July 2011

You are currently browsing the monthly archive for July 2011.

By James Carter

Historical preservation in China’s ever-growing cities is a challenge. Transformations to Beijing and Shanghai are best documented (for example, as evocatively narrated by Michael Meyer in his Last Days of Old Beijing), but dozens of cities, up and down the coast especially, are witnessing historically rapid change, and a rapid change to their histories.

Up north, the unique architecture of Harbin is among those being threatened, and like those other cities, the losses will be serious and permanent.

When I first visited Harbin, in the early 1990s, the city’s architecture was shabby, but magnificent. Russian-designed onion domes and spires are Harbin’s signature, but they were just one element. Near my dormitory, the former Danish embassy—then a kindergarten—resembled a fairy-tale castle. The city’s mosque, built in the 1920s, seemed to combine Islamic and art nouveau influences. Unique to the city, in the Fujiadian district—Harbin’s “Chinatown”—was the “Chinese Baroque” style, found nowhere else. Developed when Harbin was truly cosmopolitan (because of the Trans-Siberian Railway, it was closer to Europe than any other Chinese city and boasted a sizable population of Russians), this style blended European and Chinese with a result that was neither Chinese nor European, yet both Chinese and European.

Harbin streetscape

A June China Daily article discussing ongoing changes to Harbin’s streetscape shows that this idea of Chinese Baroque has taken a new turn. The city government, eager to spur development in this economically depressed metropolis, is razing millions of square meters in the city center and replacing the old with new buildings intended to recapture the architectural sensibility of the structures being torn down. The new development style, also named “Chinese Baroque,” is meant to be modern and efficient, while maintaining the city’s architectural richness. But in the process the very buildings that made up Harbin’s older diversity are being lost.

During that first trip to Harbin, my letters and calls home were not filled with romance or exoticism. The city was dirty and crowded, with few conveniences—living there was fascinating, but difficult. My parents’ image of the city, though, changed when I gave my father a gift of a coffee-table book of Harbin architecture. It featured dozens of the city’s buildings, constructed from the 1890s to the 1950s, blending the work of designers from China, Russia, Japan, Britain, France, Denmark, Germany, the Netherlands, the United States, and others. My father doubted he would ever visit Harbin (and indeed, he’s yet to make the trip), but seeing this architectural cornucopia—dilapidated though it was—made him want to go. I don’t think he is alone in being fascinated from a distance by Harbin’s surprisingly jumbled cityscape, but I don’t think many will take a long journey to China’s northeastern corner knowing that what they will find there are not original structures but rather modern reproductions with European-style facades.

Chinese Baroque, the sequel, will certainly maintain a sense of Harbin’s unique identity. But it will do so in the soulless, too-perfect spirit of Shanghai’s Xiantiandi or Nanjing’s 1912, Beijing’s Qianmen dajie or any of the other dozens of projects that remodel China’s architectural past in user-friendly packages. Soon, China’s major cities may all be unique…in exactly the same way.

Photo via Asian Wave Magazine.

James Carter is Professor of History at Saint Joseph’s University, Chief Editor of Twentieth-Century China, and author of Creating a Chinese Harbin: Nationalism in an International City, 1916-1932 (Cornell University Press, 2002) and Heart of Buddha, Heart of China: The Life of Tanxu, a Twentieth-Century Monk (Oxford University Press, 2010).

In early 2010, when President Obama met with the Dalai Lama, this made a considerable splash both in the news media and in diplomatic circles, and there have been various repercussions from Beijing’s side when other foreign leaders have met with the Tibetan figure. Obama’s July 16 meeting with the Dalai Lama in Washington, DC led to a furious reaction within hours from Beijing, perhaps even stronger than in the past. So we decided to ask Robbie Barnett, the Director of Columbia University’s Modern Tibetan Studies Program, the author of works such as Lhasa: Streets with Memories, and a long-time friend of this blog, what to make of this diplomatic dog that barked loudly—but so far hasn’t bitten. Here are the thoughts he passed on:

The tone of Beijing’s statements on its US relations seems to have flipped back to the positive within only 72 hours, if one believes that Beijing’s initial fury at the meeting with the Dalai Lama was genuinely felt. The evidence for this comes from Secretary of State Hillary Clinton’s meeting with Yang Jiechi in Bali on July 22, which seems to have gone off very smoothly. China’s Foreign Ministry spokesman Liu Weimin said after the talks: “The Chinese side raised its own concerns that it is important to respect the sovereignty and territorial integrity of China, and to respect China’s major concerns in the issues of Tibet and some other sensitive issues.” He added, “I sense that the US side understands the sensitivity of these issues and they both agreed to further promote dialogue and mutual understanding.”

This is astonishingly mild given the statement three days earlier from the same Ministry. That declared that the US had “grossly interfered in China’s internal affairs, hurt the feelings of Chinese people and damaged Sino-US relations.” The US Ambassador in Beijing had been called in and told that that the US must “immediately adopt measures to wipe out the baneful impact, stop interfering in China’s internal affairs and cease to connive and support anti-China separatist forces that seek ‘Tibet independence.’”

But all that Secretary Clinton had said to Yang in Bali, according to the Chinese side, was that the United States “understands the sensitivity of the Tibet and Taiwan issues” and “adheres to one-China policy and respects China’s sovereignty and territorial integrity”—very mild, boilerplate language. She did not even have to use the new terminology preferred by the Chinese side since President Obama’s 2009 visit to China, according to which the US recognizes China’s “core issues,” let alone say that those include Tibet and Taiwan.

This means that Beijing appears to have decide not to retaliate in any practical way for President Obama’s meeting with the Dalai Lama. For the moment, it looks like there will be no cost to the US side for the Dalai Lama meeting.

That would be very interesting, given the very heavy rhetoric used by Beijing and its summoning of the US Ambassador. China has been increasingly aggressive about any foreign leaders meeting the Dalai Lama, especially from 2007 onwards, and has had huge success in intimidating western European leaders into avoiding any meetings with him—a report by two German analysts even claimed last year that a country’s China trade drops for some two years after its leaders meet with the Dalai Lama. In the cases of France, Britain, and Denmark, the threat of retaliation was successfully used to get them to make diplomatic statements that rewarded China for that pressure, including embarrassing concessions, some of which were of historic proportions.

What might be the right inference to draw from this? I can think of several possibilities, some more constructive than others:

1. China might have decided that it needs to maintain good relations with the US because of the South China Seas issues and because the US is soon to make a decision on the sale of F16s to Taiwan. So it may just have decided unilaterally to drop the issue. If so, that would expose China to the risk that it will be seen as having made empty threats: it could be seen as having had its bluff called. That is not trivial in diplomacy: it was China’s success in calling President Clinton’s bluff over his human rights demands before renewing China’s MFN status in 1994 that strongly turned US-China relations to China’s advantage at that time. So it could make European and other leaders wonder if Chinese threats about such ritual events as meetings with the Dalai Lama have not always been largely empty bluster, or will be from now on.

2. The US could be seen as having skillfully handled the Chinese complaints in some way behind the scenes, without any significant concession, that persuaded Beijing not to pursue the issue. Perhaps, for example, they just reminded China about the F16s? If so, this would be interesting, because it would suggest a new and more confident, effective approach in western diplomacy towards China, one in which the megaphone is not used and does not need to be.

3. China might have interpreted the US reaction as an important diplomatic achievement for Beijing because it got the US President to agree to declare explicitly his opposition to Tibetan independence. The White House statement on the meeting with the Dalai Lama described the President as having said that “Tibet is a part of the People’s Republic of China and the United States does not support independence for Tibet.”* Such language has not appeared in previous White House statements after presidential meetings with the Dalai Lama.

So was this seen by China as a major diplomatic gift by the US side? It’s possible. But if it was, it might be expensive for China: the exact wording of the President’s acknowledgment of Chinese sovereignty appears to be new, but it is not of huge importance to Americans. In addition, the Americans pushed it into a subsidiary clause, where it would hardly be noticed other than by experts, and delivered it immediately, prior to any public pressure from Beijing. So it will not damage Obama’s reputation, and thus any cost to the Americans is relatively low.

But more importantly, the White House statement was issued hours before Beijing’s angry reaction. So if this was the reason for the sudden warming of relations, then Beijing’s claims about the deep hurt caused to the Chinese people by the meeting with the Dalai Lama and its demands for immediate recompense from the US would have been shown to be largely theatrical—its demands had already been met. And actually that’s what happened with the previous Obama meeting with the Dalai Lama, though the public never knew: Beijing made furious complaints in public afterwards, but actually its diplomats were satisfied because Obama, unlike George W. Bush, had held that meeting in private. But this time, the diplomatic process has been more visible. This could make other diplomats recalibrate their usual modes of response to China’s diplomatic threats of anger in the future.

*Note provided by RB: The first clause in the White House statement about China’s sovereignty over Tibet (“Tibet is a part of the People’s Republic of China”) is fairly standard for US officials to say, and has been said before by the President. But the second clause—”the US does not support independence for Tibet”—has been said by State Department officials only occasionally before, and I don’t know that it has ever been said by a President. The French and Danish Governments used the same two phrases in the controversial statements on Tibet they issued unilaterally in 2009, directly in response to Chinese requests (or more probably demands), in attempts to restore good relations after their leaders had met with the Dalai Lama.

Part II: What happens when the party ends?

By Michael Gsovski

(Read Part I here)

There are serious problems in the Chinese housing market. While the average urban resident has to deal with constant rent hikes and the threat of eviction in the face of new construction, the rich buy extra apartments to shield their wealth against inflation. Not only is this an economic threat, but in China it is a particular threat to stability as well. Firstly, since the turbulent boom years of the China’s opening and reform period, owning housing has been seen as a useful hedge for ordinary people against an otherwise uncertain economic situation. Secondly, owning—rather than renting—an apartment or other housing has long been a cultural precondition for Chinese men if they are to marry. When people talk about apartments being “maibuliao” (“unaffordable”) for ordinary people, the words are spat like a curse.

The question almost asks itself: Is the Chinese government doing anything about this?

To go by public statements, it is. Beginning in 2010, numerous price control measures were issued against property speculation and the central bank raised reserve requirements and interest rates to rein in investment. In addition, local governments were required to construct millions of additional low-cost housing units to relieve pent-up demand for them, requirements that have only been expanded for future years.

However, economists like Tsinghua University’s Patrick Chovanec are doubtful that local officials are going to comply with the central government policies to slow the pace of development due to the financial incentives they face to continue encouraging high levels of construction.

“They have every incentive to just say, ‘well, our real estate market is very sound,’” Chovanec said. “Because the alternative would be to pull the plug on growth and that would be committing professional suicide.”

Kunming-based commercial real estate developer Zhang Hanqing (name changed) agreed with this belief that local politicians will not be willing to reduce the cost of real estate. As an example, Zhang brought up the fact that for him leasing 1 mu (1/6th of an acre) of land in Kunming costs anywhere from 1 million RMB to 5 million RMB in payments to the government.

When asked if it was possible that the government would reduce the rate of new construction, Zhang was unequivocal.

“Personally, I think it is impossible,” he said. “The local government’s income is land income. The more land they sell, the more money they get. It’s difficult to say how much they can reduce it even if they have to.”

Additionally, there is the common off-the-books patronage that real estate companies are required to give their government contacts for permission to build. According to Hanqing’s son, Zhang Yun (name changed), his father’s associates in residential real estate have had frequent experiences with government officials who demand massive discounts on investment-grade apartments before approving deals.

“If he is the [real-estate] authority, he visits the real estate company,” the younger Zhang said. “The real estate company then has to give him a set of apartments that have no profit or even a slight loss.”

Chovanec believes the price and purchase controls on consumers were ineffective, as they did not lessen the demand to invest in housing. In this regard, he pointed to two recent attempts at regulatory remedies as standout failures. The first, raising the minimum down payment percentages for purchasing apartments, will not affect speculators because, according to Chovanec, “The investors already have plenty of cash, they’re paying 100 percent anyways.” The second, a Beijing municipal regulation restricting families to owning one apartment each has also failed because, as Chovanec said, “People got around [it] by getting divorced.”

As for the monetary tightening, Chovanec argues that unless investors believed the periodic increases in the interest rate and reserve requirement were a message portending further, more drastic policies, they were not large enough to be a deterrent, due to the high rates of return real estate has thus far produced.

“From my experience, Chinese borrowers will take the money, because in this experience, they feel that they will definitely double their money,” Chovanec said. “And the reason I think that is that in the shadow lending market…you have people regularly paying up to 20 percent interest rates—credit card rates—because they think they’re going to earn higher returns. If you’re doubling your money, tripling your money, you don’t have to worry about 20 percent.”

To make matters worse, Northwestern University political science professor Victor Shih said his research indicates that low-cost housing is not being constructed at nearly the rate that the central government wants, due to the reluctance of local governments to use land for less than maximum profit.

Shih said that the quotas imposed from on high left a great deal of wiggle room for these reluctant governments.

“The quota states that city X doesn’t have to finish building, but has to have, say, 20,000 affordable housing units ‘under construction’,” he said. “Let’s say they’ve only managed to build 4,000 units, but in the last 3 weeks of the year, they could ‘start’ construction on the other 16,000. If they’ve broke ground on some empty piece of land, there’s no telling if they’re actually going to finish those buildings, and who’s going to make them finish?”

Property analyst Roselea Yao agreed that the affordable housing numbers are being greatly exaggerated to calm citizen concerns about rising prices. She doubted Vice Premier Li Keqiang’s claim in November 2010, that 5.8 million million units of affordable housing were under construction, and that half of those would be completed by the end of that year.

“I would give them a pretty heavy discount on those 5.8 million units,” she said. “Probably something like half. And for completions, I think even lower, like 20 to 30 percent.”

Shih said that government’s response had been tepid because he did not think the government was truly worried about the prospect of popular resentment over inflation and corruption in the housing market. He cited the government’s heavy investment in censorship and policing—which for 2011 exceeded official spending on the military—saying that as a result, officials did not believe themselves vulnerable to popular protests, only to the interest groups that Kunming lawyer He Haojun had cited as being influential in society: the wealthy and the developers.

“They believe in their coercive capacity,” Shih said. “The government isn’t elected, so why should they care? They have to care about the interests of a small number of elite, including real estate developers. So as long as the developers don’t face a declining real estate market, they’re able to sell the real estate and the local government is able to sell the land, it’s fine for now.”

If you build it, they will come?

In the short run, the major effect of the rise in housing prices will be a loss in the purchasing power of the average Chinese citizen. Inflation is already a major concern—thanks to the stimulus’s money expansion, year-on-year inflation reached 5.5 percent in May 2011, its highest level in 34 months—and rents and urban housing prices are underrepresented in the CPI’s price basket.

According to Shih, this could undercut policies being enacted by the central leadership to encourage Chinese consumers to spend more to offset the ongoing downturn in export growth following the global financial crisis in 2008.

“If real estate prices keep rising, then you’re using all of your money, all of your parents’ money to buy an apartment for you and your spouse,” Shih said. “You don’t have any money to buy anything else. How can you expect people to spend more in the future when every major policy in China actually leans against that?”

But Shih said he believes that the bubble in real estate threatens to have more wide-ranging effects in the long term. For if land values are currently overpriced and therefore fall in the future, the value of all loans backed with land as collateral would be called into question, and many, extended hastily in the wake of the financial crisis to prop up the economy, would not be repaid. After a year’s research, Shih concluded that excessive lending had led to 11 trillion RMB in debts assumed not only by local governments, but also by the local investment companies established by them.

“If the land value plummets, many local governments will not be able to repay these loans, and the banking system is in big trouble,” he said.

The effects of a failure to repay this debt could include a loss in foreign confidence in the Chinese financial system and a need for the government to spend billions to re-capitalize the banks, according to Shih.

“It looks bad for a lot of bad local government loans to suddenly appear on these banks’ balance sheets,” Shih said. “Foreign investors may sell off their holding of Chinese bank shares. This would force the government to plow even more money into Chinese banks, which basically would be a re-nationalization of the Chinese banks.”

Despite a similarly rapid increase in housing prices, Chovanec cautioned against thinking that the effect of decline in Chinese housing prices would be the same as it was in the U.S. in 2008. Instead, he used Japan in the 1990s as an example of what could happen: large amounts of unacknowledged debts slowly crippling future lending and growth.

“I’m not sure that the bottom falls out,” he said. “It’s not like Japan suddenly imploded. There was lot of growth years on, and banks that looked healthy were in fact sitting on top of a mountain of debt. Given the state run system in China, I doubt like this ends up being some kind of market meltdown.”

For her part, Yao did not think that non-performing loans will run as high as Shih does and believed that the risk of massive numbers of defaults is low. In her view, the government debt load constitutes a more manageable 3 to 4 trillion RMB, which is a lower percent of GDP than that of many Western countries. However, she cautioned that any future recapitalization of the banking system would have to be Beijing’s last, due to the inflationary monetary expansion that it would require.

“You can play this game only one more time, when the next crisis happens,” Yao said. “Because you’re pumping a lot of liquidity into the system, it is very difficult to do that again.”

Hanging by a thread.

For now, however, the status quo reigns. On January 7th in the City View Hotel’s ballroom, the commercial real estate company Rayfull hosted the first 2011 meeting of the Kunming Real Estate Expo. The first presenter was Zhao Xiao, professor of Economics at the Management Institute of Beijing Technical University. The title of his presentation was “Urbanization, the Short Board in the Barrel of the Chinese Economy.”

He said that given the low urban density of China as compared to Singapore, Japan, or even America, the immediate future for real estate was bound to be a “golden age.” True, prices in the market had gotten very high, and stabilizing the situation would require the Chinese government to stop printing money and make a genuine effort to build low-cost housing, but recent actions had clearly shown that the government was taking steps along those lines. The Chinese economy did not have any underlying structural problems. In 2011, growth would continue at the breakneck pace of 9.5 percent, with inflation following at a high, but manageable, 4.5 percent.

So far, his predictions have not been borne out. Over the past six months, official year-on-year inflation in China has never been lower than 4.9 percent. And in April 2011, the World Bank published a report warning that the Chinese property market was a “particular source of risk” to future economic growth.

The expo then continued with a presentation on sustainable development practices (which elicited considerably less attention from the attendees), followed by a catered lunch during which attendees milled about exchanging business cards with each other, perhaps to justify the 1000 RMB ticket price each had paid. Then they were treated to a fashion show. Rayfull had recently decided to expand into importing designer clothes.

Outside the Grand View’s ballroom, one of Rayfull’s strategic managers, Li Yang, was in step with the upbeat mood of the conference.

Asked whether Chinese real estate was a bubble market, Yang said he wasn’t worried about stories of rents increasing by 40 percent within the space of one year and the ubiquitous lament that ordinary people cannot afford to buy an apartment any more.

But just in case the problem was cause for concern, Yang believed the government would build enough public housing to provide for the less well-off. Just like France did.

“In France, many people don’t have money. Because they don’t have enough money [the government] built public housing,” he said. “In the future in China, some people will buy apartments, some will rent apartments. And the apartments people rent will be built by the government.”

And if housing prices were to fall, the Chinese economy was hardly dependent on real estate, which Yang called a “support industry.”

As Yang gave his confident answers, ticket numbers were being called from the ballroom for a prize drawing. After nearly six hours at the Grand View, the party was still going full swing.

But, according to academics like Shih, the party will have to end sometime.

“There’s no such thing as a real estate boom that goes up forever, anytime in the world,” Shih said. “And this will not be an exception.”

What lies at the end?

Michael Gsovski is a freelance writer who recently spent a year in Kunming China, but is now based in New York City. He graduated in 2010 with a B.A. in Economics from Northwestern University.

Part I: How the real estate market got stir-fried

By Michael Gsovski

Southeast of Kunming, a new city has risen from the earth, so new that it is literally called the “Chenggong New Area.” Giant complexes of towering, modern apartment buildings line the wide, recently built streets, broken every few kilometers by parks as large and as well-designed as any in Kunming proper. Every block of apartment buildings has a police sub-station, and some have functioning schools. Along the recently constructed highways linking the new city to the old, it seems as if farmland has been transformed into a high-rise commuter suburb like those on the outskirts of Hong Kong and Tokyo in less than a decade.

But something is off. Traffic passes through at a languid one to two cars a minute, about one tenth the rate of less densely built urban districts in Kunming. Unlike residential neighborhoods in most Chinese cities, no clothing stores or noodle shops are open for business. Instead, the vast majority of operating storefronts are either real estate offices or furniture stores, and their keepers only report an average of one or two paying customers a week. Most strikingly, the expected throngs of pensioners practicing tai chi and dance in the parks are nowhere to be seen.

A closer inspection explains this eerie quiet. In almost every building, anywhere from ten to sixty percent of the windows lack curtains or any other visible signs of habitation. Chenggong is a fully built city that lies half-empty. It is a modern ghost town. Yet, there are practically no “for sale” signs. The town is both fully built and fully sold.

Similar reports are coming in from all over China. In the Kangbashi neighborhood in the desert city of Ordos, housing that observers estimate can hold between 300,000 and 1 million people has been built and left virtually unoccupied. In the seaside resort city of Sanya, property prices rose 50 percent from 2008 to 2009, yet nobody knows how much of the new construction is being used. And these are only the most visible examples of a more systemic problem. While statistics in China are notoriously unreliable, Shanghai-based economist Andy Xie publicly estimated last year that China had a vacancy rate of 25 to 30 percent, roughly 10 times the amount he would consider normal. Beijing-based Dragonomics property analyst Roselea Yao put the national vacancy rate at around 20 percent, the majority in high quality, recently constructed buildings.

“The problem right now is a structural problem,” Yao said. “Specifically, you have a shortage at the low end, but you have an oversupply at the high end.”

All this begs the question: in a rapidly growing nation where Yao believes 140 million urban housing units are serving 200 million urban households, how can so many high-quality apartments be built and sold, but then left unoccupied?

Welcome to Chenggong. Ample parking.

He Haojun is a lawyer for the Kunming branch of the Dacheng law firm, representing corporations, developer, and investors. Mr. He can list every problem in the Chinese real estate market today. The government owns all the land, and leases it out at its discretion to earn revenue. Buyers pay more than the market value, while the people living on the land receive less, with the surplus going to local governments. If there is a problem with the government, the courts will be of no help because the judges owe their jobs to the same local officials who depend on that money. Real estate companies therefore are composed mainly of individuals well versed in negotiating with the government but with little skill and even less interest in building housing that fulfills the needs of the average person.

Mr. He has himself invested in an apartment in Chenggong, not in spite of this government interference, but because of it.

“The government wants to increase their revenue, so they have to make sure the price of land increases constantly,” He said. “Under these conditions everyone must choose to invest in real estate.”

This is the “stir-fried apartment,” a phrase that describes apartments bought by wealthy individuals as investments, yet left empty because nobody they know is willing to pay the high rents. Many buyers understand that the market for apartments does not conform to consumer demand, but invest anyway, for two reasons. First, they need a place to store savings outside either the sclerotic banking system, which delivers returns far below the rate of inflation, or the Chinese stock market, which is notoriously volatile.

Second, they are confident that local governments will continue to drive land prices upwards as a way to raise land lease revenues.

Since only the government can own land, all individuals or corporations seeking to build on it have to pay fees to the authorities. In the absence of a real estate tax, these fees constitute the sole way for local governments to make money off real estate development. According to a report by Caixin magazine, they account for an average of 46 percent of all local government revenues.

Patrick Chovanec, assistant professor of economics at Tsinghua University, says that these incentives have been present since the beginning of “marketization” reforms in the housing market over a decade ago.

That real estate prices have since increased by “5 to 10 percent a year,” in Yao’s estimation, and never significantly decreased in this period only intensified the desire to invest. However, now Chovanec believes it has become a “classic bubble,” with prices decoupled from actual consumer demand.

“Unlike the stock market, which they know can go down, people see real estate as a secure store of value, that can only go up,” Chovanec said. “They’ve only seen the upside, they haven’t seen the downside.”

According to Chovanec, investment in real estate exploded after the global financial crisis in 2008, when the Chinese central government dictated that banks increase lending to stimulate the economy. As a result, the Chinese money supply increased by more than 50 percent, with the new money channeled largely into the hands of people who were already wealthy enough to invest.

“They have all this extra cash, and real estate is where they’re stashing it,” Chovanec said. “Now you’ve given them even more cash, and they’re going to put it in the same place, so the prices went up accordingly.”

In Mr. He’s estimation, the fact that housing has become unaffordable for ordinary people will not result in prices falling to meet actual demand, since the government’s policy will drive housing prices and ordinary people simply do not matter in the government’s considerations.

“In theory, [prices should decrease], but, in fact, that will not happen,” Mr. He said. “The only ones who hope housing prices will go down are the poor people.”

“Do you think the poor people are strong enough to fight against the landowners, the government and real estate companies?” He asked, rhetorically.

Unavailable vacancies.

Sun Po knows the problems of the “poor people,” that Mr. He is talking about all too well. As vice director of the Yunnan Women Migrant Educational Research Professional Association, based in the low-income Dashuying neighborhood in East Kunming, he has years of experience working with them. An indication of his leanings comes when he is asked about the importance of “nail-house” incidents, when property owners stay on their land to protest what they believe to be insufficient government compensation for the value of their buildings. While these protests are consistently well-covered in both domestic and foreign media, in Sun’s view at least, the people getting their houses torn down are the lucky ones.

“The tearing down of the houses will benefit the owners a lot,” Sun said. “It makes them rich. If they think the compensation is high enough, they will move.”

Instead, according to Sun, the people that bear the brunt of these demolitions are those who would otherwise rent out the old, cheap buildings being demolished, the people living in places like Dashuying.

“There are many old neighborhoods in the city that the mayor thinks block development,” Sun said. “So these houses are being torn down. People have nowhere to live, they come to the places where the houses haven’t been torn down, therefore the prices increase.”

Sun has felt the effects first-hand. The rent for the office where he works jumped from 450 RMB in 2007 to 850 RMB in 2010, a rise that far outstrips China’s official inflation rate of approximately 8.1 percent during the same period as taken from OECD statistics.

The macroeconomics agree with Sun Po’s experience. Roselea Yao estimates that urban rents have risen nationwide approximately “twenty to thirty percent” over the past three years. And Chovanec believes that the rent situation is primarily hurting new arrivals to the market, be they migrant workers, senior citizens, or young professionals.

“If you don’t have a place, there isn’t a product for you,” Chovanec said. “You have a choice of paying for something that actually doesn’t suit you or is far away enough that it’s actually affordable.”

A case study of this phenomenon would be Yu Huixiang and her family. As migrant workers from Songming county in Yunnan, they have always had to rent. Her family—consisting of herself, her husband, her son and her husband’s mother—rents two rooms that sit at street level in the corner of a Dashuying alley.

Their monthly rent increased 40 percent last year, from 250 RMB to 350 RMB, out of a salary of 2000 RMB made largely from Yu Huixiang’s work embroidering shoe soles.

Her response has been simple. She can’t earn more and she can’t find cheaper housing, so she now spends less on everything but her son’s education.

“The only way is to buy cheap things,” Yu said. “If things are not necessary, I will not buy them. Now that many neighborhoods have been torn down, houses are in short supply.”

When asked why houses were in short supply, Yu answered—without any trace of irony—that the government was building new housing.

“But we don’t have enough money. We can’t afford it,” she said. “Almost all of the new housing is empty, because most people can’t afford it.”

In Yao’s view, unless the government intervenes, sixty million migrant workers like Yu will be forced to continue paying higher and higher rents for substandard housing.

“Their housing needs will not be solved by the profit driven developers,” Yao said. “The government was basically blind to this problem and pushed it away for a decade, but right now they have to solve that problem. They have to do something.”

Whether they will remains to be seen.

Yu and her husband, waiting.

Read Part II of this post here.

Michael Gsovski is a freelance writer who recently spent a year in Kunming China, but is now based in New York City. He graduated in 2010 with a B.A. in Economics from Northwestern University.

By David Moser

I remember watching the legendary six-part CCTV miniseries River Elegy in my dorm room at Peking University in June of 1988—the last June in the Chinese historical calendar that would not have its 4th day permanently stained red. At the time I could not understand much of the stentorian voice-over (I was only a couple of years into my lifelong struggle with Chinese), but during the week the show was broadcast it became clear that the documentary had hit academic circles like an atomic bomb. The series’ content—a sweeping, brutally painful critique of the deep structure of Chinese culture—was the topic of conversation among many of the Peking University grad students I was hanging out with. They had seen nothing like it. “At last,” they would say to me, “a TV show that tells the truth (shuo shihua).” It was common to see handwritten postings discussing the documentary on the outdoor bulletin boards at Peking University’s sanjiaodi, “triangle area,” and informal discussion sessions on the topics of the program were organized at Tsinghua other universities throughout China.

Seen by more than 200 million viewers, the miniseries also galvanized the general population. The People’s Daily actually published transcripts of River Elegy, and references to the themes of the documentary began popping up everywhere in the local newsstands. The show was screened by diverse political figures such as Yang Shangkun and Zhao Ziyang (who clearly approved of the heroic image the film had accorded him), and received both unexpected praise by reformers and predictable vilification by conservatives. The film was so popular with audiences that it was re-aired in August of the same year, though not before the State Administration of Radio, Film and Television (SARFT) edited out certain of the more political sensitive topics to appease warnings from certain Party officials, who were already spooked by the student demonstrations that had recently erupted in Shanghai and elsewhere. Despite the opposition and controversy, the series had actually initiated a relatively open public discussion on China’s future.

More than two decades have gone by, and the once electrifying documentary now seems mostly a historical curiosity, often cited but rarely screened in the Chinese studies courses and history classes of the West. I recently downloaded and watched River Elegy again for the first time, and was surprised at how relevant it still is, even though China’s economy has morphed from the wobbly experiment it was during that summer of 1988 to an emerging 21st century powerhouse. But most of all I was struck by an obvious and disheartening realization: Despite the fact that the documentary was aired—twice!—in the turbulent 1980s, it could not be aired on CCTV in 2011. In spite of the unprecedented new information transparency and the buzz of the Internet and social media intruding at the peripheries of China’s media environment, the hallowed realm of the mainstream State television could not now tolerate anything like the blunt critique of River Elegy.

Read the rest of this entry »

« Older entries