Property prices continue to rise – of course they do! December 14:
Unless something goes seriously wrong – a US-style sub-prime mortgage disaster – property prices globally do tend to rise, not fall, particularly in administrative capitals (Beijing), financial capitals (Shanghai) and prime industrialized cities with close or immediate access to external markets (Guangzhou, Shenzhen). These simple facts should come as no surprise.
Buying property is a logical decision. For anybody who has seen pensions or savings tied up in mutual funds evaporate with the crash of the global economy, four walls and a roof are assets that you can live in, borrow off, and, despite the 60-year leasehold limits (of which there is an ongoing discussion to review) on residential property, you can leave to your children.
Of course prices go up. It’s how far they go that is worrying officials in Beijing. How far should policy control low-end housing prices, and how far can we trust the market to control high-end housing?
Yegor Gaidar and the myth of gradual reform, December 21:
Yegor Gaidar, the architect of Russia’s “shock therapy,” died last week near Moscow. China’s economic planners have never had to contend with a crisis so complete as what Gaidar faced as Yeltsin’s acting prime minister, and they likely never will. Try to imagine a similar situation in China: its foreign reserves depleted, having lost 23% of its land area, unable to raise money to pay off its foreign debts, effectively no foreign support, a government wracked by infighting, no private enterprise to share the burden of supporting its citizens, and an openly defiant central bank.
Through planning and luck, at no point has China found itself so close to the edge that such drastic reform was immediately needed. China’s reforms have been incremental because the government has had the luxury of making them incremental.
After two decades of mismanagement and stagnation under Brezhnev, Andropov and Chernenko, Gorbachev had little choice and Gaidar even less. That may be Gaidar’s most useful lesson – not that gradual reform is the best way to solve problems, but that it is the best way to avoid them.