Blog 7-Shanghai's Dilemma

Kristin Nicholson

October 12, 2012

Staggering Property in China

Skyscrapers and high rises have been home to China since the beginning of their urbanization projects in the 1990s. The Shanghai Tower, which will be a 2,073 feet glass building, is a proposed addition to China’s skyline in 2014. These building projects have been the foundation of China’s economy and contribute to its change in economy by creating jobs and multimillionaires. It is projected that at least 10 percent of China’s gross domestic product comes directly from the construction and real estate sectors. According to the article, construction in China has accounted for more than 40 percent of the growth in demand for steel and 10 percent for copper. Just as urbanization has been one of China’s main sources of economic growth, it has been a source of deterioration also. As a result, property prices have fallen and down payments and interest rates have risen. According to the article, the ratings agency Standard & Poor’s said in a recent report that Chinese real estate developers headed into 2012 facing record-high debt maturing within 12 months and a liquidity drain. As a result of China’s rapid urbanization, migrant workers from poorer, rural areas, as well as foreign investors are continuing to move to cities like Shenzhen, Beijing and Shanghai. This creates a high demand affordable housing and principal commercial space.

This is yet another story that characterizes the double sided story of urbanization. Though urbanization brings prosperity to a city’s economy, there are also negative impacts of these projects. In this case, the abundance of buildings has created high interest rates and rise in property prices. Even though there is a rise in property prices, workers are still attracted to the cities for jobs and residential spaces.

http://www.nytimes.com/2012/09/11/business/global/in-rush-to-build-property-stumbles.html?pagewanted=all&_r=1&