Bertrand Renaud: China's Growth Transition

Bertrand Renaud led a seminar discusison on “Urban dimensions of China's growth transition in an East Asian perspective.” See the Furman Center's write-up of the discussion here. 

Abstract of the presentation

Real estate is the quintessential non-traded sector of an economy. Providing services to local businesses and households, the sector’s performance in terms of prices, levels of output and volatility is an integral part of the structure and performance of the overall economy. As an economy develops, housing becomes the largest and most important of the different types of real estate assets of the economy; both in terms of land use consumption and in value. Together with financial assets, housing is one of the two largest asset classes in every high-income economy.

The massive urban housing privatizations of 1998-2003 have played a central role in China’s Great Housing Boom of 2003-2012. This urban boom has caused international fascination and generated a tidal wave of comments given its dramatic impact on global commodity markets and global growth. However, China’s boom remains best understood in the context of China’s individual development trajectory.  For the long-term development of Chinese society, this massive housing privatization has been as important as the 1978-1983 de-collectivization of agriculture at the start of the Chinese market reforms from plan to market.

Far from being unique, the extremely rapid growth and urbanization of China shares important similarities with the growth take-offs decades of other East Asian economies. Comparisons with the much earlier experiences of Japan, S-Korea, Taiwan and the city states of Singapore and Hong Kong throw considerable light on the recent urban experience of latecomer China. The presentation will show that to understand the dynamics of today’s East Asian housing systems one has to go back to the growth take-off decades of these societies when the institutional structure of mass housing markets developed. The reason is that, at least in East Asia, housing institutions have remained remarkably path-dependent until today. That section will show that the spectacular dynamics of urban land and housing prices observed at the peak of China’s growth take-off parallels the individual experiences of the five other East Asian economies. The structural reasons why East Asian housing cycles differ from western housing cycles will also be discussed.

Then the open-ended part of the seminar will discuss the housing and urban dimensions of China’s risky growth transition from its extremely rapid growth take-off to a much desired new stage of sustained development toward a high-income society. Internationally, this politically and economically risky transition is often called the “middle-income trap” because very few societies have made this transition successfully since WW2 -- except the five other East Asian economies. Then what is different in urban China today from these five past transitions? Where are the housing and urban risks in China?

The NYU Urban Seminar is co-hosted by the Marron Institute and the Furman Center.