Housing Market Bubble in Jiangsu, China Over the Past Decade: What Are Some Supply and Demand Side Causes?
Abstract
The rising housing price in China has been a concerning economic and social issue for years. Adopting the concept of Net Present Value, this essay first proves that an asset bubble exists in China. With a focus on Jiangsu province, this essay then provides a holistic picture of the demand and supply side causes of the housing bubble by analyzing the relevant data for the past decade. Furthermore, this essay investigates the role of price elasticity of demand and supply as an intensifier of the upsurge of housing price in China. In general, the housing bubble in China is a result of various factors from both supply and demand sides, including rising land prices, increasing urbanization, expansionary monetary policies, an underdevelopment financial market, the rigidity of the production of houses, and Chinese people’s unique complex of housing ownership. This essay ends by putting the conclusion in the context of nowadays COVID-19 pandemic. In doing so, it reveals the dilemma faced by today’s Chinese government: whether to let the bubble burst at the cost of present loss or arbitrarily sustain the bubble at the cost of future risk.
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DOI: http://dx.doi.org/10.18686/fm.v7i6.5644
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