Chinese Housing Price Control and Economic in One Lesson Essay Example

March.

The goal of most people was to limit the increase in residential property prices to approximately 10% (Wang,2011). Additionally, it was suggested that local governments should aim to keep housing prices between zero percent and the GDP growth rate. In his book Economics in One Lesson, Hazlitt examines the outcomes of government intervention in manipulating commodity prices above or below their natural market levels. In a free market, the price is determined by the balance between supply and demand.

Although the Chinese government has provided low-income housing, there is a considerable discrepancy in housing demand in China. Wealthy individuals possess multiple properties, while the less fortunate are unable to afford these affordable choices. This inequitable distribution of resources has a detrimental impact on social stability as housing is deemed an essential human requirement. On March 5, Chinese Premier Wen Jiabao reaffirmed the dedication to maintaining affordable housing by implementing measures to regulate the property market and prevent speculation.

The government intends to address irregularities in the real-estate market through various measures. This includes implementing differentiated credit and tax policies and making sure local officials are accountable for maintaining stable home prices. By March 31, Beijing had received goals from 608 out of China’s 657 cities regarding regulations on the increase in prices of new residential properties this year. The effectiveness of severe punishment as a solution for market irregularities is questionable. Economists may also raise doubts about price control being the optimal policy approach for any market.

I am a Chinese citizen who supports the government's regulation of the price control system. Nevertheless, it remains unclear how effective this policy

has been as real estate markets in several cities continue to have high prices. Recently, both Chongqing and Shanghai implemented a new property tax alongside the price control policy. In Shanghai, permanent residents purchasing second or additional homes will be taxed if the average floor area per family member exceeds 60 square meters when considering all owned properties.

The tax exemption of 60 square meters for each family member reduces production, as stated by Hazlitt. However, in China's real estate market, this tax burden does not directly impact suppliers but instead results in a decline in housing demand. As a result, people perceive housing as less valuable for wealth storage. Therefore, housing price control is only a temporary economic solution to maintain stable prices.

The prolonged involvement of the government in a developed real estate market is not advisable for the future. This is because the market can autonomously regulate prices and harmonize supply and demand. Additionally, it remains uncertain whether the local property sector can effectively fulfill government goals or if the new property tax will be enforced in other cities or annulled. There exists a noticeable disparity between governmental policy and practical execution due to prevailing societal circumstances and public perception in China.

The housing price in China has been a significant issue for an extended period. During 2008 and 2009, cities such as Guangzhou experienced a notable decline in housing prices. This decrease was primarily attributed to the global financial crisis rather than government macro-control measures. It indicates that the government's ability to regulate housing prices is limited within a free market. Nevertheless, the government still needs to exert

efforts in this domain.