REAL ESTATE

The possible collapse of Evergrande, China’s second largest property developer, has reverberated through global financial markets. With over $300 billion in outstanding debt, 3.8 million jobs on the line, and investments across consumer industries, the scale of the impact could be great.

The company’s fall bodes poorly for China’s over-leveraged and over-expanded real estate market. In a 2012 paper, YA PING WANG, LEI SHAO, ALAN MAURIE, and JIANHUA CHENG present a detailed history of the sector.

From the text:

“In 1981, over 82% of urban housing was in public ownership but by 2002, 80% of public housing had been sold, mainly to their occupiers. Comprehensive reform policies that commercialised urban housing were implemented in the early 1990s. In this reformed system, most urban housing would be provided through the market but some 15% of low-income families, with insufficient financial power to become homeowners, would require socially rented housing. Government supported affordable housing was to be the main source of urban housing and would cater for low to middle-income urban households (~70% of the population), including most public sector employees. On top of the housing market was commercial housing provision for the rich (~15% of the population).

Nominally, in two decades China had changed from a nation renting from state owned enterprises to a nation of homeowners. However, a large proportion of homeowners had not been fully exposed to the market; they purchased as sitting tenants, at prices that did not fully reflect market values. In 1997, China’s central bank encouraged all government owned banks to undertake mortgage business. The bank reduced basic interest rates seven times between 1996 and 1999, and introduced a 20% income tax on interest earned from savings. Mortgage interest rates were gradually reduced from 10.5 per cent in 1997 to 5.7 per cent in 2002. These policies were accompanied by a continuous and steady increase in housing supply. Between 2000 and 2002, over 2 million new homes were built each year in cities and towns. This urban housing development helped China successfully avoid serious impacts from the Asian financial crisis. The real estate industry emerged as a key economic sector and in some cities contributed more than half of total local GDP.”

Link to the piece.

• “Land has moved to the center of local politics in post-Mao China. It now shapes the restructuring of Chinese state power and radically impacts state–society relations.” A 2010 book by You-tien Hsing examines real estate investment across 24 Chinese cities. Link.
• In another paper, Ya Ping Wang, Jing Yao, and Xiaoxiang Zhang use satellite images from 1995 to 2015 to examine patterns of urbanization in Tianjin, Hangzhou and Chengdu. Link.
• “As the financial community seeks to maximize returns, minimize risk and recoup its investments easily, major metropolitan cities stand as primary targets for capital investment in real estate.” A recent book chapter by Natacha Aveline-Dubach compares trajectories of real estate financialization in Japan, Hong Kong, and Mainland China. Link.

NEW RESEARCHERS

Labor Conflicts in the US-Mexico Borderlands

Associate Professor at the Graduate School of Global Environmental Studies at Kyoto University YO TOKUNAGA studies interactions between immigrant societies in the United States. In a 2020 paper, he examines labor conflicts between Japanese and Mexican workers in California in the 1930s.

From the abstract:

“Launched by Mexican farmworkers against Japanese farmers in Los Angeles, the 1933 El Monte Berry Strike became one of California’s largest labor conflicts. The strike evolved from a local conflict into an international problem in which anti-Japanese sentiment travelled across the U.S.-Mexico border, merged with Mexican nationalism, and forced Japanese residents in Mexico to issue an unexpected pro-strike statement against their co-ethnics in Los Angeles. Using Japanese diplomatic documents and local ethnic newspapers, this article details the process by which Mexican nationalism trumped ethnic solidarity among Japanese immigrants in the transpacific borderlands, where local and international concerns of Japan, Mexico, and the United States intersected. The exacerbating situation in Mexico, rather than in California, played a decisive role in the settlement of the strike.”

Link to the article.

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org.

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• JFI, in collaboration with Federal Fluminense University (UFF) and the Euclides da Cunha Foundation, is excited to announce a partnership with the Municipal Treasury of the city of Niterói, Brazil on a pathbreaking sovereign wealth fund, the Fundo de Equalização da Receita. Read here for more details.
• “Limiting the refundability of the CTC would increase child poverty by 53 percent…the largest impacts would fall on Black children, increasing the Black child poverty rate by 83%.” A new brief from JFI Fellow Jack Landry and Lead Researcher Stephen Nuñez outlines the consequences of limiting the refundability of the Child Tax Credit. Link.
• “I argue that using inflation expectations to explain observed inflation dynamics is unnecessary and unsound.” Link. A new paper by Federal Reserve economist Jeremy Rudd on inflation theories and policy errors).
• “From 1989 to 2017, $34 trillion of real equity wealth was created by the U.S. corporate sector. We estimate that 44% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation.” By Daniel Greenwald, Martin Lettau, and Sidney Ludvigson. Link.
• Gerhard Toews and Pierre-Louis Vézina examine long-run consequences of the forced resettlement of ‘enemies of the people’ in the Soviet Union. Link.
• “Focusing on Rawabi, the celebrated first Palestinian planned city, this study unsettles the city’s narrative of triumphant urban development.” Linda Tabar and Samia Al-Botmeh on development and accumulation in Palestine. Link.
• Galina Hale and Luciana Juvenal on currency-induced external balance sheet effects caused by the onset of Covid-19. Link.
• “This borderlands case study places the birth control movement’s attention to overpopulation within the context of immigration restrictions at the U.S.-Mexico border.” Lina-Maria Murillo on the opening of a birth control clinic in El Paso, Texas in 1937. Link.
• The financialization of slavery by the First and Second Banks of the United States, by Sharon Ann Murphy. Link.
• “The productivity of agriculture in England and the Yangtze Delta are compared c.1620 and c.1820 in order to gauge the performance of the most advanced part of China vis-à-vis its counterpart in Europe. Output per hectare was nine times greater in the Yangtze Delta than in England. More surprisingly, output per day worked was about 90 per cent of the English performance. This put Yangtze farmers slightly behind English and Dutch farmers c.1820, but ahead of most other farmers in Europe—an impressive achievement. There was little change in Yangtze agricultural productivity between 1620 and 1820. In 1820, the real income of a Yangtze peasant family was also about the same as that of an English agricultural labourer. All was not rosy in the Yangtze, however, for incomes there were on a downward trajectory.” By Robert Allen. Link.

Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: editorial@jainfamilyinstitute.org