The Turning Point in Housing

Barry J. Naughton
Barry J. Naughton Former Brookings Expert, Sokwanlok Chair of Chinese International Affairs - School of Global Policy & Strategy, University of California, San Diego

June 28, 2010

Abstract: China reached an important turning point in housing policy on April 17, 2010. Policy shifted from stimulating growth to controlling speculative demand for housing, as well as increasing the supply of affordable housing. The central government has pushed the policies on reluctant local government officials, who are dependent on land-sales revenues and closely intertwined with real estate interests. Despite the tensions in implementation, central government commitment to the policy turn appears strong, and it is likely it will be sustained.


China reached an important economic turning point on April 17, 2010. This was the day the State Council issued the “New 10 Articles” designed to cool off the property market. This was one of the most widely anticipated turning points in memory: people have been waiting for it for months. One could almost say that ever since the scale and uncontrolled nature of China’s credit expansion became evident, in the first quarter of 2009, people have been wondering how and when it would be brought under control. Since mid-year 2009, the People’s Bank of China had been more or less openly calling for more aggressive action to slow credit growth, and since December 2009, had begun to drain liquidity from the system. In November 2009, the office of the Finance and Economics Leadership Small Group (LSG) had requested new data and an action plan from the Ministry of Housing and Construction, which traditionally tends to support construction interests. The LSG office then issued a report to Vice-Premier Li Keqiang—indicating his increasingly prominent role in coordinating economic policy—that stressed the importance of stabilizing housing prices, and for the first time in conjunction with housing policy raised the S-words: social stability. After that, statements by government leaders discussing the problem of high and rising housing prices became common.

Read the full article at »