"China's Real Estate Debt Pressures Household Livelihood Income... Need for Social Housing"

Small Capital Market Size Compared to GDP... Investment Needed
Middle Class Should Be Doubled and Car Consumption Encouraged

As China's real estate debt is putting pressure on household livelihood income, there are calls to prevent a sharp drop in housing prices through a soft landing policy. Social housing supplied by the state has been proposed as a solution to prevent a hard landing in the real estate market and to improve people's income.

According to Chinese economic media Caixin on the 7th, Huang Qifan, former mayor of Chongqing and standing vice chairman of the Academic Committee of the China National Innovation and Development Strategy Research Council, made these remarks at the '6th Hongqiao International Economic Forum' held in Shanghai the day before. Vice Chairman Huang stated, "Over the past decades, as China's real estate market developed, household debt has increased," adding, "High real estate debt, especially the heavy burden of principal and interest repayments, will significantly limit the annual livelihood income of Chinese households."

Hwang Chipan, Standing Vice Chairman of the Academic Committee of the China National Innovation and Development Strategy Research Association (former Mayor of Chongqing). (Photo by Baidu)

Caixin cited statistics from related think tanks, pointing out that real estate debt of urban residents in China accounts for 137.9% of household income, which is higher compared to the United States (90%) and Germany (130%). It also noted that mortgage interest accounts for 15% of urban household income, exceeding figures in the U.S. (7.8%) and Europe (8-9%).

As an alternative to this issue, Vice Chairman Huang argued that the current period of low housing prices should be utilized to promote land acquisition, transfer, and conversion of commercial real estate into residential use. He suggested that 30% of the housing created this way should be converted into social housing to be provided for low-income groups and nongmingong (migrant workers from rural areas who move to cities for employment).

Huang also emphasized the need to improve people's disposable income for China's sustainable development by increasing the number of enterprises and employed persons. He stressed, "The current middle and upper-income group of about 400 million people should be doubled to 700 to 800 million within the next 10 years," and "The low-income population should be reduced from the current 600 million to 300 million."

Furthermore, he explained that inflow of funds into the capital market is necessary to increase people's asset accumulation. He said, "A reasonable size of the capital market should be 120% of the country's Gross Domestic Product (GDP)," adding, "China's GDP in 2022 is 120 trillion yuan (approximately 2,152 trillion 800 billion Korean won), but the capital market size is only 80 trillion yuan, indicating room for development." He further explained, "Urban residents have 20 trillion yuan deposited in banks without any investment," and "If these savings enter the capital market, asset accumulation will be possible."

He also argued for increasing automobile consumption. He stated, "In the past five years, the growth rate of automobile production and sales in China has been declining," emphasizing, "Countries with a per capita GDP of over $10,000 generally have a car ownership rate of over 40%, but China is only at 21%."

Additionally, he stressed the need to reduce related expenditures through education system reform. He elaborated, "China's population will gradually decline over the next few decades," and "As a result, there is a possibility of oversupply of education and medical resources in the future." He also mentioned that to boost domestic consumption potential, tariffs on mid- to high-end and luxury goods should be lowered, and the average tariff rate should be reduced from 15% to the 5% range.

Meanwhile, Huang, who hails from Zhejiang Province, has been recognized for his achievements in stabilizing Chongqing during the political turmoil involving Bo Xilai, former Party Secretary of Chongqing. However, as a member of the Shanghai faction, the power base of former President Jiang Zemin, and also considered an associate of Bo Xilai, who once competed with President Xi Jinping for power, Huang was excluded from major political power under Xi's administration.

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