“Beijing aims to ease population pressure on its biggest urban areas and a glut of new homes elsewhere.”
Population pressure on its biggest cities has been one of the toughest problems that China has had to face. While reaching overcapacity in big cities like Beijing, some of China’s smaller urban areas have had to offer huge housing discounts to attract migrants. In Fuyang, an urban district near the Eastern provincial capital of Hangzhou, the Government is providing a one-time housing subsidy of as much as 800,000 yuan ($123,874) to try and stem the housing glut in the region. This problem originates from the recent exodus of Chinese citizens from the countryside to the cities. When most leave their rural homes, they tend to go to the most prosperous cities. This has led to overcrowding, strained infrastructure and the lack of services capable of handling that amount of people. Meanwhile, large parts of the rest of the country remain overbuilt. This has had a detrimental effect on property prices over the past couple of years. Although prices in cities like Beijing and Shanghai have been recovering, the overbuilt regions are a sizable drag on the overall economy, as prices must be forced lower to entice new buyers. The Chinese response to this housing crisis has local governments offer more comprehensive packages of benefits --from loans to social services-- to incoming residents who may not have the proper household registration documents (hukou). Many experts agree with this response, because lowering housing prices is not enough. Liu Dan, a Hangzhou-based fashion designer, says that apart from housing costs, she has to consider job prospects, social networks and proximity to family when deciding where to settle. Unfortunately, with the smaller cities these other criteria are much tougher to meet, which explains why many migrants still choose to go to the big older cities rather than the newer and smaller ones. If this trend continues, demography per se won’t be the only population related threat to China’s economy.