Is the Chinese property market too crowded?

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While China is not the largest country by landmass it is the most heavily populated with 1.3 billion people which is approximately one fifth of the world’s overall population. Despite having a total land area of some 3,700,000 mi.² there are claims that the country is over populated in some areas and the Chinese property market varies dramatically from area to area. While this is a rather strange comment, it is one which is covered in the China Forum where there is a discussion asking the question, “Is China not too crowded yet?”.

The history of China

Commonly known as the People’s Republic of China this is a country which many years was cut off from the outside world with no western influences whatsoever. However, over time the ruling Communist party slowly began to open up the country and the economy to overseas investors and overseas visitors. Commonly referred to as one of the major superpowers in the world, China leads in so many different manufacturing and technology industries that it is vital to the worldwide economy as has been shown over recent times.

While for many years America has been the powerhouse of the worldwide economy, and continues to be so at the moment, there are many experts who forecast that China will take on this mantle at some stage and compete with the US for the title of the ultimate superpower.

The Chinese economy

China has the fastest-growing economy of the developed world, one of the fastest growing economies in the world and the fourth largest GDP around the globe. Since the introduction of a market-based economy back in 1978 the poverty rate has collapsed from a disastrous 53% in 1981 to just 8% in 2001 showing how a strong economy can literally blow away the problems of poverty. However, even though the economy has grown dramatically over the last 30 years there is no doubt that many specific areas of China have benefited more than others and poverty is still a problem in some of the more rural areas.

When you consider that even in the depths of the current worldwide recession the Chinese economy is still expected to grow by 7.5% in 2009, which is the weakest growth in the economy for nearly 20 years, this more than anything else reflects the underlying strength of China. However, there are concerns about the deepening slump in the Chinese property market which is starting to impact on unemployment and will in due course have a more detrimental affect on the overall economy.

Government action

The government has taken action to try and increase economic activity with the introduction of a number of tax reforms, shopping coupons for low-income families and a $585 billion infrastructure spending programme. It is hoped that the public spending programmes will catch those in the construction sector before the unemployment figure in this area starts to mushroom.

However, perhaps more than ever before it is becoming strikingly apparent that many areas of China are in serious economic trouble while the larger areas and better-known cities continue to prosper. The likes of Shanghai, Beijing, Hong Kong and Guangzhou are suffering from the property slump at the moment but in general they are among a small group of larger better-known cities which have enjoyed the vast majority of the economic upturn in China.

So is the Chinese property market really overcrowded?

The truth is that many of the larger cities in China do have problems with ever-increasing demand with less and less supply. This has led to the expansion of the major cities to accommodate the demand which has impacted on some of the more local towns and cities in China. The 8% poverty figure in China still represents nearly 100,000,000 people which is a fact that is often overlooked when reviewing statistics for this massive of country.

Like countries such as India there is a major variation in wealth across China which has some of the most wealthy business people in the world yet some of the most deprived and desolate local communities on the planet. Many people in some of the far reaching areas of the country have been relatively untouched by the massive strides in new technology and the ever-growing economic prowess of China.

The future of Chinese property

While government have introduced a number of strategies and investment programmes to trying to pick up any slack in the Chinese property market these programs are more often than not focused upon the country’s largest cities where overseas investment into business and property has assisted greatly with the growth in the economy. Massive amounts of taxpayer’s money have been ploughed into these rescue packages which are seeing the government acquire a number of empty properties in order to reduce the over supply in the property market.

While there is no doubt that some of the larger cities are reaching bursting point with regards to the local population there are many areas of China, beautiful and with a deeply entrenched culture, which are living somewhat in the dark ages. On the surface China appears to be a country on the up and while on the whole this is correct this is not a situation which is replicated right across the country.

When you consider the country is still deemed to be in trouble from the worldwide economic slowdown even though local economic growth rates are expected to be in the region of 7.5% for 2009 this fully reflects the hopes and expectations of a country which has only really opened up over the last 30 years. Many areas of China are never covered in the press and much of the country is still shrouded in mystery and intrigue often stuck at the lower end of the poverty scale against the prosperity which is so evident in the country’s largest cities.

Conclusion

China is a massive country which continues to grow in strength and economic prowess even in these challenging times we are seeing at the moment. There is no doubt that cities such as Shanghai and Beijing for example are attracting the vast majority of the overseas income and overseas investment, which has pushed the country towards the top superpower status. Overpopulation and overcrowding is a serious problem in some areas of the more prominent cities but many of the rural areas of the country remain relatively untouched by the country’s economic expansion.

However, when you consider the size of China and its 1.2 billion population as well as the fact it has only really opened up to western investment and western visitors in the last 30 years it will take time for the economic success of the last 30 years to spread throughout the country and the population. There is no doubt there will be new and prosperous Chinese property markets developing in the future and there may be potentially enormous returns to be made for those who can spot these up-and-coming areas before they become mainstream.

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