Correlation to Althusser’s connection to structuralism
When examining the illogical nature of China’s construction industry, it bears a great deal of similarity to Althusser’s connection to structuralism wherein he states that there are overarching socio-economic and ideological structures that ultimately have power to determine the other elements of the system, even though these other elements have a fair degree of autonomy.
In this particular case, it can clearly be seen that there is an overarching system in the form of the state capitalist based economic model of China that has influenced its government to such an extent that it pursued a path of real estate development that focused on creating high value properties.
Since real estate development is normally an independent and autonomous system that is based on consumer demand, the fact that real estate developers in China still adamantly pursues high end development despite lack luster demand is indicative of a structural system in place that dictates their actions.
Evidence of this can be seen when examining regional wage developments within China (Sujian, 207-224). It was noted that the average salary of an ordinary Chinese worker is roughly 2,000 to 4,000 Yuan per month, which when converted utilizing the current monetary value of the British pound is equivalent to 190 and 380 pounds respectively or $270 and $520.
While the wage can still relatively low, it is still considered by the Chinese government as an adequate level of monetary compensation for a bare minimum standard of living. An examination of average property prices for affordable housing within China done by Bradsher (2013) reveals that the average median home price within the country is equivalent to $114,900
The pricing situation present in China’s cities is roughly equivalent to average prices within western countries such as the U.S. yet the wage demographics within China is 6 times lower making most housing within the country unattainable by the average worker. What this shows is a failure on the part of a overarching structuralist system that attempted to grow based on a particular predetermined path yet failed spectacularly due to limited vision regarding the ramifications of its actions.
China’s Real Estate Market
Within the past 2 decades China’s economy has grown to become the second largest economy in the world as a direct result of government initiatives into encouraging foreign direct investment, local entrepreneurship and real estate development (Hui, 951-961).
Unfortunately, as noted by studies such as “Study On China Real Estate Price Bubble: Will It Burst Soon? (2011)”, though there may be a high rate of property development occurring within China’s cities there is an increasingly prevalent rate of housing surplus within the country with well over 70 million surplus housing units expected to reach completion by the end of 2013.
As stated by Shen (2009), ordinarily having a certain level of housing surplus would be fine if such housing initiatives were created in order to meet expected demand within the near future, however, Shen (2009) determined that property development within China is not concentrating on either affordable housing or subsidized housing schemes which are in great demand within China.
Instead, what is present is a development strategy that is oriented towards high end property development. In fact, studies such as those by Hui (2012) which examined the 70 million housing surplus units within China took note of the fact that most if not all if these units had price schemes that were well above what an average Chinese worker would be able to afford.
This presents a rather unusual situation since real estate construction within certain areas should reflect consumer demand which is not occurring within this particular case. Instead, what is occurring in the case of China is the complete opposite of what analysts say should be an ideal rate of local real estate development (Shen, 3).
Understanding the Chinese Real Estate Market
China’s real estate market essentially works under 5 distinct forces that influence the development of its local real estate market. These forces are composed of: the central government, local government, banks, developers and consumers (Bradsher, 2). These particular 5 forces are ubiquitous in real estate markets around the world, yet, what makes the case of China unique is the greater degree of government control over the rate of development (Real Estate Bubbles and the National People’s Congress, 20).
This aspect of control was seen during the period of 2000 to 2008 where the central government effectively dictated the rate of real estate development within the country instead of allowing natural market forces such as demand and supply to influence the actions of developers (Shen, 18). This particular strategy was noted by Bradsher (2013) as being related to the central government’s desire to meet ever increasing GDP targets and, as such, utilized the real estate market in order to artificially drive up growth.
The process of real estate development within China operates under the process of local government officials selling land to developers who build mainly 3 types of housing: subsidized housing for the poor, affordable housing for people with average incomes and high end residential properties (Study On China Real Estate Price Bubble: Will It Burst Soon?, 27).
In the case of China, property auctions are often won by developers who chose to build high end properties due to the assumption that the cost of the land can be recouped through selling expensive housing units.
It is mentioned by Fung and Yu (2011) in their examination of localized property development that it is not that high end property developers do not win land bids in various international real estate markets but rather it is often the case that high end property developers do not bid as often compared to subsidized housing or affordable housing developers.
In the case of China, what is present is a high degree of demand for subsidized or affordable housing with a relatively low degree of demand for high end real estate yet what is present is a situation where there are more high end residential construction projects despite low market demand for that particular type of housing (Sujian, 207-224).
Raymond Williams and Hegemony
When examining the context of Raymond Williams and Hegemony, it can be seen that it is applicable to the case of China wherein an overriding “world view” or “class outlook” influences the development of systems of belief within a particular country (Williams 108-114). While China may espouse that its brand of communism is “for the people” the fact remains that it is the political elite and rich that in effect dictate social and economic development within the region.
China’s real estate industry is an excellent example of domination and subordination in action. The rate of development that focuses primarily on high end real estate development in what can only be described as a form of “tunnel vision” focuses on the development of structures that appeal to the rich and political elite despite the lack of localized demand.
As it has been mentioned before, in most systems, supply is meant to meet demand, however, when throwing in the concept of Williams and Hegemony into the mix, what occurs is that despite the lack of demand local corporations continue to supply since the focus is in conforming to the plan of the government for urban development despite the potential negative economic ramifications.
This is one of the issues when it comes to state owned developers and hegemony wherein an overriding directive becomes the focus which causes problems for those that are being subordinated yet benefit those who dominate the system.
State Influence in Local Real Estate Development
As noted by Fung and Yu (2011) in their examination of real estate development within China, it was noted that one unique aspect of the Chinese banking sector was that most banks within China are actually controlled by the state as opposed to the situation in other countries where banks are not directly controlled by the government (Fung, Esther, and Yu, 5).
This presents itself as a unique situation as described by the article “Restless (1998)” since this actually enables the central government to dictate lending rates, who to lend to and for what purpose (Restless, 3).
As noted by Fontevecchia (2011), state owned companies tend to receive more preferential treatment from state owned banks (nearly all the banks in China are owned by the government) which in turn enables state owned companies to outbid private developers for land deals.
In fact it has been noted by Bradsher (2013) and other similar studies that all around China state run corporations ranging from military, telecom to even oil producers have been venturing into the real estate development industry with which they utilize preferential treatment from banks to overtake private developers in the sheer amount of construction projects created.
This has created a situation where multiple state run companies are investing into a platform that simply is not in demand which will result in an eventual catastrophe for the country.
Works Cited
Bradsher, Keith. “China’s Central Bank Has Its Own Worries.” New York Times 29 May 2013: B2. Regional Business News. Web.
Fontevecchia, Agustino. “China: When Falling Home Prices Are A Good Thing.” Forbes (2011): 3. Print
Fung, Esther, and Rose Yu. “Fitch Sees Bank Risks For China.” Wall Street Journal – Eastern Edition Sept. 2011: C5. Business Source Premier. Web.
Hui, Eddie Chi-Man, et al. “Real Estate Bubbles In China: A Tale Of Two Cities.” Construction Management & Economics 30.11 (2012): 951-961. Print
“Real Estate Bubbles And The National People’s Congress.” Stratfor Analysis (2010): 20. Print
“Restless.” Business China 24.24 (1998): 3. Business Source Premier. Web.
Shen, Irene. “China’s Premier Pledges To Control Real Estate Bubble, Holds Firm On Yuan.” Businessweek (2009): 18. Print
“Study On China Real Estate Price Bubble: Will It Burst Soon?.” Allied Academies International Conference: Proceedings Of The Academy For Studies In International Business (ASIB) 11.1 (2011): 27. Print