The historical political economy of Chinese housing regulation and price speculation.

Abstract

This work posits that the current state of the Chinese real estate market is a result of its historical development of housing distribution and regulation, through a critical literature review embedded in a political economy analysis on China’s Three Red Line policy. The paper follows key transitory periods within Chinese socio political reform within the context of its housing sector, identifying several policy making decisions and structural shifts which contributed to its current environment that fosters exuberant speculation and the treatment of housing as a private commodity rather than public necessity. The Financial Crisis is employed as a case study on housing market failures, exploring the institutional role of Fannie Mae and Freddie Mac as well as the existence of a credit-speculation binary in the distribution of subprime mortgages. The economics of the interrelationship between speculative behaviors within markets and the ability to leverage debt is then studied and applied to a Chinese context, utilizing several examples including the Evergrande crisis and the Three Red Line policy to identify the underlying failures of the Chinese housing market.