China's National Bureau of Statistics on March 15 released February's real estate index of the country's 70 major cities.
As for new properties, out of the 70 cities, 56 witnessed price growth on a monthly basis in February, three more cities than in January. In terms of pre-owned real estates, 55 of the 70 cities had price increases, six more than in January.
Such increases were attained in spite of strict governmental supervision to cool home prices and stabilize the property market. In order to curb unbridled price hikes, the Central Government has recently tightened the management of commercial housing markets nationwide, especially in some first-tier cities such as Shanghai and Shenzhen. Among other actions, supervisory measures have been introduced, such as purchasing and selling restrictions, tougher rules on making value-added-tax reductions and exemptions, government-set reference prices and stricter monitoring of illegal flows of business loans into the housing market.
Generally speaking, when housing price increases, people who own a home or homes will get the illusion that they are wealthier and then show more willingness to consume. This means that the desire to consume will have a positive correlation with housing prices. For instance, when the real estate sector led China's economic recovery in 2009, consumption soon followed the trend and rebounded the same year. The same thing also happened in 2012 and 2015.
Heavily stricken by the pandemic, China used many financial tool kits to support the lousy economy in 2020. Its central bank made a relaxed monetary policy, twice bringing down the loan prime rate (LPR), in February and April last year respectively. Such measures quickly boosted the country's housing market. However, it seemed that this time when housing prices were increasing, quite the opposite, people were still unwilling to consume.
In another term, housing inflation and consumption deflation are now coexisting. I believe there are several reasons contributing to this abnormal phenomenon. Firstly, people really have less money to spend considering the higher cost of buying or renting a home. According to statistics, China's personal disposable income witnessed an increase of 5.75 percent last year. Such a figure cannot match the average annual increase rate of around 8 percent before the outbreak of the pandemic.
Meanwhile, catering, entertainment, cinema, tourism and other relevant industries are important factors for enhancing consumption. However, because of stringent measures such as restrictions on social gatherings and travels as well as tourist number capping in scenic spots, these sectors show a much slower pace of recovery and need more time to re-establish confidence.
Moreover, it is obvious that the enduring pandemic has seriously hurt the economy and pushed the global economic situation into a sluggish winter. Due to the side effects of the pandemic, the general public in China has changed their aggressive consumption habit and become more conservative, more cautious and even more aware of risks in the future. A recent online poll found that more than half of the Chinese families surveyed plan to increase their savings and reduce consumption even when the contagion is fully under control in China.
The growing number of consumer rights infringements, especially those relating to online consumption, has also to a great extent dampened consumption desires. With the rapid development of the Internet during the past years, there have been high-rocketing cases involving the stealing and divulging of private information, and the use of big data analysis to manipulate consumers' purchasing behavior. Much more than that, other pitfalls such as peer-to-peer (P2P) lending scams and other investment scams exploiting legal loopholes have victimized many people and further prompted them to shrink personal expenditures.
(The author is the editor-in-chief of Shenzhen Daily with a Ph.D. from the Journalism and Communication School of Wuhan University.)