[Correspondent Diary] The Surprising Source of China's Purchasing Power: Real Estate(?)

Real Estate in Major Cities Including Beijing, Such as Apartments, Has Risen Over 50% Compared to 5 Years Ago

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The biggest change on the streets of Beijing, China, is the cars. Before 2010, there were many old cars in Beijing (so old that it was impossible to tell the year they were produced). Not to mention the old trucks that emitted black smoke.

However, now it is difficult to find such cars. Most of the cars are recently released models. The brands are literally global. Cars bearing logos of world-famous brands run on the roads.

Notably, German premium brands stand out. Especially, small and medium-sized models priced around 300,000 yuan (about 50 million KRW) are easily seen. The American electric car brand Tesla is also frequently seen. Cars are a good example showing the lives of Chinese people whose income has increased.

Here is one question. China's per capita Gross Domestic Product (GDP) was 70,892 yuan last year, which converts to 12,760 USD. Although there are no official statistics for Beijing, the per capita GNP is estimated to be between 21,000 and 23,000 USD. For the entire country, this is about one-third of South Korea’s level, and even for Beijing alone, it is about two-thirds of South Korea’s level. Considering only per capita GNP, this level of car consumption is hard to understand.

The answer is real estate. One Chinese person said, "As Beijing real estate (apartments and other housing) prices have risen significantly, Chinese people's consumption has increased accordingly."

According to the "Housing Price Changes in 70 Major Cities in China" released by the National Bureau of Statistics of China on the 16th, the housing index (excluding new constructions) for Beijing was 150.2 as of June. Using 2015 prices as 100 (base index), it has risen by 50% in five years. Simply put, a house that cost 1 billion KRW has become 1.5 billion KRW.

Looking at cities with high housing index growth, Shenzhen is 176.0, Hebei 163.9, Hangzhou 149.7, Guangzhou 148.8, Nanjing 148.5, and Shanghai 143.0, showing that cities leading economic growth have seen significant increases in housing indices.

A Beijing real estate agent explained, "The rise in real estate prices means that monthly rent (China does not have a Jeonse system) has increased accordingly," adding, "With increased individual income plus rental income, Chinese people's purchasing power has risen."

There is also an interpretation that the rise in China's real estate prices is accelerating Chinese President Xi Jinping's 'Xiaokang (小康 - a moderately prosperous society where all citizens enjoy a comfortable and affluent life)' policy.

When the economy grows and its scale expands, real estate prices inevitably rise. Also, consumption increases only when income rises.

If the Chinese government considers real estate income such as rent as unearned income and imposes high taxes, Chinese people's purchasing power will significantly decline, and dissatisfaction with the government will increase.

This content was produced with the assistance of AI translation services.