costs of fictitious wealth are allocated. Historically the benefits of fictitious wealth tend to accrue disproportionately...
as it was being created, it must subtract from GDP growth as it is amortized.
One potential problem with all this is the way the benefits and costs of fictitious wealth are allocated. Historically the benefits of fictitious wealth tend to accrue disproportionately...
8/8
to politically powerful groups, while the cost tends to be borne disproportionately by ordinary households. Beijing should try to ensure that the costs are allocated to the same groups that received the benefits.
to politically powerful groups, while the cost tends to be borne disproportionately by ordinary households. Beijing should try to ensure that the costs are allocated to the same groups that received the benefits.
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