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CASS Calculation: Quite Confusing

Last month, Chinese Academy of Social Science published a survey which can be openly accessed; proclaiming that more than 40% of Chinese people are unable to climb up the property ladder, meaning—they are unable to afford procuring a house on their own.

This report has gone viral on the Internet and attracted the attention of millions of Chinese netizens, almost 99% of them taunting it as ‘Incorrect and in a serious breach of truth’!

CASS made the following observation on top 10 issues of Chinese which was of grave concern to the Chinese people in 2011:

Translation of the above chart could be as follows:

1. Very High and Rising Commodity Prices:  59.5% 2. Problem in Health Care and Unable to get medical care:  42.9% 3. Wealth Gap Issue: 31.6% 4. Corruption and Bribery Issue: 29.3% 5. Unemployment Problem:  24.2% 6. Soaring Housing Prices:  24% 7. Pension for the Elderly People: 16.6% 8. Safe Food Issues: 15.9% 9. High Tuition Fees: 10.9% 10. Environment Degrading Issue: 10.3%

CASS made this report on the basis of a random survey carried in 28 provinces, autonomous regions and directly administered cities in both urban and rural areas where approximately 7,000 adults were surveyed.

Although people did say and that is also not much deviation from the truth that people’s life standard has improved in the last 5 years but soaring commodity prices and very high property prices is one of their main worry and cause of immediate concern.

CASS publishes economy blueprint of the country almost every year in the first half of December. What is surprising is the great digression it has made about affordability of the house in its’ 2011 report from that of 2009 and 2010. In both the reports of 2009 and 2010, it has published that a staggering 85% of the Chinese people are unable to buy a house while in 2011 survey it reports that only 40% of the people are unable to climb the property-ladder. One fails to understand the credibility of these surveys and report. While in 2009 and 2010 it said that figure was about 85%, how could it suddenly shudder down to 40%?

When in 2009, CASS made it report, the government comment through its official media was very harsh and they mocked at the report. It laughed off at the credibility of the report and a ‘People’s Daily’ comment exclaimed that according to the report only a meagre 15% of the people live in their own home, which can not be true! Was then the CASS 2011 report made to please the CPC authorities which is going through a rough patch of time owing to huge criticism against it because of corruption, land grab and bribery charges?

However, now when CASS survey proclaims that only 40% of the people are unable to afford housing; people have again gone berserk and laughed at the report. They said that the report is demagogic and far away from the truth and absolutely void.

Procuring one’s own house is a dream of almost every Chinese youth. Like India, number of males in China is much higher than their female counterparts but unlike the country where girls and parents have to pay huge dowry to the groom’s side, in China it is generally a boy who has to allure the girls and give gifts as well as show to them that they own their own house! Not having a good house many a times leads to unable to charm the attention of girls and eventually may lead to remain as bachelor, having a sinister life.

House prices are indeed very high in China. In 2005-2008 during the real estate bubble crisis period, average home price in the USA was not more than 6 years of salary of an average worker in major citifies.  However in major cities of China like, Beijing, Shanghai, Guangzhou and Chengdu, average house price is more than 32-35 times of the annual salary of a common person. Even in 1980’s, during the property bubble crisis in Japan the home prices were not more than 15 times of the yearly compensation to an average Japanese worker.

The question simply then arises, who are buying these costly over-priced properties? The plain and honest answer is – the, corrupt government officials and some millionaire industrialists who can afford to buy not one but dozens of properties in different cities of the country. This further enrages the common citizens. According to some calculations, there is more than 8 trillion Yuan black money stashed in China which is almost 1/6th of the whole GDP of the country. While we talk about these issues, it reminds us of the similar situation, problems and issues in India too.

The problem is further compounded in China that several of these apartments remain empty for years as the owners have plethora of other places to dwell. Some reports suggest that the vacant properties could be in the range of 30 to 40% of the total properties in the whole country. This might look hilarious but according to another survey, electric meter of around 6.5 crore apartments showed no consumption for 6 months continuously.

The whole murkier picture suggests simply that while common working and middle class can not afford to have their own dream 50 square meter apartment, corrupt officials and industrialists could easily install a gold-plated toilet costing more than USD 200,000 in their homes, leave aside procuring dozens of USD 4.5-million Bugatti Veyron sports car. The rich-poor divide is increasingly widening as some are able to even afford USD 314,000 price tagged Black Swan Art Bakery cream-swathed wedding cake!

Several experts and leaders have suggested the same solutions as we suggest in India to solve these issues. Curb corruption, bring the culprits to justice, siege their properties and sell them to common masses, look into the issues of disproportionate assets but while suggestions are easy to make, action is equally difficult to promulgate.

Gini Coefficient in China is constantly rising and is touching dangerous levels. Before reform and opening up in 1970s while Gini Index of China was less than 30; it is now almost 42 and is not very far when it could touch the red-50 level mark. For a country to be called as ‘socialist’ and ‘communist’, such high level of Gini Index is indeed troublesome.

The price of a house in country should not be more than 6-7 times of the annual salary of a common worker. In the UK, while the average property price is around £160,000 the mean salary of average Britons is also around £25,000. The median home price in the USA is also around USD 200,000 with the per capita income ranging between USD 42-48,000. However, in China while an average urban person earns less than RMB 100,000 yearly, the property prices in big cities are not less than 20 million Yuan for 85 square yard apartment. A professor was firmly told by an estate agent to not to meet him unless he could afford 30 million RMB to buy any kind of residential property in main Shanghai area.

What does this high price-to-income property rates suggests in China? Many argues for bubble burst but several others are against this view as one has to pay very high deposit to procure a property and prices to some extent are declining consistently in some parts of the country.

The Chinese government has also taken a series of steps to curb this problem and has been consistently increasing the interest rates like RBI has been doing in India. Some cities are also banning people from buying the property if they have not lived in cities for at the least 5 years. Government is also forbidding local city dwellers to buy a third home and non-local citizen to buy the second property in the towns. New Real estate sales tax has been already introduced and government may impose high property taxes in the near future.

But will these measures be enough? As long as the government is not able to curb the menace of monstrous corruption and black money, probably not!

(The writer Dr. Yukteshwar Kumar, is the Course Director of Chinese Stream at the University of Bath, UK. Email:

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