Recently a graph from JP Morgan has caught the attention of Chinatells. According to the stats compiled by JPM, China’s residential land price change (YoY) has always lagged that of GDP, until end of 2009/beginning of 2010. Since then, the land price increase has surpassed that of GDP increase.
Such a chart is consistent with Chinatells’ observation that housing price (partially pushed up by land price) has gone up at a particularly fast pace since the end of 2009. As Chinatells has long argued, the ever increasing housing price in China is one of the most important factors to curb average household from consuming more. According to a study conducted by China’s Academy of Social science, Chinese households’ average saving ratio is stably around 50% in the last 10 years, if the revenue of property sales is added back to the household saving. In other words, the currently observed downtrend in Chinese households’ saving ratio reflects the fact that average Joe’s consuming power has been largely crippled by the ever increasing housing price.
To put it simple, if the government is serious about boosting the domestic consumption and try to grow the economy more towards consumption lead, then housing price (related land price) is one of the critical issues to address before we see the transition of economic growth mode to happen.