The determinants of Chinese housing price inflation.

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Worldwide access.Access changed 5/21/14.
Date
2013-05-15Author
Lin, Fangshi, 1988-
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Housing prices in major Chinese cities have been soaring since 2003. Some
economists believe that this represents a dangerous speculative bubble while others argue
that Chinese housing price inflation is a normal consequence of supply and demand
adjustments in a rapidly-developing economy. This study attempts to explain the
movement of housing prices in 35 large and medium-sized Chinese cities between 2002
and 2010.
Here, we review many of the causal relationships that have been explored in
previous research, but we uncover some interesting evidence on the financial side of the
Chinese housing market that has received little attention in previous studies. We find, for
example, a reciprocal relationship between local housing prices and the revenues of local
governments. A strong housing market provides rising revenues for a local government,
and rising revenues, along with personal saving, seem to feed back into the financial base
of the local housing market.