Who Moved My Cheese

Three months into 2104, Chinese investors announced they’ve snapped high-tech deals worth more than $6 billion in the U.S. The figure, which is greater than the combined total in the past four years, marks a giant leap in high-tech investments made by private companies from China. But instead of welcoming new jobs and R&D grants, business communities across America are advised to be wary of the innocence of Chinese companies.

A recent report published by The Rhodium Group and Asia Society concludes Chinese buyers may have set out to target high-tech industries in the U.S. While the number of deals has dropped since 2011, the value of China-U.S. high-tech transactions took a jump in the first quarter this year. Overall, Chinese direct investment in the U.S. reached a record high of $14.1 billion last year since taking of in 2008, according to the report.

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The boom can be seen across America and in a variety of sectors. A majority of Chinese investors, as graphic below shows, unsurprisingly struck deals with technological communities in California. There was a lot of Chinese money going into IT equipment when Chinese PC maker Lenovo bought IBM’s personal computer business in 2005. But the appetite for software and IT services has prominently grown in the past few years.by region 00-13

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Setting numbers aside, a primary issue the report addresses is how to react to the rise of Chinese takeover of “valuable” technological brands made in the U.S. At a conference held in L.A. on Thursday, most bankers and lawyers who helped handle high-tech transactions for their Chinese clients in the past voiced their major concerns: American companies should look out for possible technology theft, and the U.S. government should make efforts to beef up cyber security.

The big-ticket sales capture a shift in China’s economic ambition and could be a prelude to the country’s departure from being a global manufacturer. But being on a learning curve doesn’t mean the nation’s transition must be an evil breed. In nature, purchasing IBM’s personal computer business was no different from Facebook’s buying WhatsApp: both indicate the parent company sees some value in the subsidiary, and pays money to learn from it. It is fair bargain as long as both sides shake hands on the price.

The $6-million deals made in the first quarter include three major components: Lenovo, after it purchased IBM’s PC business years ago, is spending another $2.3 billion buying a server unit of IBM. Earlier, it purchased Motorola Mobility from Google for $2.91 billion. China’s Wanxiang Group took in luxury carmaker Fisker in February.

They all have eye-popping price tags, but the health of the three subsidiaries show Chinese buyers are tasked with turning failing American brands around before they move on to harness, if any, new technologies. Fisker had been in huge financial loss and filed for bankruptcy when Asian buyers emerged at the end of last year. Google paid $12.5 billion for the acquisition of Motorola Mobility to obtain the patents it needed to ward off lawsuits from Apple (and they weren’t accused of technology theft), and dumped the “perpetual money-loser” a year later. IBM’s PC unit was, again, losing money when Lenovo bought it in 2005, yet the latter has come back for more. The low-end server business Lenovo is taking from IBM has posted seven quarters of losses.

To the other end, The Committee on Foreign Investment in the United States (CFIUS) has guarded national security well. It guarded it so well that Chinese telecommunication giants had to shift their U.S. business from installing network equipment to selling smartphones to survive in the U.S. market.

In 2011, Huawei Technologies Co., China’s biggest network equipment maker, was barred from participating in building a nationwide emergency network. A year later, the U.S. House Intelligence Committee chairman discouraged U.S. companies from doing business with Huawei and ZTE Corp, for fear of intellectual-property theft and spying. The Committee also noted in a report that CFIUS “must block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests.”

From selling handsets, ZTE had a market share of 6 percent in the U.S. last year. The CEO of ZTE’s U.S. division touted the company’s decision to drop network business in the U.S. “a strategic move” and “an adaptation to America’s legal framework.”

The second-largest telecommunication manufacturer in China has opened 14 offices and five R&D centers in the U.S. It hires about 380 local employees. It has invested $350 million in its U.S. business. It remains at the mercy of geopolitics.

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TOMS Shoes – A “hand-out” vs. “hand up”

TOMS Shoes first surfaced 7 years ago with a new responsible and sustainable business model: Buy One Give One (BOGO) – when you buy a pair of shoes TOMS gives a pair to a poor child in an underdeveloped country.

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Blake Mycoskie, founder and CEO of the company, first came up with the idea in Argentina when he realized barefoot children, who accounted for over fifty percent of the children, weren’t allowed to go to school. Mycoskie contacte a local shoemaker in Argentina and ordered a few hundred pairs to sell, with BOGO model in mind, in his hometown Los Angeles. Soon, the shoes became a phenomenon, a movement some call it. It’s one of those companies that has a positive image in almost all consumers minds, and the first that comes to mind when thinking about socially conscious purchases.

In 2011, after selling millions of pairs of shoes, the company branched out to eyewear, promising to give out one glass in the developing world for every purchase. Last month, the company announced they’re expanding into the coffee market – Mycoskie stated that for each coffee bag purchased ($12 per bag), they will give a week of clean water to someone in need. Their new product will be available for purchase on their website, café, and Wholefoods stores nationwide.

Although the coffee market is a very crowded one today, Mycoskie says that they picked up on the current trend in America of artisanal coffee roasters, and argues that they will have a better hand since people feel better about themselves with purchasing from a business with BOGO model. He believes that “the same conscious consumers that love his slip-ons will dig his beans.”

However, TOMS Shoes has been the target of a backlash from consumers and philanthropists who criticize the company’s business model for not being helpful in the long run. Now with their new venture, they are sure to receive more criticism from the same people claiming that the giving people a fish and teaching them to fish are two different things and the latter is more effective in the longer run.

The Intern Problem in Today’s Economy

In 2013 two former interns, Lauren Ballinger at W magazine, and Matthew Leib at The New Yorker, sued Conde Nast for violating federal and state labor laws. Conde Nast, one of the most prestigious publishing houses in the country, owns more than 25 publications, including Vogue, Vanity Fair, The New Yorker, and GQ.

With the economy still in a slow pace, it is no surprise that internships nowadays don’t pay much, or any money. Most internship advertisements clearly state that they won’t be paying and that the internship is only available for school credit. The two Conde Nast interns were paid “$12 a day for shifts that last 12 hours or more,” which accounts to less than $1 an hour – way below the minimum wage. While industry officials claim that a Conde Nast internship is one of the most prestigious one in publishing that opens many doors, the publishing house has decided to end its internship program after the lawsuit was filed.

The problem with most internships today is that they require long hours, hard work, and little money, claiming that the internship is an invaluable experience. This, in return, creates a privileged candidate pool for these internship programs since not many students can afford living in a big city without any earnings. These internships are only available to those whose parents are able to support their stay, like the daughter of Arianna Huffington, or TV stars Lauren Conrad and Whitney Port. As a “former intern told The New York Times that if she didn’t have her parent’s financial support, she “absolutely” could not have accepted the internship.”

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The purpose of the lawsuits filed against Conde Nast is to make minimum wage internships a law. However, with the economy still running slow, and publishing suffering, this seems like a stretch. Yes, the ending of the internship program might open up more entry-level positions – but there’s also the possibility that it might not. Frances Bridges of Forbes came up with a better idea. She stated that with long hours at Conde Nast interns weren’t able to get a second job and “that was the flow with the program.” She claims that if  “Conde Nast had decreased the intern’s hours, but paid the same, small stipend, it would have increased the amount the interns earned an hour, and would have opened up their evenings, allowing them to hold a second job.”

The publishing house decided to settle the lawsuit last week, but they didn’t say what their next move would be about the internship program. Applicants say that there weren’t any more openings in entry-level positions either compared to the previous years. I think this is correlated with the slow economy and the crisis publishing houses are dealing with in the past few years. Clearly, they don’t have enough money to hire more, and that’s why they were abusing the interns – but now that that door is closed, they need to come up with a plan B in order to both attract new talent and get the job done.

Turkey’s Social Media Bans Scaring Off Potential Investors

“We’ll eradicate Twitter. I don’t care what the international community says. Everyone will witness the power of the Turkish Republic.” These were the words of Turkish PM Erdogan right before banning Twitter a in late March. A few days later, in an attempt to stop leaks of recordings that linked him in a huge money laundering scandal, he also blocked YouTube. His intentions were simple, there was an election coming up (last Sunday), and he wanted to block media channels to prevent more recordings being leaked, and to ensure his party will succeed once again in the elections.

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Although both bans were eventually lifted by the ruling of Turkey’s Constitutional Court, the illegally blocked freedom brought question marks to minds. Could Erdogan ban Facebook, Google, and eventually the Internet all together if he thought they were a threat to his power? What would then happen to the economic market in which many foreign investors depend upon?

Until Gezi Park protests this past summer, Turkey had a growing economy and was considered one of the most stable growing markets. However, it all started to fall apart on June, and nowadays Turkey’s currency has lost a third of its value.

In the recent years, Turkey had seen a great development in entrepreneurial ecosystem, but this too has changed with the unstable market. Investors are slowly withdrawing their money, as they feel more and more anxious about the unstable Turkish government. Also, since most entrepreneurial efforts rely on Internet and freedom of expression, with social media bans and Internet blocking, investors feel like Turkey is not the promising future economy anymore. “Sevin Ekinci, a Turkish economist who regularly consults foreigners looking to invest in Turkey, said that if she was a foreign investor, she wouldn’t put her money into a company here.”

Although Erdogan’s government was very pro technology throughout his rule, with President Abdullah Gul courting Twitter and Microsoft on a visit to Silicon Valley in 2012, his current strategy of blocking technology to protect himself and to silence those who are against his power is scaring off investors, and thus threatening the Turkish economy.

 

How England’s Jersey Prices Come Back to FIFA’s Host Choices

Could jersey prices really be the issue? Or is there more at play?

 Controversy arose earlier this week on Monday when England revealed their jerseys for the upcoming World Cup. The jerseys, it turned out, cost a surprising 90 pounds (150 US Dollars) and caused a frenzy from not just the English media, but for the British Prime Minister David Cameron as well.

Many have called the jerseys (which Nike manufactured) a rip off. Citizens of England are calling for boycotts and sports minister Helen Grant has asked Nike to lower the prices of the jerseys.

Cameron himself pointed out the stigma that it will have on the parents. “Parents are under enormous pressure to buy the latest kit and we shouldn’t be taken advantage of,” he said in a Reuters article.

But amidst all the controversy and the media speculation, a few things stick out more than others.

For one, Nike is not doing anything new when it comes to the skyrocketing prices of jerseys. Soccer has grown popular with each passing year and more importantly, it is slowly becoming popular in the United States. The big demand of jerseys from fans all over the world calls for higher prices for the merchandise and with more call for the merchandise comes more demand for better quality.

 Both elements go hand in hand. It is the same dilemma that other companies such as Adidas are also facing and competition just amps up the prices even more. That is how supply and demand works for items within the marketplace.

But it is not the prices of the jerseys that is the important subject.

Another important aspect of this controversy is Nike and England’s Football Association’s reasoning for the high prices. According to a comment made by both the FA and Nike, the jerseys have climacool ventilation holes designed in them to better accommodate the weather the players will face during their time in Brazil.

Once again, this becomes a discussion about FIFA’s choices when it comes to host nations. Joseph Blatter and company always make it a point to say that the choices made when it comes to host nations focuses on countries that deserve to have soccer impact their citizens.

“This is the development of football and don’t speak about money. This has nothing to do with money, as it had nothing to do with money here in Africa. It has to do with the development of the game,” he said back in 2010 during the host bids for the 2018 and 2022 World Cups in Qatar and Russia.

He went on to defend this by mentioning the great impact the World Cup had on South Africa earlier in 2010. About $100 million legacy fund went to South Africa and $20 million of that had already been used to build a new South African Football Association headquarters and stated the rest would go to “social and community projects.”

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He failed to mention the $3.5 billion FIFA made that year as well.

Brazil’s weather condition is not the only thing players will have to look forward to when they arrive to host nation later this year.

Political and social conflicts are still taking place–much of it involving the unequal disparity of money within the society.

FIFA’s next two host nations, Russia and Qatar, are also facing their own crises at the moment. Russia with its very public situation about the Ukraine and Qatar with both its strict drinking and anti-homosexual laws has many people questioning the role of money when it comes to “the beautiful game.”

Even more worrisome is the fact that two migrant workers died in Qatar on the building sites of the 2022 stadiums there (the same situation that is going on in Brazil). The “little man” in society continues talked about but not focused on in these conversations.

Which brings us back to England’s World Cup jerseys. If so much speculation is about Nike’s jerseys because of the climacool adjustments made to it for Brazil, what about the World Cup being moved to the Winter because Qatar’s summers are known to rise as high as 104 degrees Fahrenheit?

How expensive will those jerseys be? Does that really matter? Or is “the beautiful game” just getting very ugly?

College Athletes on Strike

On Wednesday, March 27th, the Chicago district of the National Labor Relations Board (NLRB) ruled that Northwestern players, led by former Northwestern Quarterback Kain Colter, qualify as employees of the university and can unionize. The decision, at first glance, might seem like a big win for collegiate athletes and their battle for compensation. But unionizing collegiate athletics is layered with multiple issues ranging from the differences between private and public institutions, tax issues and vast economic implications.

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Jay Bilas, an ESPN College Basketball analyst, former Duke basketball player and lawyer argues that the NLRB’s decision won’t affect anything in the short term, as the decision of whether collegiate athletes can unionize will, ultimately, end up in federal courts if it’s able to pass the national NLRB. But scandal has surrounded the NCAA since its formation more than a century ago, and now, more than ever, athletes, administrators and fans sense a momentum of change.

In 2013, the NCAA March Madness Tournament brought in more than $1.1 billion in television advertising revenue, $55 million more than the NFL Playoffs and $223 million more than the NBA Playoffs, according to ESPN. Student-athletes do not recoup any of that revenue, besides an athletic scholarship that ranges between $5,000-$65,000 per year. In 2008, the athletic programs at Alabama, Texas, Ohio State, Florida and Tennessee each made more than $100 million in total revenue. Alabama’s Head Football Coach, Nick Saban, is the highest paid public employee in the State of Alabama and makes at least $7 million per year, which is more than the salaries of all the head football coaches in the Mid-American Conference combined.

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The NCAA argues that amateurism and money are mutually exclusive. But collegiate athletes, especially in sports that turn a profit, such as football and men’s basketball, continue to challenge that notion. However, the NLRB decision could have unexpected tax implications and throttle the momentum. The motion put forth by Northwestern players and their lawyers argued that athletes received compensation in the form of a scholarship making them employees of the university. If the scholarship were deemed as taxable income in federal courts, an athlete would have to pay at least $15,000 in federal taxes on a $61,000 per year scholarship. In addition, this particular ruling only serves private universities, because the NLRB does not govern labor matters at public institutions. A majority of the top performing Division I collegiate athletic programs are public universities, including all five of the universities that exceeded $100 million in total revenue in 2008.

If collegiate athletes were ever able to unionize, the NCAA would deem them ineligible for receiving compensation for play. And the NCAA has always been happy with taking the easy way out and promoting inertia. But the answer to paying collegiate athletes is simple and not as convoluted as the NCAA makes it seem. To pay athletes, universities could utilize a free-market approach, as it’s worked well for the rest of us. Like any other contract, the player and university could negotiate terms, require a player to stay for three or four years, introduce non-compete and behavioral clauses and detail a performance clause that highlights performance goals on the football field or basketball court and in the classroom. Smart minds can dictate how change can be effective and efficient and satisfy the needs of all parties involved, but asking fat cats to stop eating and make room at the dinner table, might be a little harder.

Sources: ESPN, NPR, SBNATION, ESPN

 

Lululemon, and Trends in the Market

lululemon storeAs a premier sportswear brand, Lululemon is known for its high-end, innovative athletic apparels that are designed specifically for yoga practice. During the recent years, its product types have expanded into a variety of technical athletic apparels for different sports.

In the United States, participation in sports has been constantly increasing slight during the past few years, and is expected to continue such slow growth, at a rate of 0.5 percent, until 2018. Even during the economic recession, sports participation increased as people used sports activities to kill their time. As a healthy alternative exercise method as well as a convenient individualized fitness activity, yoga practice has gained rising interest from sports participants over the years and is one of the major sports activities that were responsible for most of the increase in the overall sports participation within the United States. Additionally, participation in yoga practice will see strong growth in the near future as a result of people’s increasing perception that physical activities like yoga will lead to an overall healthier lifestyle. According to the latest study conducted by Yoga Journal in 2012, approximately 20.4 million Americans practice yoga, while the number was only 15.8 million based on the study in 2008. As a result, yoga practitioners in the United States now spend over $ 10.3 billion every year for yoga products and services. This is a major opportunity for Lululemon, as it is known for its innovative, high-quality yoga apparels, which is on greatly increasing demand due to the trends in the industry and marketplace.

QQ截图20140326212518However, despite the opportunities in the marketplace, Lululemon has faced many challenges, especially in terms of increasing competition, both domestically and overseas. For instance, Nike is the biggest and one of the most famous sportswear brands in the world, offering high-end, high-quality sports apparels to its customers, just like Lululemon does. However, with a dominant place as well as a much wider reach in the market, Nike had earned $6.3 billion in sales in 2012, while Lululemon earned $1 billion during the same year. Unlike Nike, Lululemon enjoys its reputation and popularity mainly in the United States and Canada, and even though it offers a variety of technical athletic apparels for different sports, it still mainly focuses on the niche market for yoga fashion.

Considering Lululemon’s situation and the trends in the sportswear industry, another opportunity for Lululemon is that it may want to expand its business focus more into the global market. With only a few physical stores in countries other than the United States and Canada, Lululemon should consider having more physical locations set up globally, as well as provide easier access to online shopping, like better shipping and payment policies, for customers around the world. Moreover, besides its popular yoga apparels, Lululemon can expand its products lines and provide customers with more innovative, high-quality yoga practice equipment, like yoga mats and balls. As indicated by the IBISWorld Industry Report, even though there is strong competition, including overseas competition, in the market, sales of athletic equipment will continue growing in the following periods, especially for popular sports activities like yoga.

 

Official Selection Eats Away at Natural Selection – Independent Film Gets Bloated

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While Hollywood films have gotten bigger and bigger over the last few decades, the true rags-to-riches story seems to be the independent film market. Inconceivable only a short time ago, independent film became so successful, it became a new kind of studio film. The behemoths started in the nineties, from the cameras of Soderbergh and Tarantino, and raised small time wheelers and dealers like the Weinstein brothers to immortal mogul status. That said, when Reservoir Dogs was released, only 249 other films made it to the theatres that year. This year? There were 1,500. Meanwhile, the money these movies make has actually decreased. Many in the indie business are beginning to sweat. Is this the sign of a possible market bubble?

Filmmaking, with the advent of cheap digital camera technology and the age of Kickstarter, has become a by-the-people, for-some-people medium. With a new level of accessibility, an influx of hopeful artists began producing work and sending it forth into the world. Film festival culture has spawned from this new supply of infinite content. According the Salon, “in the last 15 years, the U.S. alone has seen nearly 7,000 film festivals.” Reaping the rewards of entrance fees and, especially with high-profile events like Sundance and Telluride, market visibility, the festivals themselves have done very well for themselves. Herein lies the problem: “[The industry] is built on supply…film festivals, film schools, crowdfunding sites, film festival submission aggregators, video-on-demand distributors – all apparatuses that have a vested interest in encouraging filmmakers to keep making films, demand for those films be damned.

A modern film production may look something like this: a group of young creatives raise money through crowdfunding in order to qualify for tax incentives, that they then subsidize to cover the likelihood that the film grosses under budget. Such productions produce little economic activity, as crews and cast are underpaid, and the finished product generates very little revenue. A lot of those 1,500 films made last year did not qualify for theatre runs. Instead, their producers rent out the screens for more money, just to grab a few reviews before dying a quick death on the VOD (video-on-demand) market.

The art of filmmaking takes time and skill to perfect. With so much amateur work taking up so much market space, there’s a chance the next Tarantino will simply get lost in the masses of mediocrity. Salon presents a few possible solutions, be it refocusing film festivals to screen work only created through their selection-based filmmaking labs (basically, a class for qualified filmmakers to create a thesis of sorts) or fitting independent productions into the vertical-integration model of the golden Hollywood studio system.

Film is an important part of American culture and art, but is in danger of falling into the same trap to which many American industries have become victims. Independent film is a beautiful thing, and with our digital age, the American Dream of making it in Hollywood seems closer than every before. However, the bloat of supply threatens the holy market competition that fuels both increased creativity and economic success. Young dreamers aren’t going to stop flooding the market with movies, so it may be time to start building a dam – for all our benefit.

 

Other sources:

The New York Times, http://www.nytimes.com/2014/01/12/movies/flooding-theaters-isnt-good-for-filmmakers-or-filmgoers.html?_r=0

Nofilmschool.com, http://nofilmschool.com/2014/02/kentucker-audley-stop-making-indie-films-petition/?fb_action_ids=10201041474228386&fb_action_types=og.likes&fb_source=other_multiline&action_object_map=%5B259881744187942%5D&action_type_map=%5B%22og.likes%22%5D&action_ref_map=%5B%5D

GDP is an Outdated Idea

According to Diane Coyle, an economist and author of GDP: A Brief Affectionate History, we tend to think about GDP as a natural object, like a mountain, river or lake. But GDP isn’t a thing; it’s an idea – an idea that made the U.S. economy $500 billion bigger in 2013.

Why does the world revolve around an idea that hardly anyone understands? GDP can impact elections, influence major political decisions and determine whether countries can continue borrowing or be put into a recession. In addition, though utilizing the GDP might’ve been a good statistical measure of the economy during the twentieth century, it’s become increasingly inappropriate for an economy driven by innovation, services and intangible goods, argues Coyle.

The GDP was created because of the Great Depression and people first referred to it as national income. In the decades that followed the Great Depression, national income transitioned into gross national product and eventually Gross Domestic Product.

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But around the 1950s and 1960s, the GDP began to have too much power. If a country needed help from the World Bank or the United Nations, it needed to know its GDP.  When the Cold War began, GDP began to reflect the success of a country and distinguished winners and losers.

When the GDP, a statistical measure of the economy, begins to have an inflated importance that defines whether your country is doing well or not, politicians begin to look at is a measure of their success as well. But what the GDP doesn’t do, as Robert F. Kennedy famously spoke about, it doesn’t measure the “health of children, the quality of their education, or the joy of their play. It doesn’t include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.”

Not only is GDP out of touch with our current economy, but economists also warn that GDP is a tool only to be used to measure market activity and not a country’s prosperity. GDP needs to be redefined, restructured and/or replaced in order to enact progressive change. Case in point, GDP tends to rise when crime or pollution increases or when households accrue more debt. When the United States pays to fix the damage from a hurricane or tornado, the GDP actually goes up.

That raises the question, what does a post-GDP world look like and how can we promote a measure of economy that defines real progress in the United States?  Justin Zorn, a public service fellow at Harvard University, argues that we need comprehensive indicators that are empathetic to core elements of national wellbeing in the 21st century, including economic mobility, strong families and communities, entrepreneurship, health, education, environmental quality and public safety.

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We shouldn’t leave GDP behind, but our ability to collect data and analyze it in new ways opens up the window for innovation in national accounting. With the capacity to tell stories with data in new and more complex ways, we can find an objective truth – a truth that can do better in measuring the prosperity of a nation.

Sources: Huffington Post, PrincetonNPR

China’s Increasing Concerns of a Property Bubble

Despite all the policies that the Chinese government has enforced to cool house prices in China, especially in major cities like Beijing and Shanghai, prices continue to rise, causing the property bubble in the country to expand.

Home Price Change

As shown in the graph, home prices have been increasing dramatically over the years, especially around 2005 and 2008. It slowed down a little bit after 2010, when the government started interventions and set strict real estate market policies to cool the market. For instance, in my home city, Suzhou, a fairly economically successful city in China, the newly-enforced real estate market policies in 2011 stopped many people from purchasing their new houses. If you are purchasing a new house as a resident in Suzhou and it’s the second house under the name of your family, you need to make a minimum of 60%-70% down payment instead of the original 30%-40%, with higher taxes issued and higher interest rates for loans. One family is limited to two properties in Suzhou. In major cities like Beijing and Shanghai, the market policies are even stricter. This explains the slowdown of the house price rise or even drop in China around 2011.

However, even though the real estate market seems to be under tight control of the Chinese government, the house prices in China started to rise again. According to China’s National Bureau of Statistics, China experienced a 0.8 percent rise in average new housing prices across China’s 70 major cities in August 2013 and a 0.7 percent rise in September 2013. That was the “ninth-straight monthly rise on an annual basis.” (On an annual basis, the house price rise was 9.1 percent as of September 2013) The national average new house prices continued to rise 0.5 percent in November 2013 and 0.4 percent in December 2013.

The situation is even worse when applied to individual cities in China. Beijing had a year-on-year increase of 16.3 percent in average new housing prices in November 2013, and 16 percent in December 2013. For major cities in southern China, Guangzhou had a year-on-year house price increase of 20.7 percent in November 2013 and 20.1 percent in December 2013. Even though there was a slowdown in the increase of house prices (and it was the first one in 2013), the situation is still horrible, differing from what the government expected; house prices in China are still kind of out of control, thus causing the property bubbles.

China has experienced great GDP growth over recent years. However, China’s dramatic economic growth has been a result of the government’s policy to spur exports, instead of consumer spending, which indeed indicates the purchasing power of people in the country. China’s economy is growing and expanding rapidly, and so is the wealth gap in China. Fewer residents, especially in major cities in China, can afford to purchase their own houses, while wealthy people are not quite influenced by such government policies and continue their huge investments in real estate as usual. Even though the Chinese government hopes to utilize market policies to cool the real estate market, it doesn’t seem to solve China’s problem of a property bubble. In spite of China’s ambitious economic development plan for the following years, the Chinese government really needs to take a step back to rethink about how to actually make the house prices under control, resolve the problem of property bubble and thus to realize healthier economic growth, and ultimately, to benefit its people.