The Importance of Central China’s Surging Real Estate Market
Real estate investment in China has gone up 6.8% during the first half of 2009 with central China
experiencing the fastest rate of growth the country has seen in recent years. Central China, a region
that is undergoing huge change and rebuilding of infrastructure with the aid of government monies, is
becoming increasingly consumer-oriented, largely due to government subsidies for rural Chinese to
purchase $2.2 billion in household appliances, agricultural equipment, and small cars. Central China is
the region west of the country’s coastal areas but east of the countries massive desert and mountainous
regions which are nearly uninhabitable. One of the hubs of central China and the focus of government
spending is the Sichuan province, home of the majority of the country’s migrant work force. Both
Chengdu and Chongqing are metropolitan cities of the province, and are being encouraged to become
more economically evolved in comparison with their coastal counterparts such as Beijing, Shanghai
Hong Kong and the major cities in Guangdong province. The evolving situation in central China is a
result of a government stimulus to rebuild the infrastructure and economy of interior China, the area of
China that bears a stark contrast to the more wealthy and urban coastal areas. Beijing has allocated a
quarter of China’s national budget to fund public works programs in the Sichuan province of central
China. The province faced a devastating earthquake in 2008 and forced workers to migrate back home
due to lost jobs as a result of the 2009 global recession.
Traditionally, China’s coastal provinces have fed the export markets, while the central provinces have
been supplying labor and foodstuffs to the coastal provinces, when expansion of the coastal markets
slowed, the migrant workforce had to return home, unemployed. Though China’s rapid economic
progress has helped to develop its cities and coastal areas, millions of Chinese live in rural conditions
and do not receive government aid, as the money generally goes into developing metropolitan cities.
Therefore, the wealth gap between rural and urban China, and the increasing socio-economic tensions
between the two areas has prompted the Chinese government to invest in rural China to ease perceived
tensions and quite the easily agitated migrant work force. As a result, the Sichuan province’s GDP went
up 10.8% since the first quarter of 2009, and rural domestic spending in China rose 16.7%, while urban
spending only rose 13.9%.
The Importance of Central China’s Surging Real Estate Market
Sichuan Region after the 2008 earthquake
Because of national recovery on the domestic front, real estate investment firms have made a reemergence in China, with the fastest growth taking place in central China. However, for most Chinese
residents, investing in residential real estate is being seen as a way to secure their money, not a
commodity to sell, rent, or make gains with in the short term. This sudden re-emergence of residential
real estate in China seems to be due to a growing feeling that real estate is a more stable form of
investment than Chinese banks or the stock market, not resurgence in economic conditions or consumer
confidence. On a more positive note for foreign investors, government spending in rural, interior China
is allowing for a massive work force to build up the country’s interior infrastructure, including residential
real estate projects. For investors who do not need to access their money, Chinese residential real
estate is looking to be a more concrete asset than banks or stock, as the value of the property is
projected to be at a low at this time and unlikely to dip much further. Recent government spending in
the residential real estate market may not signal the end of China’s financial crisis, rather a shift in the
perspective of the individual Chinese investor. iCORE will continue to monitor the rise in Chinese real
estate markets to provide the most recent and meaningful analysis.